Accounting And Control July 2016 past paper

Exam year:July 2016

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ACCOUNTING AND CONTROL FOR DIPLOMA IN HUMAN RESOURCE MANAGEMENT MODULE III

3 HOURS

INSTRUCTIONS TO CANDIDATES

This paper consists of SEVEN questions.
Answer any FIVE questions in the answer booklet provided
All questions carry equal marks.
Candidates should answer the questions in English

Candidates should check the question paper to ascertain that all the

Pages are printed as indicated and that no questions are missing

1. a) Explain five benefits that may accrue to the users of financial statements of an organization.(10 marks)

b) The trial balance of Fahari Traders as at 30 June 2015 did not balance and the differences was posted to a suspense account. On investigation, the following errors were revealed:

i) Sales account was overcast by Ksh9, 000.

ii) Payment of Ksh4,000 for motor vehicle repairs had been entered in the motor vehicle account.

iii) Rent account was under cast by Ksh5, 500

iv) Cash received from a debtor for 7, 000 was entered in the cash book only.

v) Purchase of Ksh6, 900 had been entered in the books as Ksh9, 600.

vi) Included in the purchases were goods valued at Ksh4, 800 which were for the proprietor’s personal use.

Prepare:

i) Journal entries to correct errors above.

ii) A suspense account duly balanced.(10 marks)

2. a) The following ledge account balances relate to Mambo Enterprises as at 1 June 2015.

Motor vehicles 640, 000
Ndombi –a debtor 12, 800
Lezit – a creditor 5, 400
Bank 18, 900

During the month of June 2015, the following transactions took place.

June 3 Bought stock Ksh98, 000 from Mbele traders on credit.

5 Cash sales amounted to Ksh 15, 000

8 Bought furniture for Ksh5,500 by cheque

14 Received Ksh12, 000 cash from Ndombi in full settlement of his account.

16 Bought a motor vehicle Ksh280, 000 from Kazungu on credit.

18 Paid Lezit Ksh5, 000 cash in full settlement of his account

20 Paid Ksh3, 800 cash for repairs to the business premises.

24 Took goods Ksh2, 000 from the business for personal use.

28 Paid Ksh4, 200 cash for rent.

Prepare ledger accounts for record the transactions above.(12 marks)

b) Meeta Ltd produces and sell products TX. In the forthcoming year, the company plans to manufacture and sell 30, 000 units at Ksh45, each. The following are the cost estimates for the year.

Direct material 450, 000

Direct labour 300, 000

Variable overheads 180, 000

Fixed overheads 240, 000

Calculate the:

i) Contribution per unit.

ii) Net profit when sales volume is increased by 5%

iii) Additional sales (units) required to maintain the current profit level when unit selling price is reduced by Ksh5.
(8 marks)

3. a) The details below relate to Beta transporters Ltd.

. On 1, June 2014 bought a motor vehicle KBT-X12 for Ksh1.2 million.
Depreciation is to be charged at the rate of 25% per annum on the reducing balance method.

. On 5, April 2015 bought a motor vehicle KBR-X10 for Ksh1.8 million.
Depreciation to be at a rate of 20% on cost, pro-rata basis.

Prepare a provision for depreciation account for the year ended 2014 and 2015.
(8 marks)

b) The following are the summarized financial statements of Kazuri Ltd.

Statement of Financial position as at 31 December 2014

Assets……..Ksh…………..Capital and Liabilities…Ksh
Plant and machinery…….1, 500, 000…..71, 000 ordinary shares of Ksh20 142, 000 each
(net)
Motor vehicle (net)…..880, 000…..10% preference shares 540, 000
Stock……420, 000…………..12% debentures 700, 000
Debtor…..420, 000……..Profit and loss account 400, 000
Other current assets….250, 000…..Trader creditors 160, 000
……………………………..Other current liabilities 250, 000
……3, 470, 000…………3, 470, 000

Income statement for the year ended 31 December 2014

………………….Ksh………..Ksh
Sales…………………………3, 400, 000
Cost of sales………………….1, 400, 000
Gross profit…………………..2, 000, 000

Add: Other income
………Discount received………200, 000
……………………………..2, 200, 000

Less: Operating expenses
Depreciation charge…132, 000
Administration expenses..286, 000
Selling expenses………292, 000
Interest charge………250, 000……960, 000

Net Profit………………………1, 240, 000

Additional information:

On, 1, January, 2014:

i) The value of stock was Ksh480, 000.

ii) The balance of income statement was Ksh76, 200.

iii) Dividends proposed during the year were:

. On ordinary shares – Ksh35, 000.

. On preference shares -Ksh27, 000

I) Calculate each of the following rations:

i) Acid test ratio.

ii) Stock turnover ratio.

iii) Debtors collection period.

iv) Interest coverage ratio

(take 1 year = 365 days).

II) The industry average for debtors collection period is 35 days while the net profit percentage is 28%.

i) Comment on the company’s performance.

ii) Advise the management on two actions to take in each case.
(12 marks)

4. a) The following account balances were extracted from the books of Songea Traders at 30th June, 2015.

Purchases……….248, 000
Returns inwards……270, 000
Returns outwards……4, 200
Carriage inwards……7, 600
Sales……………825, 000
Carriage outwards…..13, 800
Discounts received……5, 400
Trade receivables……84, 000
Provision for doubtful debts…4, 600
Postage and printing………21, 900
Administrative expenses……73, 300
Inventory (1 July 2014)…….92,800

Additional information:

i) Inventory on 30 June 2015 was Ksh 60, 400

ii) Provision for doubtful debts to adjusted to 5% of trade receivables.

iii) As at 30 June 2015;

. Rent and rates paid in advance was Ksh5, 500

. Administrative expenses owing were Ksh6, 500.

Prepare an income statement for the year ended 30 June 2015.
(9 marks)

b) The following details relate to Kesho Traders for the months of March, April, May and June 2015.

………….Sales……Purchases………Operating cost
………….(Ksh) (Ksh) (Ksh)
March……800, 000……320, 000……..175, 000
April……920, 000……330, 000……..182, 000
May……..900, 000……300, 000……..187, 000
June…….940, 000……310, 000……..178, 000

Additional information:

1. Cash from sales are received as follows:

– 80% in the month of sale.
– 20% in the month following the sale.

2. Purchases are paid for as follows:

70% in the month of purchase.
15% one month after the date of purchase
15% two months after the date of purchase.

3. Cash balance on 30th March 2015 was Ksh290, 000.

4. Overheads are paid in the month they are incurred.

Prepare a cash budget for month of March, April, May and June 2015.
(11 marks)

5. a) On 1 June 2015, Nori Traders had Ksh117, 500 in the business account. Transactions for the month of June were as follows:

2 Withdrew Ksh35, 000 from the bank for business use.
5 Bought trade inventories Ksh20, 500 by cheque.
7 Took Ksh2, 500 from the office till for personal use.
12 Received Ksh23, 000 in cash from Ngatho in full settlement of his account of Ksh25, 000
14 Cash sales amounted to Ksh7, 800.
19 Paid Kaithe’s account Ksh27, 000 after having received a 10% cash discount of Ksh25, 000
26 Paid rent Ksh6, 000 by cheque
28 Paid wages Ksh7, 500 in cash.
30 Banked all the cash except Ksh15, 000.

Prepare a three column cash book.
(10 marks)

b) Explain five advantages of cost accounting in an organization.
(10 marks)

6. a) Explain five weaknesses of the piece rate method of labour remuneration.
(10 marks)

b) Faida Traders operates a petty cash book on the imprest system with monthly cash float of Ksh65, 000. The reimbursement is made on the first day of every month. On 1 June 2015, the petty cashier had a balance of Ksh28, 800. The following transactions were made during the month.

June 2 paid Ksh18, 000 for cleaning services.
5 Paid Ksh1, 450 for postage
8 Paid Allan, a creditor Ksh6,800.
11 Bought printing papers Ksh900.
12 Bought beverages for Ksh1, 200 and snacks Ksh500.
16 Paid Ksh1,960 for taxi services.
20 Bought office equipment for Ksh3, 600
24 Bought files and folders for Ksh4, 200.
26 Paid for milk supply Ksh6, 000
28 Bought brooms for Ksh920.
29 Paid Ksh3, 750 for bus fare.
30 Bought air time Ksh1, 450.

Prepare a pretty cash book with the following analysis columns:

. Cleaning.
. Staff refreshments
. Communication and stationery.
. Travel.
. Ledger.
(10 marks)

7. a) The following details were obtained from the books of Leo Traders for the month of June 2015.

1 June Purchases Ledger balance…………1, 300, 000 cr.
Sales ledger balance………………..650, 000 dr.

Total for the month:

Credit sales………….1, 300, 000
Cash payments for trade creditors……….980, 000
Cash received from trade debtors…….1, 050, 000
Credit purchases………….1, 160, 000
Cheque paid for suppliers…….320, 000
Discounts allowed…………..65, 000
Returns outwards……………72, 000
Returns inwards……….190, 000
Discounts received…….54,800
Interest charged on overdue trade
Debtors accounts………10, 000
Penalty charged on suppliers overdue
Accounts………….18, 000

Prepare a:
i) Sales ledger control account.

ii) Purchase ledger control account.

b) The following is cash book obtained from the books of Lindi Traders and the bank statement for the month of May 2016.

i) Cash Book (Bank column)

……………..Ksh…………………………………..Ksh
Balance b/d…..710, 000……………….Babu Traders….200, 000
Miti Traders….400, 000………………Gacha Traders….812, 500
Shah Stones…..250, 500………………Ogero Ltd……..270, 000
Olekai Traders…350, 200…………….Naku Traders…..458, 500
Kigotho Traders..500, 000…………..Nkare…………240, 000
Kivu Mutut……120, 000…………Alu V……..270, 000
Rashid…..225, 400……….Gatho Enterprises….500, 000
Oloo Rai…380, 000………..Balance b/d………185, 100
Total…….2, 936, 100……………2, 936, 100

ii) Bank statement received by Lindi Traders for the month of May 2016.

Details………..Dr………………Cr………….Balance
………………Ksh…………….Ksh…………Ksh
Balance……………………………………710, 000 cr
Miti Traders………………….400, 000…….1, 110, 000
Gacha traders….812, 500……………………297, 500 cr
Kigotho Traders……………….500, 000……797, 500 cr
Naku Traders….270, 000……………………339, 000 cr
Alu V………485, 500……………………..69, 000 cr
Rashid………………………..225, 400…….294, 400 cr
Ali Traders……………………130, 000…….424, 400 cr
Bank charges…..15, 000……………………..409,400 cr
Dividends……………………..34, 500…….443, 900 cr
Masa…………155, 000…………………….288,900 cr
Singh Traders….85, 500…………………….203, 500 cr
Mako Traders………………….376, 900…….580, 300 cr

Prepare:
(I) An update cash book.
(II) A bank reconciliation statement as at 31 May 2016.
(12 marks)

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