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ACCOUNTING NOTES AND ASSGNMTS.docx


                                        RECORDING THE NETWORK OF THE BUSINESS

Book keeping

– This is a systematic collection, recording, and analysis of financial information or business transactions.

A Transaction

– Any business activities that involves exchange of goods and services that can be valued in terms of money

A Balance sheet

– This is a financial statement that shows the financial position of a firm at a specific period/time.

A financial statement that shows the assets ,liabilities  and capital of a firm at a given date.

Balance sheet items or parts

               1.  Assets

  1. These are economic resources owned by a firm.
  2. Anything of value owned by a business.

Types

  1. Fixed assets – This are economic resources that stay in a business for a long time, e.g land, premises, building, free hold property
    1. Current assets – These are economic resources whose value keeps on changing within a very short time e.g
  2. Cash at hand
  3.  Cash at bank
  4. Stock i.e. goods bought for resale

                                        – Debtors– people /firms who owe the business money

2.  Liabilities

These are debts a business owes other people /firms

Types

a)  Long term liabilities – These are debts repaid for a long period of time of more than a year e.g

          – Bank loans

          – ICDC loans

           -AFC loans

           – Debentures

B )Current liabilities – These are debts repaid within a year e.g

Creditors.-   Firms /people a business owes money when it gets goods and services on credit.

  1. Capital /Owners equity –

This refers to any economic resource/anything of a value used to start a business.

Sources of capital

  • Bank loan
  • Personal savings
  • Sale of fixed assets
  • Ploughed back profits /retained profits
  • Trade credit
  • Hire purchase
  • Mortgages
  • Members financial contribution
  • Sale of shares

Changes in Capital

There are four items that can change capital of a business

  1. Profits – increases capital
    1. Investments – Increases capital
    1. Loss – Decreases capital
    1. Drawings – Decreases capital

A drawing 

 – refers to any asset taken from the business for personal /owners use without paying cash.

Investments

 – refers to any additional asset brought into the business by the owner

  • without buying  it
  • paying for it using business funds 
  • owner uses personal funds to pay for the asset
  • converts own personal asset into business use

Features of assets liabilities and capital

  1.    (a)Assets

 -Resource owned and controlled by the business.

 -Must have been acquired in the past.

 -An item of value that can be measured reliably in monetary terms.

 -Future benefits associated with the net expected to be received by business entity.

 -They are fixed or current.

 (b)        Liability

 -A present obligation for a business to settle as a result of past commitments.

 -Settlement would reduce business assets.

 -Amount involved can be measured reliably in monetary terms.

 -Owed to outsiders.

 -They are long term or current/short term.

Capital

  • Used to start a business
  • Are assets and liabilities
  • Changes due to loss profit drawings or investments
  • Capital is owners  worth in a business
  • Capital can be borrowed fixed employed or working
  •  

   USERS OF FINANCIAL OR ACCOUNTING OR BOOKEEPING INFORMATION

             1 Owners of the business

             2 Management of the firm

            3 Prospective or potential investors

           4   Government agencies eg KRA

           5   Lenders eg BANKS and suppliers

 BALANCE SHEET  /BOOKKEEPING /ACCOUNTING EQUATION

  •  CAPITAL     = ASSETS + LIABILITIES
  • ASSETS           =   CAPITAL- LIABILITIES
  • LIABILITIES   =CAPITAL –ASSETS
  •  
  • In the table below fill in the missing figures S,T,U and V.                                                                   (4 mks)
BusinessAssets(shs)Capital(shs)Liabilities(shs)
A20,000S5,000
B42,00032,000T
CU17,00053,000
D18,000V6,000
  •  
  • Fill in the missing figures in the table below.
  • CAPITAL= FA+CA+LTL+CL
  • CAPITAL=FA+CA+L
  • ASSETS  = LTL + CL+CAPITAL                                                     (4marks)
 FACACL
a)275 500a315 000115 500
b)182 000108 700b217 100
c)c76 400123 10091 900
d)313 450211 340189 170D

 Effects of transactions on the balance sheet

A Transaction is any business activity that involves exchange of goods/services for money or on credit.

Cash transaction

This is where goods and services are exchanged between a trader and buyer for money

Credit transaction

This is where goods and services are exchanged but the buyer promises to pay the seller later.

This is an Exchange of products and an invoice is given to the buyer by the seller.

 Effects of transactions on the balance sheet

 The formula used is  Assets = liabilities +capital

  1. Capital and cash at hand

1-1-2011 Jaribu traders started a business with cash sh 260000

      Effects capital increased by sh260000 and cash at hand increased by sh260000  an asset

                                                                 Jaribu traders 

                                                               Balance sheet

                                                             As  at 1-1-2011

A                                                                                                                              L+C

Cash at hand                                         2600000              Capital                                   260000
                                                                260000                                                               260000
  • Stock and cash

2-1-2011 Bought stock and paid cash sh 100000

          Effects  stock increased  by sh100000 and cash at hand  reduced by sh100000 both are assets

Jaribu traders

Balance sheet

As at 2-1-2011

A                                                                                                                                                                     L+C

Cash at hand                                  160000                           Capital                                              260000
Stock                                                 100000 
                                                           260000                                                                                      260000
  • Stock and creditors

3-1-2011 bought stock for sh 30000 on credit from leah

Effects  -stock  increased by sh 30000 as an asset and leah creditors increased by sh30000 as a liability

Jaribu traders

Balance sheet

As at 3-1-2011

A                                                                                                                                                                      L+C

Cash at hand                                             160000Capital                                                    260000
Stock                                                            130000Leah creditors                                          30000
                                                                   290000                                                                 290000
  • Stock /cash at hand (Sales)

4-1-2011 -Sold goods for cash shs 40000

Effects -stock reduced by sh 40000 and cash at hand increased by sh 40000  both are assets

Jaribu traders

Balance sheet

As at 4-1-2011

A                                                                                                                                                                               L+C

Cash at hand                                                  200000                Capital                                                        260000
Stock                                                                 90000Leah  creditors                                             30000
                                                                        290000                                                                     290000
  • Stock  and  debtors

5-1-2011 – Sold stock to mgala  sh5000 on  credit

Effects stock reduced by sh 5000 and  mgala debtors increased by sh 5000  both are assets

Jaribu traders

Balance sheet

As at 5-1-2011

A                                                                                                                                                                               L+C

Cash at hand                                           200000Capital                                                                   260000
Stock                                                          85000 
Mgala   debtors                                        5000Leah creditors                                                        30000
                                                                 290000                                                                                 290000
  
  • -Cash at hand and cash at bank

6-1-2011 opened a bank account and deposited cash sh 120000

Effects -cash at hand reduced by sh120000 and cash at bank increased by sh 120000 both are assets.

Jaribu traders

Balance sheet

As at 5-1-2011

A                                                                                                                                                                               L+C

Cash at hand                                           80 000Capital                                                                   260000
Stock                                                          85000 
Mgala      debtors                                      5000Leah creditors                                                        30000
 Cash at bank                                         120000                                                                                 
                                                                 290000                                                                                290000

                        G –Stock and bank

6-1-2011 – Sold stock and got a cheque of sh 20000

Effects stock reduced by sh 20000 and cash at bank increased by sh20000 both are assets

Jaribu traders

Balance sheet

As at 6-1-2011

A                                                                                                                                                                               L+C

Cash at hand                                           80 000Capital                                                                   260000
Stock                                                          65000 
Mgala       debtors                                      5000Leah creditors                                                        30000
 Cash at bank                                         140000                                                                                 
                                                                 290000                                                                                290000
  • Motor van and cash

7-1-2011 Bought a motor van and paid by cheque sh 90000

Effects motor van increased by sh 90000 and  cash at bank reduced by sh 90000 both are assets

Jaribu traders

Balance sheet

As at 7-1-2011

A                                                                                                                                                                               L+C

FA                            Capital                                                                   260000
Motor van                                                 90000CL
CALeah creditors                                                        30000
 Cash at bank                                         50 0000                                                                                 
 Cash at hand                                         80 000                                                                                
Stock                                                        65 000 
Mgala         debtors                                   5 000 
                                                                 290 000                                                                             290 000
  • Furniture and creditor

8-1-2011  Bought furniture for  the business worth sh 25000 from chama traders

Effects furniture increased by sh 25000 and chama furniture creditors increased by 25000

Jaribu traders

Balance sheet

As at 8-1-2011

A                                                                                                                                                                               L+C

FA                            Capital                                                                   260000
Motor van                                                 90000         CL                                                                     
Furniture                                                  25000Leah creditors                                                        30000
CA Chama furniture creditors                                  25000                                                                               
 Cash at hand                                         80 000                                                                                
Stock                                                        65 000 
Mgala     debtors                                      5 000 
 Cash at bank                                         50 0000 
                                                               315000                                                                               315000
  1. Land /cash /creditors

9-1-2011 Bought land for sh 60000 . first paid cash sh 40000 and balance to be paid later to lazo traders

Effects land increased by sh 60000 . cash reduced by sh 40000 and lazo land creditors increased by sh 20000

Jaribu traders

Balance sheet

As at 9-1-2011

A                                                                                                                                                                               L+C

                   FA 
Land                                                          60000                     Capital                                                                   260000
Motor van                                                 90000         CL                                                                      
Furniture                                                  25000Leah creditors                                                        30000
                 CA Chama furniture creditors                                  25000                                                                               
 Cash at hand                                         40 000  Lazo land creditors                                            20000                                                                             
Stock                                                        65 000 
Mgala        debtors                                   5 000 
 Cash at bank                                         50 0000 
  
                                                               335000                                                                               335000
  • Drawings /stock /cash

10-1-2011 The owner took stock worth sh 2500 and cash sh 3000 for own and family use.

Effects   drawings increased by sh 5500 and cash at hand reduced by sh3000  and stock reduced by sh2500

               Drawings will reduce capital since goods were not paid for and cash at hand was taken without offering goods or service to the business

                                                                                            Jaribu traders

Balance sheet

As at 10-1-2011

A                                                                                                                                                                               L+C

FACapital                                                                   260000
                  Minus Drawings                                                      5500
Land                                                          60000                      Net capital                                                            254500
Motor van                                                 90000         CL                                                                      
Furniture                                                  25000Leah creditors                                                        30000
                 CA Chama furniture creditors                                  25000                                                                               
 Cash at hand                                         37 000  Lazo land creditors                                            20000                                                                             
Stock                                                        62 500 
Mgala     debtors                                      5 000 
 Cash at bank                                         50 0000 
  
                                                               329500                                                                               329500
  • Investment /bank / furniture

11-1-2011 The owner deposited sh 30000  from personal sources into business bank and converted personal furniture worth sh 20000 into business property

Effects  Investments  increased by sh 50 000  cash at bank increased by 30 000 and  furniture increased by sh 20000. Cash and furniture are investment since they were introduced by owner to business and not bought.

     Jaribu traders

Balance sheet

As at 11-1-2011

A                                                                                                                                                                               L+C

                  FACapital                                                                   260 000
 Add Investment                                                      50000
 Furniture                                                  45000            Minus Drawings                                                      5500
Land                                                          60000                      Net capital                                                            304500
Motor van                                                 90000         CL                                                                     
 Leah creditors                                                        30000
                 CA Chama furniture creditors                                  25000                                                                                
 Cash at hand                                         37 000  Lazo  land creditors                                            20000                                                                              
Stock                                                        62 500 
Mgala      debtors                                     5 000 
 Cash at bank                                         80 0000 
  
                                                               379500                                                                               379500
  • Cash /profit/stock

12-1-2011 –Sold goods worth sh 10000 for cash sh 12000

Effects  Stock decreased by sh 10000  ,cash increased by sh 12000 and profits increased by sh 2000 since he sold goods at a higher price than the cost.

     Jaribu traders

Balance sheet

As at 11-1-2011

A                                                                                                                                                                               L+C

 Capital                                                                   260 000
                  FAAdd Profit                                                                 2 000
 Add Investment                                                      50000
 Furniture                                                  45000            Minus Drawings                                                      5500
Land                                                          60000                      Net capital                                                            306500
Motor van                                                 90000         CL                                                                     
 Leah creditors                                                        30000
                 CA Chama furniture creditors                                  25000                                                                                
 Cash at hand                                         49 000  Lazo land creditors                                            20000                                                                              
Stock                                                        52 500 
Mgala      debtors                                     5 000 
 Cash at bank                                         80 0000 
                                                               381500                                                                               381500

E) BANK LOAN , CASH AT BANK ,CASH AT HAND  AND CREDITORS

13-1-2011-Got a bank loan of sh 70000

14 -1-2011 –Paid lazo creditors  all his debt by cheque and settled part of leahs debt by cash sh20000

Effects 13 th   Bank loan increased by  sh 700000 and cash at bank increased by sh 70000

             14th lazo  creditors reduced by sh 20000 and cash at bank reduced by sh 20000  and leahs debt reduced by sh 20000 while cash at hand reduced by sh  20000

     Jaribu traders

Balance sheet

As at 11-1-2011

A                                                                                                                                                                               L+C

 Capital                                                                   260 000
                  FAAdd Profit                                                                 2 000
 Add Investment                                                      50000
 Furniture                                                  45000            Minus Drawings                                                      5500
Land                                                          60000                      Net capital                                                            306500
Motor van                                                 90000         LTL                                                                     
 Bank loan                                                               70000
                 CA      
 Cash at hand                                         29 000       CL                                                                   
Stock                                                        52 500  
Mgala                                                       5 000 Chama furniture creditors                                  25000                                                                               
 Cash at bank                                         130 000Leah creditors                                                        10000
  
                                                               411500                                                                               411500

Reading the balance sheet

1 Ending Capital or Owners equity

Opening capital +profit+investment-drawings

    260000+2000+50000-5500=306500

2 Working capital

   Wc = current assets-current liabilities

   Wc =(29000+52500+5000+130000)-(25000+10000)

   Wc  =216000-35000

     Wc =181500

3   Borrowed capital= LONG TERM LIABILITIES

       BANK LOAN =70000

4 CAPITALS  EMPLOYED

CE=FA+WC or CE=ENDING CAPITAL+LTL(BC)

 CE=   195000+181500

CE=376500

OR

CE=306500+70000

CE=376500

4.         (a) The following balance sheet was prepared  from the books of Makori traders.

Makori traders

Balance sheet

                                                                          As at 31st Dec 2011

                                                Sh                    sh                                                         sh                     sh

            Fixed assets                                                                 capital                                                 280,000

            Motor vehicle              600,000                                   long term liabilities

            Furniture                     80,000             680,000           bank loan (5 years)                              500,000

            Current assets                                                              short term liabilities

            Stock                           200,000                                   creditors                         280,000

            Cash                               60,000                                  bank overdraft                20,000          300,000

            Debtors                       140,000           400,000

                                                                        1,080,000                                                                    1,080,000

            The following transactions then took place in January 2012

            (i) Opened  a bank account for the business and deposited shs 120,000 from personal sources.

            (ii) Paid part of the bank loan shs 40,000 by cash.

            (iii) Bought goods worth shs 50,000 on credit.

            (iv) Sold part of the furniture worth shs 10,000 in cash

            Required:

            Prepare Makori traders balance sheet as at the end of January 2012.

                                                                                                (10 marks)

EFFECTS

I Cash at bank sh 120000

 investment sh 120000

II    Bank loan 500000- 40000  =460000

      Cash at hand 60000-40000=20000

III  Stock   200000+50000=250000

      Stock creditors         50000

1v  furniture  80000-10000=70000

      Cash at hand  20000 +10000=30000

                                    Makori traders

                                                           Balance sheet

                                                 As at 31st January 2012

            Fixed assets             sh             sh                                                       sh                       sh

            Motor vehicle      600,000                           capital                                                    280,000

                                                         Investment                                             120, 000

            Furniture              70,000        670,00          long term liabilities       

            Current assets                                              bank loan (5 years)                                  460,000                                   Stock           250,000√                                                       short term liabilities

            Cash                30,000                               creditors                            280,000

                               Stock creditors                   50,000

            Debtors           140,000                             bank overdraft                   20,000             350,000

            Bank                120,000

                                                            540,000

                                                        1,210, 000√                                                                     1,210,000

                                                                                                Each mark (√) 1 mark 10 x1=10 marks

BALANCE SHEET FOMAT                

                                                                              Name of the business      

                                                                                Balance Sheet

                                                                                As at (date)

                              Shs                  shs Fixed Assets Land                              xxxxx Buildings                        xxxxx Motor Vehicle                xxxxx Any other fixed assets   xxxxx   xxxxxx Current Assets Stock                               xxxx Debtors                            xxxx Bank                                 xxxx Cash                                 xxxx Prepaid Expenses            xxxx Accrued revenues            xxxx Any other current assets  xxxx   xxxxxx    
                                                  Xxxxxx
                                     Shs               shs   Capital                        xxxxx Add Net profit               xxxx Add additional invest.    xxx Less drawings               xxx Net Capital                                 xxxxx Long term liabilities Long term loans            xxxx Any other ltl                    xxxx       xxxx Current liabilities Creditors                      xxxx Short term loan            xxxx Accrued expenses       xxxx Prepaid revenues        xxxx  Bank ovedraft             xxxx        xxxxx                                                    xxxxxx
  

Reading a balance sheet /types of capital

  1. Ending capital / Network /owners equity
  2. Working capital (WC)
  3. Current Ratio or working capital Ratio
  4. Quick /Acid test ratio
  5. Rate of return on capital
  6. Borrowed capital
  7. Capital employed

Types of Capital

The capital in the business can be classified as follows

  • Capital Owned/Owner’s Equity/Capital invested; – this is the capital that the owner of the business has contributed to the business. It is the Net capital/Closing capital of the business (C = A – L)

OR ENDING CAPITAL = BC+NP+INV-DRAWINGS-LOSSES

  • Borrowed capital: – They are the long term liabilities of the business.
  • Working capital: – these are resources in the business that can be used to meet the immediate obligation of the business. It is the difference between the total current assets and total current liabilities    

Working Capital = Total Current Assets – Total Current Liabilities

  • CURRENT RATIO

   CURRENT ASSETS/CURRENT LIABILITIES

  • QUICK /ACID  TEST RATIO

 Current assets –closing stock

      CLOSING STOCK

  • Rate of return on capital

 Net profit  X100

  CAPITAL

  • Capital employed: – these are the resources that has been put in the business for a long term. i.e.

     Capital Employed = Total Fixed assets + Working Capital

Or

     Capital employed = Ending Capital  + Long term liabilities

(a) The following information was extracted from the books of Jumbo Traders for the year ended 31

            December ,2014

Jumbo Traders

Trial Balance

                                                                                    Dr                                  Cr

                                                                                    Sh.                                 Sh.

                Land and buildings                                     50,000

               Capital                                                                                             94,000

            Plant & machinery                                          20,000

            Motor Vehicles                                               30,000

             10 year Bank Loan                                                                            20,000

            6 year ICDC Loan                                                                            10,000

            Stock                                                               10,000

            Debtors                                                           6,000

            Creditors                                                                                             7,000

            Rent owing                                                                                          1,000

            Cash at Bank                                                   10,000

            Cash in hand                                                   2,000

            Drawings                                                         4,000

                                                                                    132,000                         132,000

  1. Required  prepare (i) a balance sheet for the year ended 31st December
  2.   Ending capital / Network /owners equity
  3. Working capital (WC)
  4. Current Ratio or working capital Ratio
  5. Quick /Acid test ratio
  6. Rate of return on capital
  7. Borrowed capital
  8. Capital employed

                                                                        (12mks)

Jumbo Traders

Balance Sheet

As at 31st Dec 2014

ASSETS FIXED ASSETS            Sh                sh Land and building      50,000Ö  Plant and machinery  20,000Ö Motor vehicles            30,000Ö         100,000   Current assets Stock                       10,000Ö Debtors                    6,000 Cash at Bank          10,000Ö Cash at    hand        2,000Ö               28,000 128,000CAPITAL AND LIABILITIES                                Sh                 Sh Capital                 94,000Ö Less Drawings     4,000Ö            90,000   Long-term liabs 10 Year Loan         20,000Ö 6 year ICDC Loan 10,000Ö         30,000 Current Liab Creditors                   7,000Ö Rent owing                   1,000Ö         8,000                                                       128,000

                                                                                                                                ( 14x ½ =7mks)

  1. ENDING CAPITAL

94000-4000= 90000

2  Working capital =current assets –current liabilities

=28,000Ö-8,000Ö

=20,000Ö    (4x ½ =2mks)

  • Current  ratio

CA

CL

28000=3.5 times

8000

   4     QUICK RATIO

CA-CLOSING STOCK

           CL

28000-10000=2.25

8000

(b) Capital employed =Fixed assets + working capital

OR

=capital + long term Liabilities

CE=FA+WC=100,000+20,000

=120,000                                                                                                                 4x ½ =1mk

OR

CE=C+LTL=90,000+30,000

=120,000

(c) Borrowed capital =long term liabilities

=20,000+10,000Ö

=30,000Ö

ASSIGNMENT                                                                                              (4x ¼=1mk

             (b) The following balances were extracted from the books of Mbili Traders for the year ended 31st

                                December, 2014.

                                                                                                                                                  Kshs

                        Stock                                                                                                   100,000

                        Capital                                                                                                800,000

                        Debtors                                                                                                               50,000

                        Creditors                                                                                              80,000

                        Cash                                                                                                     10,000

Net Profit                                                                                             10,000

Bank Overdraft                                                                                     70,000

Machines                                                                                               600,000

Furniture                                                                                              200,000

                        Required: Prepare  Mbili Traders balance sheet as at 31st December 2014. And work out the various balance sheet formulas                 (10mks)

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ACCOUNTING NOTES AND ASSGNMTS.docx


THE LEDGER

This is a book where transactions are recorded.

      An Account

   This is a page in the ledger where transactions are recorded.

Parts of an account

a)  Debit (Dr) – This is the left side of the account

b)  Credit(Cr) – This is the right side of an account

c)  Debiting – This is the recording of transactions on the  left side of the account.

d)  Crediting – This is the recording of transactions on the right side of an account.

Debit                                                       Title                                                                                Credit

Date Details Ratio Amount Date Details Folio Amount                

Date – Shows the date when the transaction occurred.

Details – Gives a brief description of a transaction.

Folio – This is a page in the ledger book.

Amount – shows the value of the transaction.

Title – brief /summary of the transaction.

Uses of the ledger account

           1   Show changes in the value of a given item

  • used  for future reference
  • show the exact value or balance of a given item
  • used to prepare the trial balance
  • assists in tracing errors

`T’ ACCOUNT

This is an account that does not show all the details but resembles letter `T’

Rules of entering transactions in ledger account summary

Account /ItemIncreasesDecreasesBalance
AssetsDrCrDr
ExpensesDrCrDr
LiabilitiesCrDrCr
CapitalCrDrCr
RevenueCrDrCr

The rule of double entry

It states that equal debit and credit amounts are required to record any transaction .

 Any total  amount debited must also be credited in other accounts.

Expenses

This is the cost of goods and services used by a firm in the process of getting revenue e.g.

  • Rent
  • Rates
  • Water
  • Carriage /transport in and out
  • Bad debts
  • Depreciations
  • Stationery
  • Printing
  • Salaries
  • Repair
  • Interest paid
  • Discount allowed

Revenues

Income got from the sale of goods and services e.g.

  • sales
  • commission received
  • discount received
  • rent received
  • interest received

Effects of transactions on the ledger accounts

        PROCEDURE

                 1Read the transaction

2Identify the items affected

3 Apply the rules of double entry

4Draw and label the accounts

5Enter the transaction using double entry rule

+

CHAMBITI TRADERS HAD THE FOLLOWING   TRANSANCTIONS  IN THE MONTH OF DECEMBER 2017

  1. Capital and cash at hand

1-12-17  Started a business with cash sh 280,000

Effects Capital increased by sh 280,000 hence credit the account

           Cash at hand increased by sh 280,000  hence  debit the account as an asset

      CR                                                       Capital account                                                                               DR

DateDetails Folio     AmountDateDetailsFolioamount
30-12-17Bal c/d 2800001-12-17Cash at hand 280,000
   280 000   280,00
        

DR                                                                 CASH AT HAND                                                                  CR

DateDetailsFolioamountDateDetailsFolioamount
1-12-17Capital 280,0002-12-17Purchases 120,000
4-12-17Sales   50,0006-12-17furniture 15 ,000
12-12-17investment   40,0008-12-17Cash at bank 70,000
19-12-17commission   7,00016-12-17salaries   3,000
    21-12-17Paty 18,000
    29-12-17Bal  c/d 151 000
   377000   377000
        
  • Purchases  and cash

2-12-17 Purchased goods worth cash sh 120,000

Effects Cash at hand decreased by sh 120,000 hence credit the account as an asset

                          Purchases increased by sh 120,000 as an asset hence debit the account as asset

      DR                                                      Purchases account                                                                               CR

DateDetails Folio     AmountDateDetailsFolioamount
2-12-17Cash at hand 120,00010-12-17Drawings 5000
3-12-17John creditors  30,000    
18-12-17Paty creditors 25,00029-12-17Bal  c/d 170000
   175,000   175000
        
  • Purchases and creditors

3-12-17  – Purchased goods worth sh 30,000 on credit from john

Effects      Purchases increased by sh 30,000 hence debited as stock/asset

                  John creditors increased by sh 30,000 hence credited as a liability/debt

      DR                                            John creditors account                                                                               CR

DateDetails Folio     AmountDateDetailsFolioamount
15-12-17Purchases  returns   40003-12-17Purchases 30,000
17-12-17Cash at bank 26000    
   30,000   30,000
        
  • Sales and cash

4-12-17 Sold goods for cash sh 50,000

Effects Sales increased by sh 50,000 hence as a revenue its credited

            Cash increased by sh 50,000 hence debited as an asset

            DR                                                 Sales account                                                                                          CR                                                                                                                                                                                                                                                      

DateDetails Folio     AmountDateDetailsFolioamount
29-12-17Bal c/d 105 0004-12-17Cash at hand 50,000
    5-12-17Chazu debtors 25,000
    9-12-17Cash at bank 30,000
   105 000   105 000
    30-12-17Bal b/f 105 000
  • Sales and debtors

5-12-17  Sold goods on credit for sh 25000 to chanzu

 Effects   Sales increased by sh25000 hence credited as revenue

                Chanzu debtors increased by sh 25,000 hence debited as an asset

                                                                                                                                                                         DR                                              Chanzu debtors  account                                        CR               

DateDetails Folio     AmountDateDetailsFolioamount
5-12-17Sales 25,00014-12-17Sales returns 3,000
    20-12-17Cash at bank 9,000
    20-12-17Discount allowed 1,000
    29-12-17Bal c/d 12,000
   25 000   25 000
30-12-17Bal b/f 12 000    
  • Furniture and cash

6-12-17   Bought furniture for cash sh 15000

            Effects Furniture increased by sh 15000 hence debited as an asset

                         Cash at hand reduced by sh 15000  hence debited as asset

         DR                                       Furniture  account                                                CR                                                       

DateDetails Folio     AmountDateDetailsFolioamount
6-12-17Cash at hand 15,000    
13-12-17Investment 7,00029-12-17Bal c/d 22 000
   22 000   22 000
30-12-17Bal b/f 22 000    
  • Motor van and creditors

7-12-17  Bought  a motor van for sh 90000 on credit from chango motors

Effects  motor van increased by sh 90000 hence debited as an asset

              Chango motors increased as a liability by sh 90000 hence credited

      DR                                      chango motors creditors                                                                               CR

DateDetails Folio     AmountDateDetailsFolioamount
29-12-17Bal  c/d 90 0007-12-17Motor van 90,000
   90 000   90 000
    30-12-17Bal b/f 90 000
        

      CR                                            motor van account                                                                               DR

DateDetails Folio     AmountDateDetailsFolioamount
7-12-17Motor van 90 00029-12-17Bal c/d 90 000
   90 000   90 000
30-12-17Bal  b/f 90 000    
        
  • Cash at bank and cash at hand

8-12-17   Opened a business bank account and deposited cash sh 70000

Effects cash at hand reduced by sh 70000 hence credited  as an asset

              Cash at bank increased by sh 70000 hence debited as an  asset

      CR                                            Cash at bank account                                                                               DR

DateDetails Folio     AmountDateDetailsFolioamount
8-12-17Cash at hand 70,00011-12-17drawings  8,000
9-12-17sales 30,00017-12-17John creditors 26,000
20-12-17Chanzu debtors   9,00028-12-17Bankloan 24,000
22-12-17Bank loan 60,00029-12-17Bal c/d 111000
   169, 000   169 000
30-12-17Bal b/f 111, 000    

      9  Sales  and bank

9-12-17  sold goods and got a cheque of sh 30000

              Effects  sales increased as  a revenue by sh 30000 hence credited

                           Cash at bank increased as an asset by sh 30000 hence debited

                           Nb both accounts are opened

     10 Drawings and purchases

10-12-17  The owner took stock worth sh 5000 for family use

               Effects Drawings increased by sh 5000 hence debited

                           Purchases  reduce by sh 5000 hence credited as an asset

      CR                                              Drawings   account                                                                               DR

DateDetails Folio     AmountDateDetailsFolioamount
10-12-17Purchases 5 00029-12-17Bal c/d 13 000
11-12-17Cash at bank 8 000    
   13 000   13 000
30-12-17Bal b/f 13 000    

     11 Drawings and cash bank

 11-12-17  owner cashed a cheque for sh 8000 for family use

               Effects Drawings increased by sh 8000 hence debited

                            Cash at bank reduced by sh 8000 hence credited as an asset

                            Nb both accounts are opened

     12 Investment and cash

12-12-17  Owner brought into business cash sh 40,000 from personal savings 

           Effects  Investments increased by sh 40,000 hence credited as capital

            Cash at hand increased by sh 40,000 hence debited as an asset

      CR                                              Investment  account                                                                               DR

DateDetails Folio     AmountDateDetailsFolioamount
29-12-17Bal c/d 47 00012-12-17Cash at hand 40,000
    13-12-17Furniture   7,000
   47 000   47,000
    30-12-17Bal b/f 47 000

   13  Furniture  and investment

13-12-17 Converted personal furniture into business use worth sh 7000

              Effects  investments increased by sh 7000 hence credited

                             Furniture increased by sh 7000 hence debited

                             Nb both accounts are opened

14 Sales returns and debtors (returns inwards debit note issued)

14-12-17  Chanzu returned goods worth sh 3000

              Effects  Sales returns increased by sh 3000 hence debited

                            Chanzu debtors reduced by sh 3000 hence credited as an asset

      CR                                              sales returns account                                                                               DR

DateDetails Folio     AmountDateDetailsFolioamount
14-12-17Chanzu debtors 3 00029-12-17Bal c/d   3 000
   3 000     3 000
30-12-17Bal b/f 3 000    
        

15 Purchase return and creditors (Returns outwards  debit note received)

15-12-17  Returned goods worth sh 4000 to john

                Effects purchases returns increased by sh 4000 hence credited as stock reduces

                              John creditors reduced by sh4000 hence debited as a liability

 DR                                                   Purchases  returns account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
29-12-17Bal c/d 4 00015-12-17John creditors  4 000
   4 000    4 000
    30-12-17Bal  b/f 4 000
        

16 Salaries and cash (expenses)

16-12-17  paid  salaries by cash sh 3000

                    Effects  salaries increased by sh 3000 hence debited as an expense

                                  Cash at hand reduced by sh 3000 as an asset hence credited 

DR                                                                    Salaries  account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
16-12-17Cash at hand 300029-12-17Bal c/d 3000
   3000     3000
30-12-17Bal b/f 3000    
        

17 Bank and creditors

17-12-17  Settled johns account by cheque in full ie sh 26000

              Effects cash at bank reduced by sh 26000 hence credited 

               John creditors reduced by sh 26000 hence debited as a liability

                 Nb both accounts are opened

18 PURCHASES AND CREDITORS

18-12-17  Bought  goods from paty  on credit sh 25,000

Effects paty creditors increased by sh 25000 hence credited as a liability

               Purchases increased by sh 25000 hence debited as an asset

DR                                                               Paty creditors  account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
21-12-17Cash at hand 18 00018-12-17purchases 25,000
21-12-17Discount received 2 000    
29-12-17Bal c/d 5 000    
   25 000   25 000
    30-12-17Bal b/f 5 000

19 Commission received  and cash

19-12-17 Got a commission of sh 7000 cash for offering services to a customer

                 Effects commission received increased by sh 7000 hence credited as a revenue

                               Cash at hand increased by sh 7000 hence debited

DR                                              commission received   account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
29-12-17Bal c/d 700019-12-17Cash at hand 7,000
   7 000    7 000
    30-12-17Bal b/f 7000
        

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20  DISCOUNT ALLOWED , DEBTORS AND CASH AT BANK

20-12-17   chanzu paid part his debt sh 10,000 less 10% discount by cheque

                  EFFECTS –cash at bank increased by sh 9000 and was debited

                                     Discount allowed increased by sh 9000 and was debited

                        Chanzu debtors reduced by sh 9000 and discount amount sh1000

DR                                              Discount allowed   account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
16-12-17Chanzu debtors 100019-12-17Bal c/d 1000
   1000   1000 
30-12-17Bal b/f 1000    
        

21  DISCOUNT RECEIVED CREDITORS AND CASH AT HAND

    21-12-17  Paid Paty cash sh 20,000 less 10% discount

                          Effects  paty creditors reduced by sh18,000 cash and discount of sh 2000 hence debited

                           Discount received increased by sh 2000 hence credited

                           Cash at hand reducedby sh 18,000 and was credited

DR                                              Discount received   account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
29-12-17Bal c/d 200021-12-17Paty creditors 2000
   2000   2000 
    30-12-17Bal b/f 2000
        

  22  BANK LOAN AND CASH AT BANK

22-12-17 Got a bank loan and deposited money on his account sh 60000

                      EFFECTS  Bank loan increased by sh 60000 hence credited as a liability

                                         Cash at bank increased by sh 60000 hence debited

DR                                                            Bank loan    account                                                                   CR

DateDetails Folio     AmountDateDetailsFolioamount
28-12-17Cash at bank 24,00022-12-17Cash at bank 60,000
29-12-17Bal c/d 36,000    
   60000   60000
    30-12-17Bal b/f 36 000

 23   BANK LOAN REPAYMENT AND CASH AT BANK

28-12-17  Repaid part of the bank loan by cheque sh 24,000

                    Effects the Bank loan reduces by sh 24000 hence debited

                                     Cash at bank reduces hence credited

                                        NB BOTH ACCOUNTS ARE OPENED

                                               CHAMBITI TRADERS

                                    TRIAL BALANCE AS AT 30-12-17

NAME OF ACCOUNTDEBITCREDIT
Capital Cash at hand Purchases Sales Chanzu debtors Furniture Motor vehicle Chango    creditors Cash at bank Drawings Investments Sales returns Purchases returns Salaries Paty creditors Commission received Discount allowed Discount received Bank loan  Total  151 000 170 000   12 000 22 000 90 000   111 000 13 000   3 000   3 000     1 000     576000  280 000     105 000       90 000     47 000   4 000   5 000 7 000   2 000 36 000 576000

Balancing ledger accounts

 Procedure

  • Total the amount on the debit side and credit side.
  • Find the difference /the balance.
  • Carry down the balance on the side with less amount.
  • Show totals on both sides .
  • Bring forward the balance on the side with more amount.

Debit balance

This where the total amount on the debit side is more than the total amount on the credit side.

Accounts with debit balances

  • All assets
  • Sales and returns
  • Drawings
  • Net loss
  • Discount allowed
  • Fixed assets
  • Current assets

Credit balance

This is where the total amount on the credit side is more than the total amount on the debit side.

Accounts with credit balances

  1. liabilities
  2. capital
  3. Investments
  4. Sales
  5. Purchase returns
  6. Net profits
  7. Discount received

Closed accounts

 Are accounts with nil or zero balances hence they are not shown on the trial balance. The totals on the debit and credit sides are equal.

Trial balance

This is a list of debit and credit balances got from ledger account at a particular date

Uses of  a trial balance

  • Check accuracy of posting transactions to the ledger
  • Check the arithmetic accuracy of ledger accounts
  • Provide account balances at year end
  • Check that debit and credit balances are in agreement
  • Summarizes the information in the ledger account
  • Facilitates the preparation of final accounts

ASSIGNMENTS

b)         Kivunja started business on 1st January 2017 with capital sh. 210,000 in cash.  The following transactions took place during the first week of the month:

            2017

            Jan 2:    Opened a bank account and deposited cash. Sh. 90,000

                  3:    Bought stock of goods Sh. 40,000 on credit

                  4:    Cash sales paid direct into the bank Sh. 12,000

                  5:    Paid rent Sh. 2,000 in cash

                  5:    Sold goods Sh. 21,000 payment received by cheque.

                  6:    Bought office equipment for Sh. 150,000 by cheque

                  7:    Received a commission from Taptok traders Sh. 1,000 cash

            Required:

            Prepare the relevant accounts, balance them off on 7th January, 2017 and extract a trial balance as at that date.                                                                                                        (12 marks)

(b)        The accounts of Hakuna Matata Traders showed the following balances on 1st January 2014.

                                                Sh.

            Cash                             250,000

            Debtors                         60,000

            Creditors                      42,000

            Stock                            30,000

            Bank loan                      120,000

            Motor vehicle              310,000

            The following transactions took place during the month of January 2014.

            Jan 2:                Bought stock worth Sh. 50,000 on credit.

            Jan 3:                Cash sales Sh. 80,000

            Jan 5:                Received Sh. 20,000 cash from debtors

            Jan 10:              Paid part of loan Sh. 70,000 cash

            Jan 12:              Paid creditors Sh. 52,000

            Jan 16:              Bought office furniture Sh. 45,000 cash

            Jan 20:              Paid salaries Sh. 40,000 cash

            Jan 25:              Deposited Sh. 100,000 into the bank

            Required:

      Record the above transactions in the relevant ledger accounts and balance the accounts on 31st January 2014.                                                                                                                                 (10marks)       

b)   The accounts Hakuna Matata Traders showed the following balances on 1st January 2014.10mks

DR                              PURCHASES A/C                                                     CR                                     2010                                                                2010

            Jan 2 creditors                         50,000ü          Jan 31st Bal c/d                                   50,000ü

            Jan 31 Bal b/d                          50,000                        

DR                                                       BANK A/C                                          CR

2010                                        SH                   2010                                                   

            Jan 25cash                                100,000ü         jan 31 bal c/d                            100,000ü

            Jan 31 b/d                                100,000

DR                                           CREDITORS   A/C                                          CR

2010                                        SH                               2010                            SH

            Jan 12 cash                               52,000 ü                     Jan 1 bal b/d                 42,000ü

            Jan 31 bal c/d                           40,000 ü                     Jan 2 purchases            50,000ü

                                                            92,000                                                             92,000

                                                                                                  Jan 31 Bal b/d               40,000

DR                                           STOCK A/C                                         CR      

       2010                                  sh

      Jan 1 bal b/d                       30,000 ü         bal c/d                                      30,000ü

       DR                                  MOTOR VEHICLE A/C                                            CR

      Bal b/d                               310,000ü                    bal c/d                          310,000ü

DR                                     CASH A/C                                                             CR

      2010                                              SH                               2010

      Jan Bal b/d                         250,000ü                     JAN 10 loan                 70,000ü

      Jan 3 sales                          80,000ü                      Jan 12 creditors            52,000ü

      Jan 5 Debtors                     20,000 ü                     Jan 16 furniture            45,000ü

                                                                                    Jan 20 salaries              40,000ü

                                                                                    Jan 25 bank                  100,000ü

                                                                                    Jan 31 BAL C/D           43,000ü

                                                350,000                                                            350,000

      Jan 31 bal b/d                     43,000

DR                                                 DEBTORS       A/C                                          CR

      2010                                  SH                               2010

      Jan 1 bal b/d                       60,000 ü                     Jan 5 cash                     20,000ü

                                                                                    Jan 31 bal c/d               40,000ü

                                                60,000                                                             60,000

      Jan 31 bal b/d                     40,000                        

DR                                                 BANK A/C                                           CR

      2010                                  SH                               2010                            SH

      Jan 10 cash                         70,000 ü                     Jan 1 bal b/d                 20,000ü

      Jan31 bal c/d                      50,000 ü                                

                                                120,000                                                             120,000

                                                                                    Jan 31 bal b/d               50,000

DR                                                 FURNITURE A/C                                CR

      2010                                  SH                   2010

      Jan cash                             45,000 ü                     Jan bal c/d                    45,000ü

      JAN Bal b/d                       45,000                        

DR                                                 SALARIES A/C                                    CR

      2010                                  SH                   2010                                        SH

      Jan 20 cash                         40,000 ü         bal c/d                                      40,000ü

      Jan 31 bal b/d                     40,000            

            (b)        Record the following transaction in the affected accounts and balance them off on 10th                              January 2015.                                                                                                              (10mks)

            2015

            January            1:         Start business with furniture worth Sh.130,000

                                    2:         Bought goods for Sh.50,000 on credit from Nyamwea.

                                    4:         Sold stock of goods for Sh.40,000 cash

                                    5:         Opened a bank account and deposited Sh.20,000 from cash till.

                                    6:         Obtained a loan from K.I.E Sh.30,000 by cheque.

                                    7:         Paid Nyamwea Sh.30.000 by  cheque.

                                    9:         Withdraw cash Sh.60,000 from bank for office use.

    b) Lurambi traders had the following transactions which took place for the month of March 2002

            1st Started a business with 90,000 in bank

            3rd Purchased furniture 5,000 by cheque

            5th purchased goods worth 20,000 and paid by cheque

            8th  sold goods worth 15,000 to Masinde  on credit

            10th withdrew shs, 10,000 from bank foe office use.

Prepare his ledger accounts balance them and extract a trial balance

            (b)        The following transaction belong to Kebareti traders for the month of april 2013

                        April 1st :stated business with Ksh. 45,000 in the bank

                                  3rd Bought stock on credit sh. 15,000 from Rotich

                                  4th Bought furniture sh. 5,000 by cheque.

                                  6th withdrew Sh 15,000 from bank and put it in business cash fill

                                  8th Paid cash sh. 5,000 for goods bought on credit from Rotich.

                                    9th sold stock on credit Sh. 9,000 to Joan

            Required :

            Prepare Kebeneti traders ledger account duly balanced.                                                        (12mks)

  • Ali had the following assets and liabilities as at 1.7.2009.

Cash at Bank             50,000

Debtors                      30,000

Creditors                    50,000

Stock                          20,000

Furniture                    35,000

                        Additional information:

                        July 2: Purchased stock worth Sh.16,000 on credit.

                               6: Sold some furniture for Sh.4,000 by cheque.

                             9: Received Sh.11,000 cash from debtors.

                             13: Sold stock Sh.10,000 paid by cheque.

                        Required:

                        Prepare the relevant ledger accounts.                                                                  (10 marks)

  • The follow balance sheet was extracted from the books of Uchumi enterprises on

1stDecember, 2015.

Uchumi Enterprises

Balance Sheet

As at 1st December, 2015

SH                      SH                                                                   SH

FIXED ASSET                                                                     Capital                              830,000

Premises                                             564,000           

                                                                                            SHORT TERM LIABILITIES

CURRENT ASSETS                                                             Creditor                           54,000

Stock                        280,000

Cash                            40,000               320,000.

                                                            884,000                                                                884,000

During the month of December, Uchumi Enterprises carried out the following transactions

December 2:- The proprietor sold her personal equipment for Sh.60, 000. She received payment in cash and invested it in her business.

“                 11:- Purchase goods for Sh.58, 000 on credit from Alpha distributors.

“                 19:- Returned goods worth Sh.6, 000 to Alpha Distributors after they were found

defective.

“                 24:- Sold goods for cash Sh.24, 000

“                 30:- She took away goods costing Sh.16, 000 for her domestic consumption.

Required:

  1. Record the above transactions in ledger accounts and balance off the accounts.
  2. Extract a trial balance as at 31st December, 2015.                                   (12 marks)

Limitations  of a trial balance or errors not disclosed by atrial balance or errors not affecting the agreement of atrial balance

Even when the trial balance totals are equal, it does not mean that there are no errors made in the ledgers. This is because there are some errors that do not affect the trial balance.

A trial balance only assures the book keeper that the total of debit entries is equal to total credit entries.

 The errors that do not affect the trial balances are;

                 I Error of total omission; This occurs when a transaction takes place and nothing about it is recorded in the books of accounts i.e. it is completely omitted such that neither a credit nor a debit entry is made in the ledgers.

             II  Error of original entry; this occurs where both the debit and credit entries are made using similar but erroneous figures. As the wrong amount is recorded in the two accounts.

         III  Error of commission; This occurs where double entry is completed but in the wrong persons accounts especially due to a confusion in names e.g. a debit entry of shs.2000 was made in Otieno’s account instead of Atieno’s account.

      IV  Compensating errors; These are errors whose effects cancel out e.g. over debiting debtors account by sh.300 and under debiting cash account by sh.300.

       V  Complete reversal of entries; This occurs where the account to be debited is credited and the account to be credited is debited e.g. the sale of goods to Lydia on credit may be recorded as follows;

Dr.sales a/c

Cr.Lydia a/c              instead of

Dr.Lydia a/c

Cr.sales a/c

  VI    Error of principle; This is where a transaction is recorded in the wrong account of a different class from the correct one e.g. repairs of machinery was debited in the machinery instead of debiting the repairs account.

Errors that may cause a trial balance not to balance or agree

  1. Partial omission of a transaction was recorded on only one account i.e. a debit or a credit entry might have been omitted in one of the affected accounts.
  2. Transferring (posting) a wrong balance to a trial balance.
  3. Different amounts for the same transaction might have been entered in the accounts(Amount Dr. different from amount cr)
  4. Failure to post a balance to the trial balance or omission of a balance from the trial balance.
  5. Posting a balance to the wrong side of the trial balance
  6. Recording a transaction on the same side of the affected account
  7. Arithmetic mistakes might  have been made when balancing the ledger accounts
  8. Arithmetic errors in balancing the trial balance

Types of Ledger Accounts

  1. Real Account –  This are accounts for tangible /visible assets e.g cash, furniture, land, buildings, machinery
  2. Personal account – This are accounts for debtors and creditors
  3. Nominal account – This are accounts for expenses and revenue, profits and loss
  4. Private account – Accounts where capital, drawings, investments are recorded

                                      L     E        D          G        E        R    S

                                        I                                                       I

PERSONAL ACCOUNTS                                                  IMPERSONAL ACCOUNTS

     I                           I                                                         I                     I                         I

DEBTORS                 CREDITORS                                                    REAL                  NOMINAL                PRIVATE        

     I                           I                                                   I      I                    I                         I

SALES                        PURCHASES                                         CASH    GENERAL      NOMINAL                  PRIVATE

LEDGER                    LEDGER                                                 BOOKS   LEDGER       LEDGER                       LEDGER

  1. Four accounts where changes in stock is recorded name their  ledgers and source documents.
  2. Purchases
  3. Purchase returns
  4. Sales
  5. Sales returns
  • Complete the table below by indicating the account to be debited and credited
TransactionDebitCredit
Started business with cash at bank  
Cash sales  
Paid business electricity using private funds  
Took cash for personal use  
Cashed a cheque for own use  
Converted personal furniture into business use  
Took stock for private use  
Started business with personal buildings worth sh. 10,000  
Got a bank loan sh. 4,000  
Gave a supplier a cheque  
Got cash from a credit customer  
A credit customer returned goods  
Returned goods to a credit supplier  
Withdraw cash from Bank for office use  
Took cash from the cash till to the bank  

State whether the following accounts have debit or credit balance.

AccountBalance
Cash at hand 
Salaries 
Prepaid expenses 
Rent owing 
Capital 
Drawing 
Net Profit 
Carriage in and out 
Sales returns 
Purchase returns 
Investment 
Discount allowed 
Discount received 
  • FINANCIAL STATEMENTS

They are prepared at the end of a firms trading period to determine the profit and losses of the business, and also to show the financial position of the business at a given time.

They includes;

1 A trading account,

2  A profit and loss account,

3 A trading profit and loss account

4   The balance sheet.

DEFINITION OF A TRADING OR ACCOUNTING PERIOD

A trading period is the duration through which the trading activities are carried out in the business before it decides to determine it performances in terms of profit or loss and viability. The period may be one week,  a month, six months or even a year depending on the type of the firm and the operations.

At  the end of the accounting period, the following takes place;

  • All the accounts are balanced off
  • A trial balance is extracted
  • Profit or loss is determined
  • The balance sheet is prepared

Determining the Gross profit or loss of a business

When a business sells its stock above the buying price or cost of  the stock, it makes a gross profit, while if it sells below it makes a gross  loss.

GP = NET SALES –COST OF SALES (BUYING PRICE)

In calculating the gross profit, the following adjustments are put in place

  • Return inwards/Sales return: –

These are goods that have  been returned to the business after being sold and  therefore they reduce the value of sales.

            Therefore Net sales = Sales – Return inwards

  • Return outwards/purchases return

 These are goods that had been bought from the suppliers  and have been returned to them

. It reduces the purchases and is therefore subtracted from the purchases to obtain the net purchases.

  • Carriage inwards/Carriage on purchases/Transport in

This is the cost incurred by the Trader in transporting the goods from suppliers up to their premises  . It is treated as part of the purchases, and therefore added to purchases to determine the actual value of purchases/Net purchases as goods  have not been sold.

Therefore Net Purchases = Purchases + Carriage inwards – Return Outwards

  • Opening stock  is the value of stock of goods in the firm at the beginning of the trading period,
  •  Closing stock  is the value of  stock of the goods not sold at the end of the trading period

Gross profit is therefore calculated as follows;

      Gross Profit = Sales – Return inwards – (Opening stock + Purchases + carriage inwards – Return outwards – Closing stock)

      Or

      Gross profit = Net sales – Cost of Goods Sold (COGS)

      COGS = Opening Stock + Net Purchases – Closing stock

Trading Account

This is prepared by the business to determine the gross profit/loss during that trading period

It takes the following format;

Name of the business

Trading Account

           Dr                                                    For the period (date)                                             Cr

                                       Shs                 Shs Opening stock                                    xxxxxx add Purchases                   xxx add Carriage inwards      xxx less Return Outwards      xxx……   XXXXX Goods available for sale                    xxxxxx Less Closing Stock                                xxx Cost Of Goods Sold (COGS)           xxxxxx Gross profit c/d                                    xxxx                                                            xxxxxx                                     Shs                    Shs Sales                             xxxxxx Less Return inwards          xxx Net sales                                          xxxxxx                                                                                 xxxxxx Gross profit b/d                           xxxx

The following balances were obtained from the books of timoTraders for the year ending may 31st 2010

                        Sales                                                     670 000

                        Purchases                                              380 000

                        Return inwards                                       40 000

                        Carriage outwards                                   18 000

                        Return outwards                                     20 000

                        Carriage inwards                                     10 000

Additional information;

  • The stock as at 1st June 2009 was shs 60 000, while the stock as at 31st May 2011 was shs 70 000

Required; Prepare Ramera Traders trading account for the period ending 31st May

2010

Ramera Traders

Trading Account

           Dr                 For the period ending 31/5/2010                                            Cr

                                       Shs                 Shs Opening stock                                       60 000 add Purchases              380 000 add Carriage inwards     10 000 less Return Outwards     20 000    Net purchases                                    370 000 Goods available for sale                       430 000 Less Closing Stock                              70 000 Cost Of Goods Sold (COGS)            360,000 Gross profit c/d                                 270,000                                                              630,000                                     Shs                    Shs Sales                             670 000 Less Return inwards      40 000 Net sales                                         630 000                                                                    630 000 Gross profit b/d                             270 000

Importance of a Trading account

  1. It is used to determine the gross profit/loss for a given trading period for appropriate decision making by the management.
  2. It is used in determining the cost of goods that was sold during that particular accounting period.
  3. It is used to reveal the volume of turnover i.e net sales
  4. May be used to compare the performance of the business in the current accounting period and the previous period
  5.  It can also compare its performance with other similar businesses
  6. It facilitates the preparation of profit and loss account, since the gross profit is carried forward to the profit and loss account.

NET PROFIT

The profit realized after the cost of all the expenses incurred have been deducted is what  is referred to as Net profit.

The net profit can be determined through calculation or preparation of a profit and loss account.

EXPENSES – Refers to the cost of goods and services used   by a firm to earn revenue. Eg salaries wages

INCOMES – Refers to the money got or realized from the sale of of goods and services by a firm eg sales, rent income , discount received

NET PROFIT= GROSS PROFIT – EXPENSES

OR

NET PROFIT = GROFIT – EXPENSES +OTHE INCOMES

Profit and Loss account

In preparation of this account, the gross profit is brought down on the credit sides, with all other revenues/income/loss of the business being credited and the expenses together with the net profit being debited.

Name of the business

Profit and Loss Account

Dr                           For the period (date)          Cr

                                                           Shs                       Expenses                                    Insurance                                            xxx Electricity                                          xxx Water bills                                         xxx Interest on loans                                 xxx Bad debts                                            xxx Insurance                                            xxx Repairs/  maintenance                        xxx Advertising                                         xxx Water/ electricity                              xxx Printing / stationery                           xxx Carriage Outwards                            xxx General expenses                               xxx Provision for Depreciation                xxxx Discount allowed                               xxx Commission allowed/exp                  xxxx Rent paid  /exp                                  xxxx Any other expense                            xxxx Net profit c/d                                      xxxx                                                        xxxxxx                                                          Shs Gross profit b/d                                 xxxxxx Discount received                                  xxx Rent income                                          xxx Commission received                            xxx Any other income received                    xxx                                                                        xxxxxx Net loss                                            ……………..                              xxxxxxxxx               

For example

The following information relates to Akinyi’s Traders for the period ending March 28th 2010. Use it to prepare profit and loss account.

Gross profit                             100 000                            Discount received           12 000

Salaries and wages                  20 000                              Power and lighting              10 000

Opening stock                         150 000                             Rent income                      10 000

Commission allowed                15 000                           Commission received         16 000

Repairs                                       10 000                      Discount allowed                    8 000

Provision for depreciation                  6 000               Carriage outwards                  4 000

Akinyi Traders

Profit and Loss Account

           Dr                                     For the period ending 28th March 2010                              Cr

                                                           Shs      Expenses                                    Power and lighting                      10 000 Carriage Outwards                       4 000 Salaries and wages                      20 000 Provision for Depreciation          6 000 Discount allowed                          8 000 Commission allowed                  15 000 Repairs                                        10 000 Net profit c/d                               65 000                                                  138 000                                                  Shs Gross profit b/d                         100 000 Discount received                       12 000 Rent income                                10 000 Commission received                  16 000                                                                    138 000 Net profit b/d                                      65 000

In case the expenses are more than the income, then the business shall have made a net loss, and the loss will be credited.

Net profit/loss can also be found through calculation as follows;

Net profit/loss = Gross profit + Total other revenues – Total expenses

For the above example;

Total other revenues = 12 000 + 10 000 + 16 000

                                      = 38 000

Total expenses = 10 000 + 4 000 + 20 000 + 6 000 + 8 000 + 15 000 + 10 000

                                     = 73 000

Therefore; Net profit = Gross profit + Total other revenues – Total expenses

                                    = 100 000 + 38 000 – 73 000

                                    = 65 000

(b) The following information was obtained from the books of Karanja traders for the year

      ending 31/dec.2003                                                                                                         ( 10mks)

                                    Kshs.

            Opening stock               20,000

            Purchases                    270,000

            Sales                            300,000

            Return inwards              15,000                      

            Closing stock                50,000

            Cariage on purchases   10,000           

  • Prepare his gross profit and loss account
    •  

3.         The following figures were extracted from Kipkelion stores for the month of October 2012

            Sales                                                    1,200 000

            Cost of sales                                            800,000

            Salaries and wages                                    200,000

              Electricity                                                   10,000

              Rent and Rates                                             5,000

            Office expenses                                               2,000

            Water bill                                                        2,000

            Transport                                                         3,000

            Motor vehicle expenses                                 16,000

            Require:

            (i)         Profit and loss account for the month ended  30th Oct.2012                                      (6mks)

Gross profit ………………………………………………………………………………… 20,000 Commission allowed …………………………………………………………………… 200 Carriage on sales ………………………………………………………………………… 4,000 Discount received ……………………………………………………………………….. 8,000 Salaries     …………………………………………………………………………………….. 6,000 Rent     ………………………………………………………………………………………….. 2,000 Discount revived ………………………………………………………………………… 400 Commission received ………………………………………………………………….. 1,500 Interest on bank loan …………………………………………………………………… 500  

The following transactions relate to the books of Amina traders as at 31st December 2015.

Prepare Amina‘s profit and loss account for the period ended 31st December, 2015.

                                                                                                                                                                                                        (5 marks)

Importance of Profit and Loss account

  • It shows the revenue earned, and all the expenses incurred during the accounting period
  • It used to determine the net profit/net loss of a given trading period
  • It is a requirement by the government for the purpose of taxation
  • May be used by the employees to gauge the strength of the business, in terms of its ability to pay them well
  • It is vital for the prospective investor in the business, in terms of determining the viability of the business
  • The creditors or loaners may use it to assess the business ability to pay back their debts
  • It is used by the management to make a decision on the future of their business.

Trading, Profit and Loss Account

This is the combination of trading account and trading profit and loss account to form a single document. It ends when the net profit/loss brought down has been determined. That is;

Name of the business

Trading, Profit and Loss Account

           Dr                                                                For the period  ended  (date)                              Cr                                                

                                       Shs                 Shs Opening stock                                   xxxxxx add Purchases              xxxxx add Carriage inwards      xxx less Return Outwards      xxx Goods available for sale                  xxxxxx Less Closing Stock                                 xxx Cost Of Goods Sold (COGS)            xxxxxx Gross profit c/d                                      xxxx                                                           Xxxxxx     Expenses   Insurance                                                xxx Electricity                                                xxx Water bills                                             xxx Carriage Outwards                                 xxx General expenses                                     xxx Provision for Depreciation                   xxxx Discount allowed                                     xxx Commission allowed                            xxxx Rent paid                                               xxxx Any other expense                                 xxxx Net profit c/d                                        xxxx                                                            xxxxxx                                     Shs                    Shs Sales                             xxxxxx Less Return inwards       xxx Net sales                                         xxxxxx                                                                       xxxxxx   Gross profit b/d                                     xxxx       Discount received                                  xxx Rent income                                          xxx Commission received                            xxx Any other income received                                                                                                                                         xxxxxx   Net profit b/d                                       xxxx

                                                                                                            Name of the business

Balance Sheet

As at (date)

                              Shs                  shs Fixed Assets Land                              xxxxx Buildings                        xxxxx Motor Vehicle                xxxxx Any other fixed assets   xxxxx   xxxxxx Current Assets Stock                               xxxx Debtors                            xxxx Bank                                 xxxx Cash                                 xxxx Prepaid Expenses            xxxx Accrued revenues            xxxx Any other current assets  xxxx   xxxxxx    
                                                  xxxxxx
                                     Shs               shs   Capital                        xxxxx Add Net profit               xxxx Add additional investt    xxx Less drawings               xxx Net Capital                                 xxxxx Long term liabilities Long term loan            xxxx Any other                     xxxx       xxxx Current liabilities Creditors                      xxxx Short term loan            xxxx Accrued expenses       xxxx Prepaid revenues        xxxx Any other                     xxxx        xxxxx                                                    xxxxxx

                                                   ————-

  1. Mark with a tick to indicate in the appropriate column the financial statement in which each of the items in the table below

would appear.                                                                                                                                                                              (4mks)

ItemTrading AccountProfit & Loss A/c.Balance Sheet
Opening stock   
Capital   
Carriage in   
Discount received   
Carriage out   
Cost of Sales   
Turn Over   
Bank Overdraft   

USES OF A BALANCE SHEET

  1. Show assets owned by a business
  2. Shows debts a business owes other firms (creditors)
  3. Shows sources of finance for a business
  4. Shows the liquidity of a business
  5. Shows the net worth of a business
  6. Can be used to get loans  from lenders
  7. Helps in decision making by owners or management

(b)     The following is the trial balance of Jomba traders as at 31-12-2011

 DRCR
Purchases and Sales700,0001,600,000
Returns 30,000     40,000
Discounts   50,000     35,000
Capital 862,000
Commission39,000     25,000
Carriage inwards 28,000 
Carriage outwards135,000 
Debtors and creditors400,000    300,000
salaries220,000 
Bank266,000 
Cash   94,000 
Buildings600,000 
Equipment 200,000 
Stock Jan. 1100,000 
 2,862,0002,862,000

  Additional information

Stock Dec. 31 was valued at shs.94, 000

Required

  • Prepare Trading and Profit and Loss Account
  • Balance sheet as at 31-12-2011

            (b)                                JOMBA TRADERS

                                    Trading and profit and loss account

                                    FOR THE PERIOD ENDED 31-DEC.2011

Opening stock  100 000üsales 1 600 00ü
Add:  purchases  700 000üLess returns inwards      30 00ü
   800 000 1,570,000
Add carriage inwards    28 000ü  
   828 000  
Less returns outwards    40 000ü  
Goods available  788 000  
Less closing stock    94 000ü  
Cost of sales  694 000  
Gross profit  876 000ü 
 1570 000 1 570 000
  
Discount allowed  50 000üGross profit b/d876 000ü
Commission paid  39 000üDiscount received  35 000ü
Carriage outwards135 000üCommission received  25 000ü
Salaries220,000ü  
Net profit492 000üü  
 936 000 936 000

        30 x ⅓ = 10 marks

                            JOMBA TRADERS

                          BALANCE SHEETü

                          AS AT 31/12/2011

Fixed Assets Capital   862 000ü 
Building600 000üAdd net profit   492 000ü 
Equipment200 000ü 1 354 000 
             800 000   
Current Assets    
Debtors400 000üCreditors  300 000ü 
Bank266 000ü   
Cash 94 000ü   
stock   94 000ü   
            854 000  
          1,654,000 1,654,000ü 

                                                                                    30 x ⅓ = 10 marks

  • 5(a)     The following Trial Balance was extracted from the books of omba Traders on 31st December 2015.

                                                               Omba Traders

                                                               Trial Balance

                                                          As at 31/12/2015

 SHSSHS
Capita and drawings32,500250,000
Stock (1/1/2015)46,100 
Sales and purchases284,400415,300
Return inwards and return outwards3,6006,700
Carriage inwards27,900 
Carriage outwards10,000 
Wages and salaries47,200 
Furniture25,000 
Motor vehicles60,000 
Debtors and creditors48,50052,800
Bank29,100 
Cash600 
Discount received and allowed3,4001,900
General expenses31,700 
Premises100,000 
Rent 23,300
 750,000750,000

Closing stock was Sh. 55,300

REQUIRED

Prepare omba Trader’s Trading, profit and loss account for the period ended 31st December 2015, and a Balance Sheet as at that date.                          (15 marks)

4.       The following trial balance was extracted from the books of Ouma traders

as at 31/12/2012.

 Dr. (Shs.)Cr. (Shs.)
Opening stock30,000 
Purchases/sales275,000390,000
Debtors47,000 
Commission received 36,000
Returns10,0006,000
Carriage inwards16,000 
Bad debts3,000 
Wages20,000 
Rates12,000 
Buildings450,000 
Furniture180,000 
Bank overdraft 210,000
Insurance19,000 
Discounts5,0007,000
Drawings25,000 
Creditors 52,000
Cash at bank250,000 
Cash at hand40,000 
Capital689,000
 1,390,0001,390,000

                                                2                                             

Additional information:

1.       Closing stock  Sh.50,000

2.       Carriage outwards Sh.  8,000

          Required:

  • Prepare Ouma traders trading, profit and loss account for the

period ended 31/12/2012.

  • Balance sheet as at 31/12/2012.                                                          (10 marks)
  • The following information was extracted from the books jamaa traders

Traders as at 31st December 2009.

 Shs.
Bank loan567,000
Bank loan interest1,440
Capital1,680,000
Closing stock87,000
Creditors272,400
Debtors140,280
Discount allowed170,400
Electricity30,240
Furniture489,804
Furniture repairs86,436
Gross profit624,720
Maintenance on premise72,000
Motor vehicle1,080,000
Motor vehicle maintenance360,000
Premise648,000
Rent received144,000
Sundry expenses122,520

                        Prepare;

  • Profit and loss account for the year ended 31st December 2009
  • Balance sheet as at 31st December 2009.                                                 (10 marks)

USES OF A TRADING PROFIT AND LOSS A/C

  1. Shows the profit of a firm
  2. Used to make decision
  3. Can be used to borrow money from banks
  4. Shows sources of income/revenue of a business
  5. Shows the areas of expenditure/expenses and CoGS
  6. Used to compare the financial performance in various years
  7. Shows the types of business a firm is involved in i.e. purchases
  8. Shows the viability of the investment
  9. Business determines COGS.

FINAL RATIOS

Formulas from the trading A/C

GP = SALES – COGS/COS

GP=EXPENSES + NET PROFIT

COGS = OS + P – CS

COGS = SALES – GP

N.PURCHASES = COGS + CS – 0S

NP=PURCHASES + Cariage In – Purchase Returns

Net sales = Turnover

Net sales= G.P + COGS

Net sales= Sales – Sales returns

Expenses = GP – NP

BASIC FINAL RATIO/ FORMULAS

  1. Mark-up % = G.P x 100

                                    COGS

            i.e GP as a % of COS

  • Margin % = GP  x 100

        Sales

             i.e. GP as a % of Turnover

                      Gross profit ratio

  • Net profit % =  Net profit    x 100

    Net sales

            Net profit as % of net sales

  • Average stock = OS + CS

                                              2

  • Rate of stock turnover = COGS 

 AS

  • Rate of return on capital = Net Profit  x 100

   Capital

  •   Return on capital employed = NP  x 100

CE

  •   Current Ratio = CA 

       CL

           Quick / Acid test ratio = CA – CS

                                                           CL

  •    Creditors Ratio = Creditors x 365 days

           Purchases

  1.      Debtors Ratio = Debtors  x 365 days

                                             Sales                

Relationship between margin and mark-up

Since margin and mark-up are all the expression of Gross profit, it is possible to change one to the other.

  • Changing mark-up to margin

Mark-up can be changed to margin as follows:

  1. Convert the mark-up percentage as a fraction in its simplest form.
    1. Add the value of the numerator of the fraction to the denominator to come up with the new fraction (margin fraction) that is

If the mark-up fraction =

Margin fraction =

  • Convert the margin fraction as a percentage to obtain margin
    •  
MARK UPMARGIN                              %
1 2=  1                            2+1         3                            33.3%
1 3   1     =   1                            3+1         4                             25%
2 32         =  2                            3+2         5                            40%
3 53        =  3 5+3        8                             37.5%
  • Changing margin to mark-up
  • Convert the margin percentage as a fraction in its simplest form
  • Subtract the value of the numerator of the fraction from the denominator to come up with the new fraction (mark-up fraction) that is

If the margin fraction =

Mark-up fraction =

  • Convert the margin fraction as a percentage to obtain mark-up
MarginMark –up                                %
1 31         = 1 3-1        2                              50%
1 41         =   1 4-1           3                           33.3%
2 52          =  2 5-2            3                           66.6%
3 73          = 3 7-3          4                            75%

Importance of Financial Ratios

  • Mark up and margin helps in the following; setting the selling price, calculating  profit or losses and determining the sales for a given period of time
  • Final  ratios are useful in analyzing the financial position of a business which helps in making investment decisions
  • Working capital and acid test ratio help in showing whether the business is in a position to meet its short term obligations and checking whether the business is utilizing its resources properly. That is high working capital ratio shows that most of the resources are idle
  • Return on capital shows the following;
  • The performance of the business in relation to other similar businesses
  • Comparison of the performance of the business over different periods
  • Whether the business finances have been invested or not
  • Help the potential investors on the decision on where to invest
  • Rate of stock turnover also help in determining how fast or slow the stock is moving. It also helps in computing the gross profit or loss.

EXAMPLE

 b)        The following information was extracted from the final accounts of Suba traders on

31st Sept 2012.

                                                                                    Sh.

                                    Sales                                        150,000

                                    Purchase                                  65,000

                                    Stock(2/9/2011)                      18,000

                                    Fixed assets                             100,000

                                    Current assets                          45,000

                                    Current Liabilities                   37,000

                                    Total expenses                        10,000

                                    Stock (31st Sept 2012)             12,500

Calculate the following financial ratios;

i) Margin                                                                                                                                 (3mk)

ii) Mark up                                                                                                                              (2mk)

iii) Return on capital                                                                                                               (2mk)

iv) Working capital ratio                                                                                                        (1mk)

v) Rate of stock turn over.                                                                                                      (2mks)

i) Margin

                   Margin = gross profit x 100

                                   Net sales

                        Gross profit = sales – cost of goods sold

                                                = sh. 150,000 – sh(18,000 + 65,000 – 12,500)

                                                = sh.150,000 – sh. 70,500

                                                            = sh. 79,500

                                    Margin =

                                       = 53%

                                                                                                                                                            ii) Mark up

                        Mark up = gross profit              x 100

                                       Cost of goods sold

                                                =

                                                = 112.77%

                                                = 113%

iii) Return on capital

                                    Net profit x 100

                                    Capital employed

                        Net profit = gross – total expenses

                                    = sh. 79,500 – sh. 10,000

                                    = sh. 69,500

                  ==      69500×100

                      100000 +8000

                  ==        64.4%

iv) Working capital ratio=  ca

                                            cl

                                                              45000  =   1.22:1

                                                              37000

v) Rate of stock turn over.= COGS   =  70500

                                               AS           15250

                                          ROST0=4.623 TIMES

3.         (a) Chapa kazi traders had the following balances as at 31st March 2013.

                                                                        Shs.

            Capital                                                 20,000

            Sales                                                    140,000

            Purchases                                            90,000

            Closing stock                                      70,000

            7 year bank loan                                  30,000

            Insurance expenses                             25,000

            General expenses                                12,000

            Debtors                                               25,000

            Creditors                                             75,000

            Cash at bank                                       20,000

            Cash in hand                                       10,000

            Premises                                              95,000

            Calculate

            (i) Mark up                                                                                                                              (2 mark)

            (ii) margin                                                                                                                               (2 marks)

            (iii) Rate of stock turn over.                                                                                                    (2 marks)

            (iv) Return on capital                                                                                                             (2 marks)

            (v) Current ratio.                                                                                                                     (2 marks)

3.         (a) (i)   mark up = gross profit

                                        Cost of sales

            Cost of sales = opening stock + purchases – closing stock

                                  =160,000 + 90,000- 70,000

                                =180,000√√

            Gross profit = sales – cost of sales

                                =240,000 – 180,000 = 60,000√

            Mark up = 640,000 x100 = 33 1/3%√

                              180,000

                                                                                                                                    4 ticks x ½ = 2 marks

            (ii) Margin =gross profit x100

                                    Sales

                                                60,000 x100 = 25%√

                                                240,000 √

            Alternative method

            Mark up                                              margin

            1/3                                                        1    =1/4 = 25%

                                                                        3+1

                                                                                                                                    4 ticks x ½ = 2 marks

            (iii) Rate of stock turnover = cost of sales

                                                            Average stock

                        Average stock = opening stock + closing stock

                                                                        2

                                                160,000+ 70,000 = 230,000 = 115,000

                                                        2  √                       2

            Rate of stock turnover =180,000 = 1.565 times √√

                                                    115,000√

                                                                                                                                    4 ticks x ½ = 2 marks

            (iv) Return on capital  = net profit          x 100

                                                     Capital

            Net profit = gross profit – expense

                            = 60,000 – (25,000 +12,000)

                            = 60,000 – 37,000 = 23,000√

            Capital employed = total assets – total liabilities.

            Total assets

            Premises                      95,000

            Closing stock              70,000

            Cash at bank               20,000

            Cash in hand               10,000

            Debtors                       25,000             220,000

            Less total liabilities

            7 year loan                  30,000

            Creditors                     75,000             105,000                       115,000√

            Return on capital employed = 23,000 x100

                                                            115,000

                                                            = 20%√√

                                                                                                                        4 ticks x ½ = 2 marks

            (v) Current ratio= current assets

                                         Current liabilities

            Current assets

            Stock                           70,000

            Debtors                       25,000

            Cash at bank               20,000

            Cash in hand               10,000                         125,000√

            Current liabilities

            Creditors                     75,000

            Current ratio = 125,000√ = 5:3 ≈ √√   2:1

                                     75,000

JAMBO WHOLESALERS HAD THE FOLLOWING ON 31-12-2005

SALES                                         500,000

PURCHASES                              320,000

OPENING STOCK                      80,000

CLOSING STOCK                      40,000

DEBTORS                                  140,000

 CREDITORS                               90,000

  EXPENSES                                   3,000

  • CALCULATE –
  • MARGIN
  • MARK UP
  • NET PROFIT
  • AVERAGE STOCK
  • RATE OF STOCK TURNOVER
  • RATE OF RETURN ON CAPITAL  
  • Quick or acid test ratio
  • Current ratio
  • Creditors ratio
  • Debtors ratio    

EXAMPLE II

            The following information relate to Subra traders for the year ended 31st Dec. 2012.

                        Opening stock                                     sh. 16000

                        Sales                                                           71,000

                        Profit margin                                               20%

                        Expenses                                             sh. 10,000

                        ROSTO                                               4 times

                        Required :      

               1 cost of goods sold

  • Average stock
  • Closing stock
  • gross profit
  • Net profit                                                                          (10mks)

3.         a)         (i)         Rate of stock turn over (4 times) =

                            20  =  GP x100  

                                      71 ,000

                        (iii)       Rate of stock turn over 4 =

                        Average stock x 4 = shs 568,000

                        Average stock = shs 568,000 4 = 142,000

                        (iv)      

                        (i)         Gross profit = sales –  cost of sales

                                                            = shs 710,000-shs 568,000=142,000

                        (ii)        Net profit = Gross profit – expenses

                                                =shs 142,000 – shs 100,000 = shs 142,000

b)       The following information relates to Ingo Traders as at 31st December 2015.

                                                    Shs.

Purchases                        400,000

Stock 1-1-2015               150,000

Stock 31-12-2015           50,000       

Mark up                         25%

Capital                           187,500

Expenses                        40% of Gross profit

  1. Turnover
  2. Net Profit
  3. Rate of Stock turnover
  4. Return on capital

11. The following relates to Juma traders

                          Sales                  600,000

                         Opening stock   40,000

                         Closing stock     25%  of C.O.G.S

                          GROSSPROFIT MARGIN  20%

    CALCULATE     –     G.P

                                    C.O.G.S

                                   PURCHASES

12.  The following relates to butere traders

                          Net sales         220, 000

                         Margin             25%

                        R.O.S.TO           5 Times

                      Expenses            20,000

            Calculate       G.P

                                   C.O.G.S

                                   N.P

                                   Average stock

13  The following relates to Dino traders

  Sales                    150,000

 Opening stock       25,000

 Margin                   20%

 Purchases            130,000

          Required prepare his trading account

14   Sagala traders  had the following on 31-12-2013

           R.O.S.T.O           4    TIMES

          Margin                20%

          Expenses            5% of turnover

          Opening stock   80,000

         Closing stock     120,000

          Capital                800,000

Calculate     GP

                        Purchases

                        Sales

                        Rate of return on capital

15.  Jawabu  traders had the following

            Opening stock                  –          60,000

            Gross profit                        –          80,000

            Rate of turnover               –          4 times

            Margin                                 –          2/5

            Calculate –  COGS

                                  Closing stock

16. Wathii  enterprises had the following 31/12/2008

            Turnover                             150,000

            Stock 1/1/2008                   20,000

            Purchases                            120,000

            Debtors                                  50,000

            Stock 31/12/2008               20,000

            Creditors                               40,000

Calculate – Margin

                     Working capital

                     R O S T O

17.The following relates to Jacob traders

            Opening stock                  30,000

            Closing stock                     10,000

            Turnover                            300,000

            Margin                                 25%

            Determine  –  GP

  • Purchases

18. Matata traders had the following in his books

            Rate of return on capital employed              20%

            Fixed assets                                                            600,000

            Current  Assets                                                      100,000

            Current Liabilities                                                             40,000

            Determine – Working capital

                                    Net profit

19.   XYZ  traders had the following on 31/12/2009.

            GP                                                      80,000

            Opening stock                              40,000

            Margin                                             16%

            Returns inwards                           30,000

            RODTO                                            6 times

            Determine  –          Sales

  •          Closing stock

20. The following relates to Raha traders

            Opening stock      –          50,000

            Sales                          –          360,000

            GP                              –          25% of sales

            Closing Stock        –          80,000

            Calculate   –     COGS

  • ROSTO

21.  Complete the table below relating to a balance sheet

COCEBCFAWCCLCA
16,000110,000255,00048,00063,000
450,00020,000150,00025,000175,000

The following relates to watu traders on 31/12/2010

            Sales                                      60,000

            Stock 1/1/2010                 10,000

            G.P.                                          4,000

            Stock  31/12/2010            16,000

Prepare his trading a/c

  •  Give the definition of the following terms:
  • Debiting
  • Folio
  • Double entry
  • Crediting
  • Explain five benefits of the following to a firm
  • Cash book
  • Ledger A/Cs
  • Trial balance
  • Financial statements
  • The following relates to Chavakali Traders in the month of February 2009.

Feb.     1     Started business with cash 100,000 bank 50,000

            2       Bought stock for cash shs. 15,000

            4       Sold stock and got a cheque shs. 12,000

          10     Bought goods for shs. 20,000 on credit from Juma

          15     Sold goods on credit to Ingo shs. 3,000

          20     Returned goods for shs. 2,500 to Juma

          21     Ingo returned goods shs. 500

          22     Bought furniture gave a cheque shs. 13,000

          23     Bought building on credit shs. 25,000 from Iddi

          24    Took stock for shs. 3,000 for family use

          26    Withdrew from Bank shs. 2,000 for family use

          27    Paid Juma by cheque shs. 4,000 less 10% discount

          28    Converted personal vehicle into business use shs. 30,000

Required : Ledger accounts, balance item and extract a Trial balance.

  •  The following information relates to Chavakali traders

Drawings                                                                10,000

Cash                                                                           45,000

Bank                                                                          30,000

Debtors                                                                    50,000

Purchases / Stock                                                48,000

Sales returns                                                          5,000

Discount allowed                                                 4,000

Capital                                                                     191,600

Carriage in                                                             4,500

Sales                                                                          70,000

Investment                                                             15,000

Prepaid expenses (Salaries)                              30,000

Unpaid rent                                                                       2,000

Commission income due                                               2,500

Commission Income received in advance   3,400

Discount received                                                           2,000

                Required:  Prepare his Trial Balance

  •  The following information relates to Mudete traders for the year ended 2009.

Turnover                                         270,000

Margin                                             40%

Rate of turn over                          6 times

Expenses                                          40,000

     From the information above, calculate:

  1. Gross profit
  2. Cost of goods sold
  3. Net profit
  4. Average stock

                           SOURCE DOCUMENTS AND BOOKS OF ORIGINAL ENTRY

 SOURCE DOCUMENTS

These are documents containing financial information of business transactions and they act as evidence that the transaction actually took place mainly in home trade.

 They include

  • A receipt: – a document that shows that cash as been received or paid out of the business either in form of cash or cheque.
  • AN Invoice: – a document issued to demand for payments when the transaction was done on credit . 

The invoice will be used to record the information on credit purchases and credit sales

  • A Credit note: -used to correct any overcharge that may have taken place  when goods are returned to the business by the customer or the business return goods to the supplier.  It will be used to record information in the purchases return journals, or  the sales return journals/diaries
  • A Debit note: – a document used to correct an undercharge that may have taken place to inform the debtor to pay more. It therefore acts as an additional invoice
  • Payment voucher: – a document used where it is not possible to get a receipt for the cash/cheque that has been received or issued. The person being paid must sign on it to make it authentic. It is therefore used to record information just as receipts
  • BANK DEPOSIT SLIP – Shows money that has been deposited at the bank account directly by the payer
  • CONSIGNMENT NOTE– Shows the transport charges that have been paid to the transport company
  • A STATEMENT OF ACCOUNT– A Summary of all transactions between buyer and seller and shows the payments made and balance owed to the seller in a given period.
  • MINUTES – written resolutions by the management authorizing and allocating a given sum of money to be spent on a  given project ‘
  •  AUTHORITY TO INCUR EXPENDITURE –  The manager is allowed or permitted in written to spent a given  sum of money without consulting the management of the organization .
  • BANK STATEMENT – It shows cash that has been deposited and withdrawn from the bank and the balance.

Books of original entries/Journals/Diaries/day’s books/Subsidiary books

  • These are books where transactions are first recorded as they occur before they are posted to their respective ledger accounts.
  • The financial information in the source documents is used to make entries in these books.
  • Posting is where  transactions are transferred to the ledger using double entry from the day books.

The books of original entries include:

  • Sales journals
  • Sales return journals/Return inwards journals
  • Purchases journals/creditors journals/bought journals
  • Purchases return journals/return outwards journal
  • Cash receipt journals
  • Cash payment/cash disbursement journals
  • Three column cash book
  • The petty cash book
  • Analysis cash book
  • General journals/journal proper

Uses  or benefits of Journals or subsidiary books

  • Used to record transactions when they first occur
  • They record more details about the transaction that are not found in the ledger
  • They facilitate tracing of errors
  • They facilitate the preparation of control accounts
  • They help to curb fraud and promote efficiency, since they are prepared by different people from the ones handling ledgers
  • They reduce a lot of details to be recorded in the ledger accounts.
  • Act as back-up data from which other information may be extracted if need arise.
  • Used for future  reference as they Contain information such as units, trade discounts
  • Sales journals
  • This is used to record credit sales of goods to debtors.
  • The  outgoing invoice/invoice issued is used to record the information in this journal.
  • The  total in the sales journal is credited to sales account in the general ledger  
  • Individual debtors account in the sales ledger are debited.
  • The format is as follows

Sales journal

DateParticulars/detailsInvoice noLedger folioamount
     

Example:

The following information relates to Tirop traders for the month of June 2010

          June   1: Sold goods to wafula on credit of ksh 200, invoice no 0114

2: Sold to the following debtors on credit; Wanjiru ksh 400, Musyoka ksh 300,    Wafula ksh 300

5: sold goods on credit to Wanjiru of ksh 300

10: Sold goods to the following on credit Kanini ksh 100, Wafula ksh 500, Wanjiru ksh 600

12: Sold goods on credit to musyoka of ksh 350

          Required:

Prepare the relevant day book for the above transactions; hence post the various amounts to their respective individual accounts

Sales journal

DateParticulars/detailsInvoice noLedger folioamount
June 2010: 1 2 2 2 5 10 10 10 12 15  Wafula Wanjiru Musyoka Wafula Wanjiru Wanjiru Wafula Kanini Musyoka Totals posted to the sales account (Cr)  0114                      SL SL SL SL SL SL SL SL SL  
GL
  200 400 300 300 300 600 500 100 350   3050

(Post the rest to their individual debtors account)

  • Sales Return Journals/Return inwards journals
  • This is for recording the goods that the customers/debtors have returned to the business.
  • It uses the credit note issued as a source document to prepare it.
  • The total  is therefore recorded in the return inwards account in the general ledger,
  • The individual’s entries are credited  in their respective debtors account .
  • It takes the following format

Sales return journal

DateParticulars/detailsCredit note noLedger folioamount
     

For example;

Record the following transaction for the 2007 in their relevant diaries, hence post them to their respective ledger accounts;

May 1: goods that had been sold to M Okondo of shs 2600 on credit was returned to the business

    “   2: G. Otuya returned good worth shs 1320 that was sold to him on credit to the business

  “    8: the following returned goods that had been sent to them on credit to the business H Wati shs 3500, Muya shs 4700 M Okondo shs 2900

  “    12: G Otuya returned goods worth shs 5400 that were sold on credit to the business

   “  30: Goods worth sh 8900 that had been sold on credit to G Otuya were returned to the business

Sales Return journal

DateParticulars/detailsCredit note noLedger folioamount
May 2007: 1 2 8 8 8 12 30  M Okondo G Otuya H Wati Muya M Okondo G Otuya G Otuya Totals posted to Return Inwards a/c (Dr)                 S.L S.L S.L S.L S.L S.L S.L  
GL
  2600 1320 3500 4700 2900 5400 8900   29320

(Post the entries to the individual ledger a/c’s (Cr))

  • Purchases Journal
  • This is used to record the credit purchase of goods for resale or stock
  • The totals are then debited in the purchases account in the general ledger,
  • The individual creditors accounts are credited.
  • It used the invoices received/incoming invoices as it source document.
  • It takes the following format;

Purchases journal

DateParticulars/detailsInvoice noLedger folioamount
     

For example

The following information relates to Mikwa Traders for the month of April 2011. Record them in their relevant day’s book, hence post the entries to their relevant ledger accounts.

April 2011;

          “ 2.  Bought goods worth shs 25 000 on credit from Juma, Invoice no 3502

            3.  Bought goods worth shs 16 500 from kamau on credit, invoice no 2607

            6.  Bought goods worth shs 12 700 from Juma on credit, invoice no 3509

    8.  Purchased goods of shs 25 200 from juma, invoice no 3605; shs 17 500 from Kamau, invoice no 3700; shs 45 000 from Wamae wholesalers, invoice no 3750

  15.  Purchased goods of shs 9 200 from Wamae wholesalers on credit, invoice no 3762

  18.  Bought goods of shs 17 000 from Kamau on credit, invoice no 3802

  24.  Purchased goods of shs 36 000 from Juma suppliers on credit, Invoice no 3812

Purchases Day book

DateParticulars/detailsInvoice noLedger folioamount
April 2011: 2 3 6 8 8 8 15 18 24    Juma Kamau Juma Juma Kamau Wamae Wamae Kamau Juma Totals posted to the Purchase account (Dr)  3502 2607 3509 3605 3700 3750 3762 3802 3812      PL PL PL PL PL PL PL PL PL  
GL
  25 000 16 500 12 700 25 200 17 500 45 000 9 200 17 000 36 000   204100

(Post the individual entries to their relevant accounts in the ledger (crediting))

  • Purchases Return Journals/Return outwards Journals
  • This is used to record goods that have been returned to the creditors by the business,.
  • It uses the credit note received as the source documents,
  • With the totals being in the purchases return account
  • The individual creditor’s accounts are debited in their respective ledger accounts.
  •  It takes the following format

Purchases return journal

DateParticulars/detailsCredit note noLedger folioamount
     

For example;

Record the following transaction in the purchases return day book for Njiru’s traders for the month of June 2010, hence post the information into their relevant ledger accounts.

June 2010;

“ 3. Returned goods worth shs 400 that had been bought from Nairobi stores, credit note no 56

“ 8. Return goods of shs 1 200 to Matayos store, Credit no 148

“19. Had some of their purchases returned to the following; Njoka enterprises shs 700, credit note no 205, Nairobi Stores shs 600, credit note no 58, Matayos store shs 1 000 credit note no 191

“26. Returned goods worth shs 1 800 to Njoka enterprise credit note no 210

“30. Return goods worth shs 1 020 to Matayos store, credit note no 200

  1. Cash receipt Diaries/JOURNAL
  2. This is used to record all the cash and cheques that have been received in the business.  It totals are posted to the cash and bank accounts in the general ledger (Dr), while the individual accounts are credited in their respective accounts in the ledger.
  3. It uses the cash receipt issued and bank slips received as the source documents.
  4. It takes the following format;

Cash receipt journal

DateParticulars/detailsReceipt noLedger folioDisc allowedcashbank
       
  • Cash payment Journals
  • This is used to record cash and cheques that have been issued to the creditors of the business. Its totals are credited (Cr) in the cash and bank account and the individual accounts are debited (Dr) in their respective accounts
  • It uses the cash receipt received and bank slips issued as the source documents.
  • It takes the following format;

Cash Payment journal

DateParticulars/detailsReceipt noLedger folioDisc receivedcashbank
       

For example:

Record the following transactions into their relevant day books of Onyango traders, hence post the entries to their respective ledger accounts and balance them off;

May 2011:

          “1. Cash sales amounting to ksh 3 000, receipt no 0112

“2. Paid the following creditors by cheque after having deducted a cash  discount of 10% in each case; H. Mwangi ksh 1 500, J. Mwaniki ksh 1 600, N. Mugo ksh 1 200

“3. Receive the following Chaques from debtors in settlement of their debts after having deducted 5% cash discount in each case; Lucy kshs 22 800 cheque no 0115, Otieno kshs 8 550 cheque no 0011, Martha ksh 1 330 cheque no 0016

“5. Paid for repairs in cash kshs 16 000, receipt no 0251

“10. Paid Juma in cash kshs 9 500, receipt no 0295

“14. Cash sales kshs 17 000, receipt no 02714

“15. Banked kshs 6 000 from the cash till

“15. Received cash from Mary of kshs 13 500, receipt no 0258

“16. Cash sales of kshs 26 400 was directly banked, bank slip no 40152

“20. Cash purchases of kshs 8 920, receipt no 117

“22. Cash purchases of kshs 15 200 was paid for by a cheque, cheque no 512

Cash receipt journal

DateParticulars/detailsDocument noLedger folioDisc allowedcashbank
May 2011 1 3 3 3 14 15 15 16    Sales Lucy Otieno Martha Sales Cash Mary Sales   Totals to be posted to the cash and bank a/c (Dr)  0112 0115 0011 0016 02714   0258 40152  GL SL SL SL GL “c” SL GL    1200 450 700               2 350  3 000       17 000   13 500         33 500    22 800 8 550 1 330   6 000   26 400       65 080

(Post the totals and the entries to their respective accounts)

Cash Payment journal

DateParticulars/detailsDocument noLedger folioDisc Receivedcashbank
May 2011 2 2 2 5 10 15 20 22    H. Mwangi J. Mwaniki N. Mugo Repairs Juma Bank Purchases Purchases   Totals to be posted to the cash and bank a/c (Cr)        0251 0295   117 512  PL PL PL GL PL “c” GL GL  166.70 177.70 133.30                 477.30        16 000 9 500 6 000 8 920         40 420  1 500 1 600 1 200         15 200       19 500

(Post the totals and the entries to their respective accounts)

2.       (a)     The following transactions relates to Kaka Traders which took place during the Month of                        April 2012.

                   April 2:        Sold goods on credit to Dada traders worth sh 80,000, Nyota sh 60 000

                   April 10:     Bought goods on credit from Ndugu Enterprise for sh 50,000, Motari sh                                           100,000

                   April 18:     Goods returned by Dada traders worth sh 7000

                   April 20:     Returned goods bought on credit from ndugu Enterprise worth Sh 10,000                                               which were found to be defective.

                   April 22:     Issued invoice to Onyango traders worth Sh 40,000

                   April 25:     Issues credit note to Onyango traders worth Sh 2000

                   April 28:     Sold goods on credit to Nyanya Enterprise worth Sh 90,000

                   April 30:     Received invoice from Babu Traders worth Sh 75 000

          Required:

                             Record the above transactions in the books of Original entry and post the totals to the general ledger.                                                                           (12mks)

SALES JOURNAL

DATEDETAILSINVOICE NO.L.FAMOUNT
2012 2 – 04 2-04 22-04 28-04  Dada traders Nyota Onyango traders Nyanya enterprise Total taken to sales  A/C (cr)   SL1 SL2 SL3 SL480,000ü 60,000ü 40,000ü 90,000ü 270,000

PURCHASES JOURNAL

DATEDETAILSINVOICE NO.L.FAMOUNT
2012 10 – 04 10 – 04 30 – 04    Ndugu Enterprise Motari Babu traders Total taken to purchases   A/C (DR) PL1 PL2 PL3    50,000ü 100,000ü 75,000ü 225,000

SALES RETURNS JOURNAL

DATEDETAILSCREDIT NOTE NO.L.FAMOUNT
2012 18 – 4 25 – 4    Dada traders Onyango traders Total taken to sales  returns A/C (Dr)   SLR1 SRL2    7,000ü 2,000ü 9,000

PURCHASES RETURNS JOURNAL

DATEDETAILSCREDIT NOTE NO.L.FAMOUNT
2012 20 – 4    Ndugu Enterprise Total taken to purchases returns A/C (Cr)   PRL1  10,000ü 10,000
DR                                                   DADA TRADERS A/C                            CR
           Sales            80,000üSales returns                     7,000ü  
DR                                                   NYOTA  A/C                            CR
           Sales            60,000ü   
DR                                          ONYANGO TRADERS A/C                            CR
           Sales            40,000üSales returns                     2,000ü    
DR                              NYANYA ENTERORISE  A/C                            CR
           Sales            90,000ü   
DR                                             SALES  A/C                            CR
          Total debtors                      270,000ü    
DR                                         NDUGU ENTERPRISE  A/C                            CR
   Purchase  returns           10,000üPurchases                    750,000ü    
DR                                                   MOTARI    A/C                            CR
          Purchases                     100,000ü    
DR                                               BABU TRADERS  A/C                            CR
          Purchases                     75,000ü    
DR                                                   PURCHASES A/C                            CR
           Total creditors 225,000ü   
DR                     SALES RETURNS JOURNAL                                         CR
          Total debtors           9,000ü   
DR                               PURCHASES RETURNS JOURNAL                     CR
          Total creditors                      10,000ü    

          (b)     The following transactions relate to Pumua Wholesalers for the month of

March 2011.

March 1:     Bought goods on credit from Kawe distributors Shs.26,200,

Kamakia Ss.15600, Mambo Shs.33,360.

                   March 2:     Sold goods on credit to Fuma retailers Shs.37,200, Tito grocers

                                      Shs.25,500 and Wamba traders Shs.16,250.

                   March 6:     Returned goods to Kamakia Shs.2,400 and Mambo Shs.4,160.

                   March 9:     Sold goods on credit to Tamu Shs.5,500 and Patu Shs.18,200.

                   March 11:   Bought goods on credit from Chuma Shs.33,840.

                   March 15:   Goods returned by Tamu Shs.1,500 and Fuma retailers

Shs.1,820 and Patu Sh.2,600.

                   March 18:   Bought goods on credit from Jama Shs.21,210 and Sama

Shs.53,850.

                   March 26:   Credit sales to Kamanja Shs.16,600, Orengo Shs.19,260 and

Wama traders Shs.15,200.

                   REQUIRED:

                   Enter the above transactions in the respective books of original entry.

(10 marks)

  1. The general Journal/Journal proper

It is used to record purchases or sales of fixed assets of the business on credit and other transactions  that cannot be recorded in the above books .

Uses of the general journal;

  • To record purchases of fixed assets on credit
  • To record sales of fixed assets on credit
  • To correct errors by checking the balances
  • To record the opening and closing entries
  • To write off bad debts
  • To record the inter ledger transfers
  • To record issue of  shares and debentures in companies
  • To make end of the year adjustments for the final accounts
  • In this journal, the account to be debited begins at the margin, while the account to be credited is indented from the margin, with a narration below them put in brackets.
  • The narration simply explains the nature of the transaction that has taken place.
  • The individual entries are then posted to their respective accounts by either debiting or crediting depending on the transactions.
  •  It takes the following format;

General journal

DateParticulars/detailsLedger folioDr shsCr shs
     

For example;

Journalise then following transactions which took place in the business of J Opuche during the month of March 2005

March 5; Purchased office furniture on credit for shs 25 000 from miugiza Furniture Limited

          10; Sold old duplicating machine for shs 15 000 to samba academy on credit

15; Bought a new motor vehicle for shs 800 000 from explo motors Ltd, paying shs 300 000 in cash and balance was to be settled at a later date

18; Sold old vehicle to Mara Secondary school for shs 500 000 on credit

25;The owner converted personal electronic calculator valued at shs 9 000 into business asset

27; Sold old computers valued at shs 20 000 for shs 15 000 on credit to Mara secondary school

30; Sold old dining chairs worth shs 10 000 to Maendeleo for shs 15 000 on credit

General journal

DateParticulars/detailsLedger folioDr shsCr shs
March 2005 5       10         15         18       25       27         30      Office Furniture a/c        Miugiza a/c (Being a credit purchase of office furniture from Miugiza) Samba Academy a/c        Duplicating Machine a/c (Being credit sales of duplicating machine to Samba academy) Motor vehicle a/c         Cash a/c         Explo Motors a/c (Being purchase of motor vehicle from explo. motors, paying part in cash and part on credit) Mara Sec sch a/c        Motor vehicle a/c (being the credit sale of old motor vehicle to mara sec sch) Calculators a/c       Capital a/c (being conversion of private calculator to business asset) Mara Sec. Sch. a/c Loss on disposal a/c       Computer a/c (being credit sale of old computers to Mara school at a loss of 5 000) Maendeleo a/c        Furniture a/c        Gain on disposal a/c (being the credit sale of dining chairs to maendeleo at a gain of 5 000)           25 000       15 000         800 000         500 000       9 000       15 000 5 000       15 000          
1 384 000
      25 000       15 000         300 000 500 000       500 000       9 000         20 000       10 000 5 000       1 384 000

The entries are then transferred to their respective accounts in the ledger, with the ones debited in the journals being debited and the ones credited being credited.

The Journal proper can also be used to show the opening entries and the closing entries. That is;

  • Opening entries

The opening entries are the entries of the assets and liabilities at the beginning of the trading periods to facilitate the opening of different accounts for them. They are the balance b/d for the assets and liabilities of the business.

The assets to be debited are recorded first, followed by the liabilities and capital to be credited. In case the capital is not given, it can be calculated using the book keeping equation, that is A = C + L. the narration then follows the entries.

The opening entries are necessary when;

  • A business that did not keep complete accounting records would like to start keeping
  • Opening up new sets of accounting books, after closing the old ones
  • Starting accounting records for a business which has been bought, though was in full operation

For example;

The following balances were extracted from Martine’s store that did not keep complete records, and would like to start keeping on 1st January 2011. Prepare for them their relevant subsidiary book to show the balances.

                                                                        Shs

                   Motor vehicles                         230 000

                   Machinery                                 40 000

                   Creditors                                    10 000

                   Debtors                                        5 000

                   Cash in hand                              20 000

                   Stock                                         10 000

                   Insurance prepaid                         5 000

                   Bank                                          25 000

                   Premises                                  335 000

                   Capital                                     660 000

Martine’s Store

General journal

On 1st January 2011

DateParticulars/detailsLedger folioDr shsCr shs
2011 January 1Premises Motor vehicle Machinery Debtors Cash Insurance prepaid Bank Stock     Capital     Creditors (being the records of assets, liability and capital at the beginning of new period)       335 000 230 000   40 000     5 000   20 000     5 000   25 000   10 000              
670 000
                660 000   10 000           670 000

3.       a)       Kimemia had the following transactions during the month of January 2009.

                   You required to journalize the transactions.                                                  (10mks)

                   1 .1.08        Sold furniture at sh. 160 to Moyo traders on credit.

                   2 .1. 09        Bought a computer on credit from Bon-go at sh. 20,000

                   3. 1. 09        Bought some goods from Nyaga sh. 4,000 on credit the transaction was not entered in Kimemia books.   

                   4. 1. 09        A transport expense of sh. 500 written in the books as sh. 50.

                   5. 1. 09        Sold a motors vehicle for sh. 80,000 on credit to Omega.

b)   The following transactions related to Kioko Traders for the month of May 2012 May 2:  Sold goods on credit to Asunta sh.24, 000 and Janet sh.32, 000 May 8:  Bought goods on credit from Patel Traders sh.80, 000

May 12: Asunta returned goods worth sh.4, 000

May 15:  Purchased goods on credit from Karoki sh.68, 000 and Petero sh.62, 100

May 20: Goods worth sh. 12,000 were returned to Patel Traders and goods worth sh.6, 000                                                                             to Karoki May 23: Goods sold on credit to Asunta sh. 16,000, Tom sh.22000 and Joseph sh.26, 000  May 27: Goods

returned by Janet sh.4, 000

May 30: Purchased a motor vehicle on credit worth sh. 1,000,000 from General motors

Prepare the relevant journals.                                                                                            (10mar)

In the table below, indicate the books of original entry that the information obtained from the given source documents are used to prepare

Source DocumentBooks of Original entry
SalesInvoice/invoiceissued/Invoice retained/invoice copySales journals
Purchases Invoice/Invoice received/Original invoicePurchases journals
Credit note issued/Credit note retained/Credit note copyReturn inwards/Sales return journals
Credit note received/credit note originalReturn outwards/purchases return journals
Original receipt/Receipt receivedCash payment/Analysis cash book/ Cash book
Receipt copy/Retained receiptCash receipt journal/Analysis cash book/cash book
Petty cash voucherPetty cash book
  1. Complete the table below by indicating the relevant information
Item  TransactionType of A/CType of LedgerSource document
Debtors   
Creditors   
Fixed Assets   
Salaries   
Cash sales   
Capital   
Drawings   
Credit Purchases   
  1. Complete the table below given the following source documents.
Source documentsBooks of Original  entryLedger accounts
Incoming invoice  
Outgoing invoice  
Incoming credit note  
Outgoing credit note  
Incoming debit note  
Outgoing debit note  
Incoming receipt  
Outgoing receipt  

                                        CASH BOOK

DEFINITION

A book which records any cash received and cash paid out by a trader

Credit transactions are not recorded in this book since cash or cheques are not involved.

Cash or cheques received are debited and cash or cheques paid out are credited

Uses of a cash book

  1      shows sources of revenue of a business

  • shows areas of expenditure of afirm
  • shows cash and bank balances at a given date
  • shows sources of capital
  • used for future reference
  • shows discount received and discount allowed 
  •  Shows total cash received and cash paid out at bank and at hand

TERMS USED IN THE CASH BOOK

1 CONTRA-ENTRY (C)

An entry that affects both the cash at hand and cash at bank at the same time ie cash deposit to the bank or cash withdrawal from the bank (cash a cheque for office use)

2 BANK OVERDRAFT

  • A credit balance in the bank account
  • It’s a short term loan given to current account holders by banks  whereby they are allowed to withdraw more amount than what is at the bank account

Types of cash books

1 Single column cash book

  • Double or two column cash book
  • Three column cash book

1 SINGLE COLUMN CASH BOOK

1-1-2001 Juma started a business with cash at hand of sh 45000

2-1-2001 He purchased goods worth sh 15000

3-1-2001 He opened a bank account and deposited sh 20000

4-1-2001 He sold goods for cash sh 5000

5-1-2001 He deposited  sh 3000 to the bank from the cash till.

6-1-2001 He sold goods and got a cheque of sh 8000

7-1-2001 He invested cash sh 12000 into the business

8-1-2001 He deposited sh 10000 into the business bank

9-1-2001 He purchased goods worth sh 4500 by cheque

  • -1-2001 He paid salaries cash sh 600
  • -1-2001 He bought stationery by cheque sh 1200
  • -1-2001 He  got a commission of cash sh 3500 for work done
  • -1-2001 He took cash sh 2000 for personal use
  • -1-2001 He bought furniture worth sh 2500 by cheque

REQUIRED 1 PREPARE SINGLE COLUMN CASH BOOKS

                                       CASH AT HAND

DATEDETAILSAMOUNTDATEDETAILSAMOUNT
1-1-2001capital450002-1-2001purchases15000
4-1-2001sales 50003-1-01bank20000
7-1-01investment120005-1-2001bank3000
11-1-01Commission35008-1-01bank10000
   10-1-01Salaries       600 
   12-1-01drawings2000
   14-1-01Bal c/d14900
  65500  65500

                                    CASH AT BANK

DATEDETAILSAMOUNTDATE AMOUNT
3-1-01Cash at hand200009-1-01purchases4500
5-1-01cash300011-1-01stationery1200
6-1-01sales800013-1-01furniture2500
   14-1-01Bal c/d22800
  31000  31000
      

DISCOUNT

A Cash allowance that a seller of good and services gives to the buyer for paying promptly or for buying in large quantities.

TYPES OF DISCOUNTS

1 QUANTITY DISCOUNT                              

A Cash allowance that sellers give to buyers who have bought goods in large quantities eg buying 20 bags of sugar costing sh10,000 but buyer pays sh9800  hence sh200 is quantity discount.

2  TRADE DISCOUNT

A quantity discount given by a trader to another trader who has bought many goods for resale eg offered by wholesalers to retailers so that they get profit.

NB-QUNANTITY AND TRADE DISOUNTS ARE NEVER RECORDED IN THE BOOKS OF ACOUNT SINCE THEY ARE NOT PART OF THE INVOICE OR RECEIPT

  • CASH DISCOUNT

A cash allowance or deduction from invoice price that sellers give to debtors to encourage them pay debts promptly.

Types

 Discount allowed

-A cash allowance given to debtors to pay promptly.

 -Its an expense hence account is debited.

Discount  received

-Acash allowance got from creditors for paying them promptly.

-It’s a revenue hence account is credited

NB DA and DR are day books in the 3- column cash book   

2 A TWO COLUMN CASH BOOK

It’s a combination of cash at hand and cash at bank cash books into one book’

  1. On 1st July 2012, Mara traders had Sh.6,000 cash in hand and bank overdraft of Sh.2,000. During the month the following transactions took place:

2012

July 2:   Received cheques from debtors totaling to Sh.50,000 July 5:   Paid rent Sh.2,000 cash.

July 15: Withdrew Sh.5,000 from the bank for personal use. July 25: Banked all the cash except Sh.1000

Prepare a Two-column Cash Book for the month.                              (5 marks)

8.       On 1 Match, 2001, Mingi traders had Ksh. 13,200 in cash and bank balances of Sh 56,000. The following transaction took place during the month.

          2001 2 Cash sales sh. 12,000

          12 paid a creditor sh. 8,200

          27 received a cheque for sh. 4,500 from debtors

          31 paid rent 7,500 in cash

          Record the above information in a two column cash book and balance it off. (4 mks)

THREE COLUMN CASH BOOK

A cash book that combines cash at bank ,cash at hand ,  discounts allowed and discount received.  

   (b)  On 1st October 2013, Nyati Traders Had shs.10 000 and shs.40 000 at the bank.  During the

month, the following transactions took place.

Oct 2Bought goods worth shs3,100 by cheque
         3Paid motor expenses shs.6000 in cash
         6Sold goods worth 8200 cash
        10paid a creditor shs.9500 by cheque after deducting a 5% cash discount
      12Received a commission of shs.580 directly into the bank account.
    14Shelby, a debtor, settled her account of shs.30,000 by cheque less a 2.5% cash discount
  15The bank deducted shs. 850 from the business account for services rendered
   19The owner took  shs.1500 by cheque for personal use
        23Paid Maboko traders shs.39,200 by cheque in full settlement of their account less 3% cash discount
      24Withdrew shs.15,000 from bank for business use
     26Received shs.8,200 cash from a debtor in full settlement of a debt of shs.8,500
     30Took all the cash to the bank leaving only shs.1800 in the cash till

Required:

         Prepare a duly balanced three column cash book                                                          (10 marks)

(b)                                            NYATI TRADERS

                                                CASH BOOKü                                                                                                                                   

DateDetailsDiscountcashBankDateDetailsDiscountcashBank
2013    2013    
Oct 1Balance b/d 10 000ü40 000üOct.2Purchases   3100ü
      6sales   8 200      3Motor expenses  6 000ü 
     12commission       580ü     10creditor   500ü  9 500ü
     14Shelby        750ü 29 250ü     15Service charge      850ü
    23Mobeke traders     1 176ü 38 024ü     19Drawings    1 500ü
    24Bank 15 000ü      24cash  15 000ü
    26Debtors       300ü  8 200ü     30    
 cash  25 400ü bank 25 400üü 
      Bal c/d   1 800ü111 504üüü
  2 226.00ü33 200ü141 454ü   500ü33 200ü141 454ü

                                                                        30 x ⅓ = 10 marks

          (b)     The following were the balances of KILO Traders as at 1st January

2009.  Cash Sh.40,000, bank overdraft Sh.17,000.  During the month

the following transactions took place.

January 2nd : Mutiso a debtor settled his account of Sh.32,000 by

cheque of Sh.30,000                                             

                              4th :   Paid salaries amounting to Sh.16,000 by cash.

                             10th:   Deposited Sh.12,000 into the business bank account

from the cash till.

                             14th:   Settled Wayua’s account of Sh.40,000 and she was

allowed a discount of 1% through a cheque.

                             16th:   Deposited Sh.56,000 in the bank from private resources.

                             17th:   Sold goods for cash Sh.24,000.

20th:   Mutua, a debtor, settled his account by a cheque of Sh.16,000 having been allowed a discount of 2%.

                             24th:   Purchased furniture Sh.10,400 paying by cheque.

                             26th:   Received Sh.7,200 cash from Odhiambo.

                             30th:   Banked all the available cash except Sh.3200.

                   Required:    Prepare a three column cash for KILO Traders.               (10 marks)

  1. The following cash book was poorly prepared, prepare the correct one.

CASH BOOK

DateDetailsFCashBankDateDetailsFCashBank
1/1/01Bal  b/f       Cash Purchases   Bank loan   Salaries   Investment         C10000       4000         2000   10005000         3000   6000 Drawings   Sales   Bank   Rent Income   Debtors   Bal c/d        C    3000         400   2000   5003000       4000             600
   1800014000   1800014000

Assignment:

(Exercise 1B pages 50 and 51, Nos16 and 18 in Inventor book 4, KLB Students book)

b) On 1st March 2006 Mokaya traders had cash in hand Ksh.10,000 and cash at bank ksh.15,000. The following transactions took place during the month.

                        March 2:          Bought goods in cash sh.1,500

                        March 4:          Paid salaries by cash 7,500

                        March 5:          Received cheques from the following debtors after allowing 2% discount

in each case Salga Sh.980, Gumbo Shs.1,960

                        March 8:          Paid the following accounts by cheques in each case deducting 5%

discount

                                                Kiimo Ksh.3,000, Karani Ksh.1,200

                        March 12:        Bought machinery by cheque Shs.5,000

                        March 20:        Withdrew Sh.1000 from bank for personal use

                        March 25:        Cash sales Shs.2000

                        March 26:        Banked cash amounting to Ksh.1000

                        March 29:        Received Shs.3000 cash from Alex a debtor.

                        Required:

                        Prepare a three column cash book duly balanced as at 31st  March 2006      (12 Marks)

2.         (a)       On 1st November 2013:Tabagon Co. Ltd. had a balance of shs. 12,000 at the

bank and shs. 2500 in hand.  During the month, the following transaction took place;

Nov. 1             Cash sales Shs. 2500, cash purchase Shs. 1750

Nov. 3             Paid the following accounts by cheque.

                        Kirop Shs. 1500 less 5% cash discount

                        Kirui Shs. 2000 less 5% cash discount

                        Nasimiyu shs. 2100 less 3 % cash discount

Nov. 5             Received the following amounts from debtors,

Ondiek shs. 1200, Jane shs. 3850 and Mueni by cheque shs. 2050 after allowing her shs. 300 cash discount.

                        Nov. 14           Paid office cash to the bank shs. 2000

                        Nov. 17           Cash sales 8500

                        Nov. 22           Mueni paid her account of shs. 5000 by cheque less 10% cash

discount

Nov. 28           Withdrew all the money from the bank for office use except shs. 1000

Nov. 29           Paid salary cash shs. 8000

Nov. 30           A cheque received from Mueni on Nov. 5th was dishonoured.

Prepare Tabagon Co. Ltd. three column cash book.                       (10 marks)

          (b)     The following were the balances of Kiboko Traders as at 1st January

2009.  Cash Sh.40,000, bank overdraft Sh.17,000.  During the month

the following transactions took place.

January 2nd : Mutiso a debtor settled his account of Sh.32,000 by

cheque of Sh.30,000                                             

                              4th :   Paid salaries amounting to Sh.16,000 by cash.

                             10th:   Deposited Sh.12,000 into the business bank account

from the cash till.

                             14th:   Settled Wayua’s account of Sh.40,000 and she was

allowed a discount of 1% through a cheque.

                             16th:   Deposited Sh.56,000 in the bank from private resources.

                             17th:   Sold goods for cash Sh.24,000.

                             20th:   Mutua, a debtor, settled his account by a cheque of

Sh.16,000 having been allowed a discount of 2%.

                             24th:   Purchased furniture Sh.10,400 paying by cheque.

                             26th:   Received Sh.7,200 cash from Odhiambo.

                             30th:   Banked all the available cash except Sh.3200.

                   Required:    Prepare a three column cash for Kubuka Traders.            (10 marks)

Date 2002ParticularsCashBankDateParticularsCashBank
2/5 12/5 20/5 28/5Bal Sales   SalesW 20000 50000X     1200006/5 18/5 22/5 30/5Wages Purchases Rent Bal c/d    6000 Y 60000  30000 150000  

                                                                                (

Determine the figures represented by W, X, Y,Z                                                                         (4 mks)

REVISION ACCOUNTING QUESTIONS

  1. The following balances were obtained from the books of Jomba Traders as at 30th July 2014

                                                      Shs.

      Opening stock                          50,000

      Sales                                        360,000

      Gross profit                              25% of sales

      Closing stock                           70,000

Calculate

  • Cost of goods sold                                                                                                                    (2Marks)
  • Rate of stock turnover                                                                                                               (2 Marks)
  • Enter each of the following transactions in the relevant ledger accounts
  • Started business in June 15th 2014 with Ksh. 500,000 in bank.
  • Bought a motor vehicle in June 16th 2014 for KSh. 250,000, payment made by a cheque.
  • Withdrew Ksh. 50,000 in June 20th 2014 from the business bank a/c to be used in the office.
  • June 24th, 2014, paid salaries Ksh. 18,000 cash.
  • On June 1st 2015, Kelly had KSh. 6000 cash in hand and a bank overdraft of Sh. 2000; during the month the following transactions took.
  • Received cheques from debtors totaling to KSh. 80,000 on June 2nd
  • June 5th, paid telephone bills Sh. 1200 cash
  • June 8th, withdrew Sh. 16000 from bank for office use.

Enter the above information in the two – column cash book given below and balance it off                 (4 Marks)

Kelly Traders

Two – Column Cashbook

for the month of June 2015

DateParticularsBankCashDateParticularsCashBank
                    

4. The following balances were extracted from books of Masaku Traders for the year ended 31/12/2004

            Rent                                                                             48,000

            Lighting                                                                         7,200

            Water                                                                             9,220

            Salaries                                                                        75,000

            Commission received                                                  12,370              

            Discount allowed                                                          4,600

            Discount received                                                         8,500

            Gross profit                                                               320,000

            General expenses                                                         98,000

            Stock                                                                           25,250

            Motor Vehicle                                                         2,300,000

            Furniture & equipment                                                650,000

            Debtors                                                                      270,000

            Creditors                                                                    396,400

            Bank                                                                          200,000

            Cash                                                                            50,000

            Capital                                                                    3,000,000

Prepare

      (i)   Profit and loss a/c for the year ended 31/12/2004                                                                        (5 ½ marks)

      (ii) Balance sheet as at 31/12/2004                                                                                                  (4 ½ marks)

5.The accounts of Hakuna Matata Traders showed the following balances on 1st January 2014.

                                                            Sh.

            Cash                            250,000

            Debtors                          60,000

            Creditors                        42,000

            Stock                             30,000

            Bank loan                     120,000

            Motor vehicle                310,000

            The following transactions took place during the month of January 2014.

            Jan 2:                           Bought stock worth Sh. 50,000 on credit.From  omba traders

            Jan 3:                           Cash sales Sh. 80,000

            Jan 5:                           Received Sh. 20,000 cash from debtors

            Jan 10:                         Paid part of loan Sh. 70,000 cash

            Jan 12:                         Paid creditors Sh. 32,000

            Jan 16:                         Bought office furniture Sh. 45,000 cash

            Jan 20:                         Paid salaries Sh. 40,000 cash

            Jan 25:                         Deposited Sh. 100,000 into the bank

            Required:

Record the above transactions in the relevant ledger accounts and balance the accounts on 31stJanuary 2014.                                                                                                                                       (10marks)

6.Kiganjo Traders had the following balances as at 31st December, 2014.

                                                                        Sh.

            Capital (1st December, 2014)                 350,000

            Additional investments                         100,000

            Drawings each month                           48,000

            Capital (31st Dec’ 2014)                        470,000

      Determine the profit for the year.                                                                                                     (4 marks)

7. The following balances relates to the retail business of Omondi for the month of July 2012.

            Sales 50,000

            Expenses 10% of sales

            Cost of goods sold 40,000

      Calculate:

      (i)   Mark up.                                                                                                                                  (1 mark)

      (ii)  Margin.                                                                                                                                    (1 mark)

      (iii) Total expenses.                                                                                                                         (1 mark)

      (iv) Net profit.                                                                                                                                (1 mark)

8. For each of the following transactions, state the account to be debited and account to be credited.         (4 marks)

 TransactionsA/c debitedA/c credited
(i)The owner brought in cash from private sources.  
(ii)Bought goods and paid by cheque.  
(iii)Withdrew cash for personal use.  
(iv)Paid a creditor by cheque.  

9. The following trial balance was extracted from the books of Okumu traders as at 31/12/2012.

 Dr. (Shs.)Cr. (Shs.)
Opening stock30,000 
Purchases/sales275,000390,000
Debtors47,000 
Commission received 36,000
Returns10,0006,000
Carriage inwards16,000 
Bad debts3,000 
Wages20,000 
Rates12,000 
Buildings450,000 
Furniture180,000 
Bank overdraft 210,000
Insurance19,000 
Discounts5,0007,000
Drawings25,000 
Creditors 52,000
Cash at bank250,000 
Cash at hand40,000 
Capital689,000
 1,390,0001,390,000

Additional information:

1.   Closing stock                Sh.50,000

2.   Carriage outwards        Sh.  8,000

      Required:

  • Prepare Okumu traders trading, profit and loss account for the period ended 31/12/2012.
  • Balance sheet as at 31/12/2012.                                                                                           (10 marks)

10. The following were the balances of Kiboko Traders as at 1st January 2009.  Cash Sh.40,000, bank overdraft Sh.17,000.            During the month the following transactions took place.         

January 2nd :     Mutiso a debtor settled his account of Sh.32,000 by cheque of Sh.30,000            

4th :      Paid salaries amounting to Sh.16,000 by cash.

10th:     Deposited Sh.12,000 into the business bank account from the cash till.

14th:     Settled Wayua’s account of Sh.40,000 and she was allowed a discount of 1% through a cheque.

16th:     Deposited Sh.56,000 in the bank from private resources.

17th:     Sold goods for cash Sh.24,000.

20th:     Mutua, a debtor, settled his account by a cheque of Sh.16,000 having been allowed a discount of 2%.

24th:     Purchased furniture Sh.10,400 paying by cheque.

26th:     Received Sh.7,200 cash from Odhiambo.

30th:     Banked all the available cash except Sh.3200.

Required:Prepare a three column cash for Kubuka Traders.(10 marks)

23. Ouma enterprise started business one year ago with an investment of Ksh 1200 000. At the

    end of the  year his capital was Ksh 1600000 and his monthly  drawing was ksh 20000, calculate  his profit for the year                                                                                       ( 4marks)

11. Prepare Sunshine Traders Balance sheet from the following list of balances extracted from his books as at31 December 2013.                                                                                                                                                           (4mks)

Capital                                                             357,000

Stock                                                                40,000

Machines                                                          150,000

Furniture                                                               7,000

Motor vehicles                                                  200,000

Bank                                                                   20,000

Creditors                                                             25,000

Cash                                                                     5,000

Debtors                                                               60,000

Loan from KCB                                                100,000

12. Tripple SSS wholesalers had the following information as at 31 December 2013                                            (4mks)

       Closing capital                                                             70,000

       Total expenses                                                              5,000

       Drawings of goods                                                         6,000

      Total incomes                                                                3,000

      Calculate the capital at the beginning of the year.

  1. Identify the day book associated with the following source documents given below.                                 (4mks)
Source documentsDay books
Invoice received 
Credit note received 
Receipt issued 
Debit note received 
  1. The following balances were extracted from the books of Okinda wholesalers on 31st  December 2006.             (4mks)

                                                                                    Sh

Capital                                                             800,000

Sales                                                                250,000

Debtors                                                              70,000

Purchases                                                         160,000

Creditors                                                            45,000

Opening stock (1.1.2006)                                     40,000

Closing stock (31.12.2006)                                  20,000

General expenses                                                 50,000

5 year bank loan                                                200,000

Insurance expenses                                              20,000

Salaries and wages                                              80,000

Required, calculate

  1. Mark up                                               (1mk)
  2. Current ratio                                         (1mk)
  3. Rate of stock turnover                           (1mk)
  4. Rate on return on capital                 (1mk)

15. On 1stjan 2017,Lyon opened a stationery shop with shs 65000.During the month,she               invested an additional shs 12000 and withdrew shs 23400 for personal use.On 28thfeb       2017,the final capital was kshs 40,000.Calculate the profit or loss made in the course of             that trading period.                                                                                          (4 marks)        

  1. The following transactions relate to Vivylex wholesalers for the month of December 1998.                     

1998Dec.   1          Bought goods on credit from Weka Distributors sh.46,200, Micko sh15,600 and Limo shs38,360.

3          Sold goods on credit to Lwanda Retailers shs.39,200, Motor Grocers sh.25,560

and Mawe shs.12,650.

7          Returned goods to Micko sh4,200 and Limo shs6,140.

11        Bought goods on credit from Tuktuk sh34,830.

12        Goods returned by motor Grocers hs4,550 and Lwanda Retailers sh1,280.

15        Sold goods on credit to Motor Grocers shs6,800, Marion traders shs12,800.

18        Goods returned by Marion Traders shs2,060.

22        Bought goods on credit from Fatuma shs22,100,  Temo shs38,350.

28        Credit sales to Ngula shs16,060, Oyunga shs12,960 and Mawe shs15,260.

            Enter the above transaction in the respective books of original entry                                            (10mks)

16. The following trial balance was extracted from the books of Mugoya Traders as at 30th

            June, 2014

Mugoya Traders

                             Trial balance

As at 30th June 2014

DetailsDr (shs)Cr (shs)
Premises1,500,000 
Debtors and creditors     20,000     30,000
Cash at bank     90,000 
Cash in hand     10,000 
Purchases and sales   140,000   320,000
Stock of good on 1st July 2013     45,000 
Discounts       6,000       2,000
Salaries and wages     50,000 
Commissions        8,000
Power and lighting     12,000 
Returns     15,000     19,000
Carriage outwards       2,300 
Carriage inwards       5,400 
Capital 1,543,700
Furniture     27,000 
 1,922,7001,922,700

Additional information

Stock of goods on 30th June, 2014 was worth sh22, 000.

Required: prepare trading, profit and loss account for the period ended 30th June, 2014.                      (10mks)

  1. State whether each of the following transactions will increase, decrease or have no effect on the Balance Sheet totals                                                                                                                                                             (4mks)
TransactionEffect on Balance sheet totals
Sold a private car and deposited the money in business bank account 
Withdrew money from bank for office use 
Paid Mr. Kimeli, a creditor in cash 
Purchased a Motor car by cheque 
  1. Enter the following transactions in the relevant book of original entry                   (4mks)

2014 June  1. Made cash purchases worth sh. 25,000

  5.  Paid sh.38,000 by cheques in full settlement of a debt owed to Kibogong after deducting 5% cash discount.

 12. Bought stationery and paid by cash sh.19,000.

                   19. Settled a debt of sh.90,000owed to Yatich stores by cheque after deducting a 3%        cash discount.

28. Paid the month’s salaries of sh 80,000, by cash, sh. 30,000 and the balance by cheques.

  1. The following balances relate to the business of Roba Traders during the period ended 31st March 2014.

                                                        Shs.

Cash at bank                  680,000

Premises                       500,000

Machinery                    175,000

Creditors                       190,000

Furniture                         85,000

Motor van                      200,000

Cash in hand                    50,000

Extract the trial balance of Roba Traders as at 31st March 2014.                                                               (4mks)

  • Prepare ledger accounts from the following transactions relating to Tito Traders for the month of January 2015                                                                                                                                                                        (4mks)

January      5th sold goods for Shs 20,000 cash

                        10th bought furniture for Shs 50,000 on credit from Jamwal Traders

                        21st Paid Shs 10,000 cash to Jamwal traders

                        21st Returned furniture worth Shs 6,000 found damaged to Jamwal Traders

  • The following balances were extracted from the books of Njoro Traders for the period ended 31st December 2013

                                                                        Ksh.

            Gross profit                                          10,000

             Salaries                                                  2,000

            Commission income                               4,000

Rent received                                          3,000

Electricity                                               2,000

Carriage outwards                                  4,000

             Prepare a profit and loss account                                                                                                      (4mks)

  • The following information relates to Waruhio Traders as at 31st December 2011.

Waruhio Traders

                                                                   Balance Sheet

                                                        As at 31st December 2011

Fixed Assets:                              Shs.                                                                  Sh.

             Furniture                                     203,000            Capital                                        359,000

                                                                                    Plus Net profit                           114,000

Current Assets:                                                                                                 473,000

             Stock                                           174,000             Less Drawings                            73,000

             Debtors                                       113,000                                                                 400,000

             Cash at Bank                               53,000              Short term liabilities:

                                                                                    1 year Loan                                 79,000

                                                                                    Creditors                                     64,000

543,000                                                            543,000

  1. Calculate the total current assets.                                                                                                                  (1mk)
  2. Determine the capital owned.                                                                                                                        (2mks)
  3. Calculate the working capital                                                                                                                        (1mk)
  •  On 1st November 2013:Tabagon Co. Ltd. had a balance of shs. 12,000 at the bank and shs. 2500 in hand.  During the month, the following transaction took place;

Nov. 1        Cash sales Shs. 2500, cash purchase Shs. 1750

Nov. 3        Paid the following accounts by cheque.

                  Kirop    Shs. 1500 less 5% cash discount

                  Kirui     Shs. 2000 less 5% cash discount

                  Nasimiyu shs. 2100 less 3 % cash discount

Nov. 5        Received the following amounts from debtors,Ondiekshs.1200, Jane shs.3850 and Mueni by chequeshs.2050 after allowing her shs. 300 cash discount.

Nov. 14      Paid office cash to the bank shs. 2000

Nov. 17      Cash sales 8500

Nov. 22      Mueni paid her account of shs. 5000 by cheque less 10% cash discount

Nov. 28      Withdrew all the money from the bank for office use except shs. 1000

                    Nov. 29     Paid salary cash shs. 8000

Nov. 30      A cheque received from Mueni on Nov. 5th was dishonoured.

Prepare Tabagon Co. Ltd. three column cash book.                                                              (10 marks)

  • The following trial balance was extracted from the ledgers of Gathioro’s mobile phones business for the year

ended 31st Oct 2013.

Gathioro’s mobile phones

Trial Balance

       As at  31st Oct 2013

DetailsDr.(Shs)Cr.(Shs)
Sales    855 000
Purchase  420 000 
Sales returns    12 000 
Purchase returns     20 000
Creditors   165 000
Debtors    63 000 
Motor vehicle  480 000 
Cash in hand    65 000 
Furniture  190 000 
Carriage inwards    14 000 
Stock  280 000 
Capital   626 250
Drawing    88 000 
Telephone      6 400 
Insurance      8 200 
Postage      3 850 
Rent    19 600 
Discounts received       4 000
Advertising     12 900 
Discount allowed       7 300 
 1 670 2501 670 250

            On 31st Oct. 2013, the business had closing stock valued at Shs. 60,000

            Required

  • The trading, profit and loss a/c for the year ended 31st Oct 2013.                                            (8 marks)
  • A balance sheet as at that date.                                                                                            (4 marks)
  • The following information was extracted from the books of Dawida business enterprise for the year ended 30th June 2000.

Capital as at 30th June, 2000 640,000

Capital as at 1st July 1999                420,000

Drawing for the year                       180,000

Net profit for the year                     140,000

Determine the additional capital during the year.                                                      (4 mks)

  • Identify the book of original entry in which the following transactions can be recorded.                            (4 mks)
TransactionBook of Original Entry
Paid salaries by cheque 
returned goods to a supplier 
Sold goods on credit 
Bought delivery van on credit 
  • Kiburu carried out the following transactions during the month of February 2015.

February    1:   Started business by depositing sh 220,000 in business bank account

                        7:    Bought goods on credit from MiyogoSh 72,000

                        8:    Paid rent by chequeSh 20,000

                        16:   Sold goods to Kamula on credit Sh 50,000.

Required: Post the above transaction in the relevant ledge accounts.

  • Mention whether the following transactions have an increase, decrease or no effect on the assts, capital and liabilities of a business.                                                                                                                                     (4 mks)
 TransactionAssetsCapitalLiabilities
(a)Bought premises on credit   
(b)Took stock of goods and donated to a local dispensary   
(c)Withdrew money from bank for office use   
(d)Sold furniture receiving cash   
  • The following information relates to Liston traders for the period ended 31st March 2012.

Opening stock        Sh 40,000

Sales                      Sh 100,000

Closing stock          25% on cost of sales

Mark-up                 25%

By clearly calculating gross profit and purchases, prepare a trading account

  • Gross profit                                                                                                                                          (1 mk)
  • Purchases for the year                                                                                                                           (2 mks)
  • The following information relates to Maralal Traders for the month of May 2014.

                 May 1:          Balance brought forward:

                                    Cash     Shs. 180,000

                                    Bank    Shs. 450,000 (Cr)

                         3:         Received a cheque of 1,500,000 from Mpasha, a debtor

                         7:         Cash sales Shs. 280,000

11:        Jolloimat, a creditor of Shs.600, 000 was paid by cheque of sh 400,000 and the balance by cash.

                         14:        Received commission in cash sh. 150,000

                         17:        A debtor, Leteipa, paid his account of 185,000 by cheque less 2% cash discount.

                         19:        Paid the following expenses by cheque:

                                     Rent Shs. 75,000, Electricity Shs. 32,000, Water Shs. 25,000

                        21:        Withdrew Shs. 100,000 from bank for personal use

                        24:        Paid cash Shs 133,280 to Kinai after deducting a cash discount of 2%

                        25:        Received a cheque of sh. 200,000 from Kiyapi, a debtor

                        28:        Paid Salaries Shs. 120,000 by cheque.

                        31:        Banked all cash except sh. 50,000.

Required: Record the above transactions in a three column cash book.                                                                                              (10marks)

31. The following trial balance has extracted from the books of Bishar Retailers on 30thApril, 2006.

 Dr shsCr shs
Sales 186,000
Purchases115,560 
Stock 1.5.200537,760 
Carriage outwards3,260 
Carriage inwards2,340 
Returns outwards 3,550
Returns inwards4,400 
Motor expenses6,640 
Rent4,560 
Salaries and wages24,490 
General expenses12,000 
Rates1,200 
Equipment60,000 
Machinery31,960 
Trade debtors45,770 
Trade creditors 30,450
Bank38,760 
Cash12,000 
Drawings20,500 
Capital_______128,440
 348,440348,440

Stock at 30th April, 2006 was shs 49,980. 

                         Required;    i) Prepare Trading, profit and loss Account for the year ended 30th April 2006.    (7marks)

                                            ii) Balance as at 30th April 2006.                              (5marks)

  • The following information relates to Ogello Traders as at 31st December 2009.

Capital (1-1-2009)              Kshs. 100,000

Loss during the year           Kshs.   40,000

Investment                         Kshs.  35,000

If the trader took goods worth Kshs. 15,000 during the year for private use, calculate the capital of the business as at 31.12.2009.                                                                                                                                          (4mks)

  1. Prepare Betty’s trial balance from the following information.                                                                  (4mks)

Items                                       Kshs.

Purchase                                  130,000

Capital                                     150,000

Sales                                        165,000

Debtors                                      45,000

Creditors                                    40,000

Motor vehicles                         120,000

Stock                                         50,000

Cash at Bank                              10,000

  1. Ondiko Traders had Kshs. 100,000 cash in had, Kshs. 243,000 cash at bank during the month of March 2008.  The following transactions took place in that month.

March 3 –   Paid insurance Kshs. 5,000 cash.

March 11 – Cash sales Kshs. 14,000

March 14 – Purchased equipment worth Kshs. 37,000 paying by cheque.

March 20 – Deposited Kshs. 30,000 into Bank from cash till.

March 31 – Took Kshs. 10,000 cash for personal use.

Prepare Ondiko Trader’s Two-column Cash Book for March 2008.                                                      (5mks)

  • State the journal that deals with each of the following types of transactions.                                                         (4mks)
 Type of transactionJournal
(i)Credit sales 
(ii)Return of goods by customers. 
(iii)Return of goods to suppliers. 
(iv)Cash cheques received. 
(v)Credit purchases 
(vi)Sale of fixed assets 
(vii)Purchase of motor van on credit from General Motors 
(viii)Correction of errors. 
  • The following information relates to Bahari retailers for the month of January 2013.

                        Invoices received

Jan       6          Mandela Ltd                             shs.         70,000

                        12        Othiambo Traders                     shs.      150,000

                        18        Jua Kali Enterprises                  shs.         50,000

                        Invoices

Jan       5          Jambini Traders                        shs.        10,000

                        10        Fedha Ltd                                 shs.      100,000

                        15        Kalu Works Ltd                        shs.      120,000

                        Credit Note issued

Jan       5          Jambini Traders                        shs.        12,000

                        13        Fadhili Ltd                               shs.          6,000

                        Credit Note received

Jan       7          Mandela Ltd                             shs.          5,000

                        14        Othiambo Traders                     shs.          1,000

Additional Information:

            Jan       8          Sold machinery on credit to Kwetu retailers shs. 50,000

                        9          Bought electronic equipment on credit from lowland retailersshs. 8,000

                        10        Brought shs. 5,000 cash into the business from own sources.

Required:  Record the above transactions in the appropriate diary books.                

  • The following information relates to the books of Mwalimu Traders as a 31st December 2014.

Sale                                          670,000

Purchases                                 380,000

Opening stock                            60,000

Closing stock                             40,000

Return inwards                           70,000

Carriage on purchases                 10,000

Commission received                 15,000

Rent paid                                   18,000

Salaries and wages                     33,000

Postage                                        2,000

Discount received                         7,000

Travelling                                   12,000

Repair and maintenance                 4,000

Required:

Prepare Mwalimu Traders Trading Profit & Loss Account for the year ended 31st December 2014. (10mks)

  • The following balances were extracted from the books of Mwenge Traders on 30th June2010.

Shs.

Debtors                                                120 000                                   

Creditors                                              240 000

Ten-year loan  Loan                              400 000

Closing Stock                                         25 000

Cash in hand                                          50 000

Drawings                                                30 000

Furniture                                              700 000

Required: Prepare a Balance  Sheet as at 30th June  2010                                                                         (4mks)

  • The following transactions were carried out by Ushirika  Stores  during the month of July2012.

July 1   :Started a business with sh. 10 000 in cash

July 2   :Opened a bank account for the business by depositing Sh. 20 000 from Personal savings

July 10 :Bought goods worth Sh.10 000 and paid by cheque

July 20 :sold goods worth  Sh. 20 000 which were paid in cash

Required: Record the above transactions in the relevant ledger accounts                                                  (4 mks)

  • The following information was extracted from the books of Ngikwa Stores for thefollowing years

                                                            2014                             2013

                                                            Shs.                              Shs.

      Stock                                              120 000                        224 000

      Bank                                              20 000                           60 000

      Debtors                                          268 000                        120 000

      Creditors                                        272 000                        200 000

      a)   Determine the current Ratio for 2014 and 2013                                                                                (3mks)

      b)   Comment on the significance of the change in current Ratio                                                                    (1mk)

  • Kitinga Enterprises runs a general Merchandise business. The transactions during the month of June

2014 were as follows:

2014

            June  1     –       Bought on credit from Orina Ltd. goods worth shs. 100 000, received a 20% trade discount.

            June  4     –       Sold goods on credit to Rono Ltd. shs. 30 000 and allowed them a 10% trade discount.

            June 8      –       Sent Rono Ltd. a credit note for goods returned, which had a value ofshs. 30 000.

            June 10    –       Sold goods on credit to Akinyishs. 60 000

            June 12    –       Purchased goods from Wamalwa ltd for shs. 100 000 and he allowed a 30% trade discount.

            June 15    –       Purchased  goods on credit from Nyamburashs. 45 000

            June 16    –       Sent Akinyi a credit note for goods returned worth shs. 10 000

            June 18    –       Wamalwa Ltd. sent us a credit note for sh.30 000 for goods returned.

            June 19    –       Received a credit note for goods returned to Orina worth sh.25 000

            June 25    –       Sold goods to Wairimu on credit sh. 25 000

            June 27    –       Sent Wairimu a credit note for sh.5 000 to rectify an overcharge on their invoice.

            June 28    –       Sold goods on credit to Rono for sh. 56 000

            June 29    –       Purchased a Motor Van on credit from Awori Ltd. worth shs. 80 000

            June 30    –       Sold on credit  Old machinery to Nairobi Trading Company for  sh.35 000 (prior to this

owned machines worth shs. 100 000

Required: Make the necessary entries in the relevant books of original entry                                      (10 mks)

(NB. Posting to the ledger Accounts is not necessary)

  • The following trial balance was extracted from the books of Mwelu Traders on 30th April 2015
Account nameDrCr
Sales  186 000
Purchases 115 560 
Stock on 1/5/2014   37 760 
Carriage outwards     3 260 
Carriage inwards     2 340 
Returns inwards     4 400 
Return outwards      3 550
Salaries   24 470 
Electricity     6 640 
Rent     5 760 
Sundry Expenses   12 020 
Equipment   24 000 
Furniture     6 000 
Debtors   45 770 
Creditors     30 450
Bank   38 760 
Cash     1 200 
Drawings   20 500 
Capital   128  440
 348  440  348  440

Stock as at 30th April 2015 was Shs. 49 980

Required:   Prepare Trading profit and Loss Account for the period ending 30th April 2015.               (10 mks)

  • State the books of original entry in which each of the following transactions would be recorded    (4marks)
TransactionsBooks of original entry
Bought a machinery on credit 
Received sh. 40,000 from Mweni a debtor 
Sold goods worth sh. 20,000 on credit to Salama 
Returned goods previously bought on credit to Wainaina 
  • The following balances of assets and liabilities were provided by mawazo Traders as at 31st/12/2014. (4marks)

            Item                                         shs

            Bank overdraft                          80,000

            Land                                        200,000

            Accrued electricity bill             50,000

            Stock                                         10,000

            Debtors                                     20,000

      The business had drawings amounting to sh. 20,000 during the year.

      Prepare a balance sheet to determine the net worth of the year

  • The following information relates to commodity ‘X’.

Year                                         Price (shs)

            2010                                        450

            2014                                        675

(i)   Calculate the consumer price index

(ii)  Comment on your answer.                                                                                            (4marks)

  • A business enterprise had the following transactions on 3rd June 2008.

      (i)   Returned goods worth sh. 15,000 to Kombo traders.

      (ii)  Awino, a customer returned goods worth 3,500 to the business.

            Required: Record the above transactions in the relevant ledger accounts                           (4marks)

  • The following information relates to Kitui Traders for the year 2013.

Turn over shs                270,000

Margin                         40%

Rate of turnover            6 times

Expenses sh                  40,000

            From the information given above, Calculate:-

  • Gross profit
  • Cost of goods sold
  • Net profit
  • Average stock                                                                                                                          (4marks)
  • State the effect of the following transaction on the balance sheet totals indicating either “increase, decrease or No effect”                                                                                            (4marks)
 TransactionEffect on Balance sheet total
a)Dec 14 Received a cheque for sh 150,000 being amount borrowed from a lending institution. 
b)December 15 – paid creditors sh 10,000 in cash 
c)Dec 26- owner took cash sh 10,000 from business for own personal use 
d)Dec 3 – Deposited cash sh 15,000 in to the business bank account. 
  • The following balances relate to Brian traders as at 31st December 2013

                                                            Shs.

            Salaries                                       70,000

      Stock (1/1/2013)                          30,000

      Creditors                                     35,000

      Capital                                     700,000

      Purchases                                 150,000

      Insurance                                    10,000

      Electricity                                   40,000

      Debtors                                       60,000

      Sales                                        350,000

      Stock (31/12/2013)                      20,000

      2 year bank loan                       200,000

      Returns inwards                           15,000

Required:

  • Prepare a trading, profit and loss account for the year ending 31st December 2013            (5 Marks)
  • Calculate the following ratios
  • Margin                                                                                                    (1 mark)
  • Rate of stock turn over                                                                             (2 marks)
  • Rate of return on capital                                                                           (2 marks)
  • On 1st July 2014 moshi traders had cash in hand Ksh.560,000 and a bank overdraft of Ksh. 175,000.

            The following transactions took place during the month:

            July 9:              Paid the following creditors by cheque after deducting 10% cash discount:

                                    Betty  Ksh. 140,000

                                    Mary Ksh. 98,000

            July 12:            Settled kithekas account Ksh.70, 000 by cheque after deducting 10% cash discount

            July 16:            Received cheques from the following debtors after deducting 10% discount in each case:

                                    Ali Ksh. 350,000

                                    Hassan Ksh.105,000

            July 23:            Received the following cheques from debtors after having deducted cash discount of 2%

                                      In each case:

                                    Joseph Ksh. 411,600

                                    Daniel Ksh. 123,480

            July 29:            Received the following amounts in cash from debtors having deducted cash discount 2%

                                    Josephine Ksh.82, 320

                                    Fatuma Ksh.246, 960

      Required:

      Record the above transactions in a three column cash book and balance it off at the end of the month  (10 marks)

51. Show the accounts to be debited or credited for the following transactions.                                  (4 marks)

 TransactionsAccount to DebitAccount to Credit
APaid wages in cash  
BTook business cash for private use  
CPurchased office furniture on credit from Ritho Ltd  
DPaid electricity bill by cheque  
  • The following information was extracted from the books of Juma Traders as at 31st December 2009,

                                                            Shs

            Opening stock                          2,500

            Purchases                                 46,000

            Closing stock                            1,500

            Mark-up                                   20%

                  Require;Prepare Juma Trader’s Trading Account                                                                      (4 marks)

  • State the source documents for each of the following subsidiary day Books                                  (4 marks)
 Subsidiary BooksSource Documents
ASales Journal 
BPurchase Sales Journal 
CReturns Inwards Journal 
DReturns Outward Journal 
  • The following balances of assets and liabilities were provided by Pati Traders as at 31st December 2012

Items                                                                           Shs

            Bank overdraft                                                                   80,000

            Land                                                                                  200,000

            Accrued electricity                                                              50,000

            Stock                                                                                  10,000

            Debtors                                                                              20,000

            The business had drawings amounting to sh 20,000, during the year.

            Required:

            Prepare balance sheet for Pati Traders.                                                                                             (4 marks)

  • A business enterprise had a cash balance of 50,000 and overdraft of sh 15,000 on 1st June 2007.

            The following transactions were conducted.

            June 2, A debtor paid sh 40,000 by cheques

            June 10, The business bought stock sh 10,000 in cash

            June 15, Sold goods sh 30,000 cash.

            Required:

            Prepare a two column cash book.                                                                                               (4 marks)

  • The following trial balance was extracted from the books of Tausi Traders as at 30th June 2014
DetailsDrCr
Stock on 1st July 2013 Debtors and creditors Discounts Sales and purchases Premises Carriage outwards Returns Fixtures and fittings Carriage in wards Machinery Commissions Capital Wages and salaries Cash in bank Rent income      180,000     195,000       75,000  1,200,000  1,630,000       24,000       60,000     300,000     100,000     600,000       48,000         90,000     420,000   4,712,000     120,000       96,000  1,740,000         150,000             42,000  2,454,000         110,000  4,712,000

Closing stock 210,000

Required:   Prepare a trading, profit and loss account for the year ended 30th June 2014.                     (8 marks)

Prepare tausi’s balance sheet as at 31st   June 2014                                                          (4 marks)

  • Record the following information relating to the traders in the relevant books of original entry for

the month of June 2013 and post them to the relevant ledger Accounts.                                        (10 marks)

June 2:             Credit sales to Wako retailers worth sh 8,000 issued invoice No. 0111.

June 5:             Credit purchases from Jamu suppliers worth sh 30,000 received invoice No. 20

June 8:             Credit sales to Mwenda worth sh 12,000 issued invoice No.12

June 16:           Credit purchases from Sam Traders and Mwiti traders worth sh 5,300 and sh 6,200 and issued with an invoice No.13 and 14 respectively.

June 18:           Credit sales Wako retailers and Mwiti traders worth sh 5,300 and 6,200 and issued with an invoice No. 13 and 14 respectively.

June 24:           Credit purchases from Sam and Wangu traders sh 1000 and 2,800, invoice No.451 and 722 respectively

  • The following transaction took place in the business of JohanaMakembo in the month of May 2013.

2013

May 1:              started business with sh 100,000 in bank and sh 20,000 in cash

May 3:              Purchased goods values at sh 24,000 from Kanyua on credit

May 6:              Paid rent sh 1200 by cheques.

May 10:            Purchased a delivery van valued at sh 720,000 from Mwema Motors and paid by cheques.

May 12:            Sold goods in cash sh 45,000.

May 15:            Paid Kanyuash 10,000 by cheques.

Required:         Use the above information to:

Prepare the relevant ledger accounts and balance them off as at 15th May 2013     (7 marks)

Extract a trial balance.

  • The following balance sheet was extracted from the books of Tumaini Investment as at 31st December 2014.

Calculate:-

i)    Borrowed capital                                                                                  (1 mk)

ii)   Capital employed                                                                                 (2 mk)

iii) Working capital                                                                                    (2 mk)

  • From the transactions given below name the account to be debited (Dr.) and the account to be credited (CR)

(4 mks)

      TRANSACTION                                                  DEBIT (DR)                            CREDITED (CR)

i)    Deposited shs. 2000 into the bank from

            the cash box

ii)   Sold goods on credit worth shs 5,000

iii) Purchased goods in cash worth shs 4,000

iv) Withdrew goods worth shs 2,500 for own

            consumption.

61 . The following balances were extracted from the books of Rioba Agencies for the period ended 30th June 2013.

                                                            shs

Stock (1/7/12)                                14,700

      Sales                                              86,400

      Purchases                                       65,000

      Returns outwards                              4,700

      Carriage inwards                              2,200

      Commission received                       8,100

      Salaries                                            2,500

      Stock on 30th June 2013                 20,000

Required:

Prepare the trading account for Rioba Agencies for the year ended 30th June 2013.                                        (4 mks)

62. The following cash transactions took place in he business of Ochieng during the first week of June

      2013.

2013 June

2013 June              1. Balance brought down was cash shs 20,000, bank shs 45,000

2013 June              2. Sold goods worth shs 10,000 by cash

2013 June              3. Sold a piece of furniture for shs 8,000 and the amount was directly paid to the bank.

2013 June              4. Bought goods worth shs 16,000 paying partly by cheque worth shs 9,000 and the balance

    was paid  in cash.

2013 June              5. Banked all the cash except shs 5,000

Required

Prepare a two column cash book.

63. The following information was obtained from the books of Nyota Njema Traders

Invoices Received

Jan 2,2015             Shari Traders for sh. 80,000 invoice No. 41

Jan 18,2015            Chacha traders for sh. 120,000 invoice no. 72.

Jan 25,2015            Nala traders for sh. 200,000 invoice no 31

Invoices issued

Jan 5,2015             Song traders for sh. 50,000 invoice no.1

Jan 6,2015             Mali traders for sh. 6,800 invoice no. 2

Jan 10,2015            Mamba traders for sh. 22,000 invoice no. 3

Credit Notes received

Jan 10,2015            Shari traders sh. 4,000 Credit Note number 16

Jan 28,2015            Malo traders for sh. 3,500 Credit Note no. 23

Credit notes issued

Jan 8,2015             Song traders for sh. 3,000 credit note No. 1

Jan 26,2015            Mali traders for sh. 7,200 credit note no. 2

Required: Journalize the information above in the relevant subsidiary books                                      (10 mks)

64. The following transactions relate to Leo traders for the Month of Feb 2015                           

            Feb 1 started a business with sh. 180,000 in bank

            6 Bought goods on credit from Mato sh. 80,000 and King sh. 50,000

            10 Sold goods for credit to Edna sh. 141,500

            12 Paid Mato sh. 25,000 and King sh. 31,000 by cheque

            15 Recieved a cheque worth sh. 24,000 from Edna

            28 Returned goods to Mato sh. 1,000

            28 Withdrew sh. 5,000 from bank for personal use.      

Required: Enter the transaction above in the relevant ledger accounts and balance them off.         (13 mks)

65. The following information relates to Karima Kogi stores for the year ending 31st Dec 2014

                                                                           Sh

      Stock                                                          50,000

      Cash at Bank                                              15,000

      Machinery                                                 240,000

      Creditors                                                    75,000

      Debtors                                                      55,000

      Required: Draw Karima Kogi stores Balance Sheet as at 31st December 2014                                       (3mks)

66. Classify the following account as real, nominal or personal

      (a) Purchases

      (b) Stock

      (c) XYZ Company Ltd

67. Record the following transactions in a 2 – column cash book of Waigwa Traders and balance it off                  (5mks)

            2012

            Jan 1                Balance b/d                  Cash                             Sh. 10000

                                                                        Bank                            Sh .25000

            Jan 2                Bought  stock in cash                                        Sh.   6000

            Jan 7                Cash sales                                                        Sh.   2500

            Jan 12              Withdrew cash from bank for office use             Sh.   4000

            Jan 15              Paid wages in cash                                            Sh.   3000

            Jan 21              Received sh 4500 from Karanja by cheque

68. Indicate whether the transactions given below will increase, decrease or have no effect on the capital of a business                                                                                                                                                                         (4mks) 

 (a) Bought stock on credit

      (b) Losses incurred by the firm

      (c) Received cash from a debtor

      (d) Additional cash invested by the owner

69. The following Trial balance was extracted from books of Maragwa Traders as at 31st December 2014

                                                            Maragua Traders

                                                              Trial Balance

                                                            As at 31st Dec 2014

            Details                                                 Dr. (sh)            Cr. (sh)

            Purchases                                              300,000

            Sales                                                                            450,000

            Returns inwards                                      40,000

            Returns outwards                                                            10,000

            Capital                                                                           89,000

            Machinery                                              90,000

            Bank                                                      30,000

            Carriage inwards                                     20,000

            Carriage outwards                                     1,500

            Stock (Jan 1.2014)                                   50,000

            Creditors                                                                        85,000

            Debtors                                                  60,000

            Salaries                                                    9,000

            General expenses                                      3,500

            Rent                                                       30,000

                                                                        634,000             634,000

      Stock on 31 Dec 2014 was valued at sh. 67,500

      Required

(i)         Prepare a Trading and profit and loss account for the year ended 31st December 2014

(ii)        Prepare a Balance sheet as at 31st Dec 2014                                                                   (12mks)

70. Mega Traders had the following transactions that took place in the month of April 2014

            Invoices received

            April    1    K.K. Suppliers                                Sh. 40,000

                         2    Onchoke                                         Sh.  8,000

6    K.K. Supplier                                  Sh. 15,000

            Invoices issued

            April    3  Onyango                                          Sh. 50,000

                         4  Moturi                                              Sh. 30,000

            Credit notes issued

            April    5   Moturi                                              Sh. 3000

            Credit notes received

            April    7    K.K. Suppliers                                Sh. 1000

                         7    Onchoke                                         Sh. 1500

  Required :  Record  the above transactions in  the relevant subsidiary books and relevant post to the ledger accounts     (10mks)

71. The following balance sheet relates to Uzuri traders

      UZURI TRADERS                                                                                    Balance Sheet

                                                                                     As at 31st  May 2015

                                   sh.                    Sh. Fixed Assets                    Land                      1,800,000 Motor vehicle        1,000,000 Furniture                    30,000      2,830,000 Current assets Stock                          80,000 Debtors                      50,000 Cash at bank               32,000 Cash in hand               20,000        182,000                                                     3,012,000                                                     ======Capital and Liabilities Capital                                  2,172,000 Long term liabilities Loan from KCB     400,000 Loan from K.I.E     300,000    700,000 Short term liabilities Creditors                 100,000 Salary owing             40,000    140,000                                                ________                                              3,012,000                                              =======

Required:

Calculate          (i)         Capital owned                                                              (1 mark)

                                    (ii)        Borrowed capital                                                          (1 mark)

                                    (iii)       Working capital                                                            (1 mark)

                                    (iv)       Capital employed                                                          (1 mark)

72. Record the following transaction in a two column cash book.

            2012

             Jan       1          : Started business with capital of sh20,000 cash and sh 50,000 at bank.

                         2          : Bought stock in cash sh 120,000

                         3          : Cash sales sh 5,000

                         7          : Bought stock worth sh 10,000 on credit.

                         12        : Withdrew cash from bank for office use sh.8,000.

                         15        : Paid rent by cheque shs 6000.

                         20        : Received shs 4000 by cheque from a debtor.

73. Enter the following transactions in the relevant ledger accounts.                                 (4 marks)

      2011

       July 1:        Opening balances cash ksh 24,000, bank kshs 8000 (cr)

              3:         Paid rent kshs 4,000 in cash

              4:         Bought goods worth ksh 8,000 and paid by cheque

              5:         Deposited ksh. 5,000 from the business into the bank.

74. Peterson started a hardware business on 1st January 2010. The following is a summary of his transaction during the month

      Invoices issued

  • Jan 2: Mwiti Traders kshs 50,000

             Jan 5: Mutahi Traders ksh 150,000

            Invoices received

            2010    Jan 3: Solomon Traders kshs 80,000

                                4: Kanake Enterprises kshs 160,000

Required:

Record the above details in the appropriate subsidiary books.                                                            (4 marks)

75. The following trial balance was extracted from the books of Kigumo Enterprises for the year ended  31/12/2014.

         KIGUMO ENTERPRISES

TRIAL BALANCE

                  AS AT 31ST DEC. 2014