COURSE ACF 111 (M) 2015/16 SEM I

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University of Swaziland

Department of Accounting

Exam Paper - Semester - I

Programme of Study Bachelor of Commerce

Year of Study Year one (Full Time); Level 1 (Part Time)

Title of Paper Introduction to Financial.Accounting - I

Course Code ACF 111 (Full Time and Part Time)

Time Allowed 3 Hours.

Instructions: 1. Total number of questions on this paper is four (4).

2. Answer all questions.

3. Begin the solution to each question on a new page.

4. The marks awarded for a question 1 part is indicated at the end of each
question 1 part of question.

5. Where applicable, submit all workings and calculations on the answer

sheet alongside the case.

Note: You are reminded that in assessing your work, account will be taken of accuracy of the
language and the general quality of expression, together with the layout and presentation
of your final answer.

Special requirement Calculator.

This paper is not to be opened until permission has been granted by the invigilator.
 ACF 1112015/16 SEM I
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QUESTION 1:

The following post adjustment trial balance was prepared on 31 st March 2015 by the accountant
of Snow White.

l Opening Inventory 25,000

i Receivables 30,000
Purchases 200,000
Returns 7,500 5,000
Raila~e 4,000
Salaries & ~ages 12,500
Machinery 40,000 I
Furniture ~
10,000 I
Bad debts ~
4,000 .'

Land & Buildings 200,000 I

Insurance 8,500
Fixed deposit 15,000 .
Discount allowed 6,000
Bank balance
i~-
25,000 .
I
•

Drawmgs - - 25,000
Capital I 2,25,000 I
i
I
Payables 17 ,500 I
Sales 350,000 .
~mission received 6,500
Allowance for doubtful debts 5,000
Royalty income 3,500
6,12,500
6,12,500

Year-end adjustments

i) Closing inventory as on 31 st March 2015 was E20,000

ii) Salaries and wages outstanding E500
iii) Insurance prepaid was E2,000
iv) Allowance for doubtful debts is to be created at 10%
v) Depreciate Machinery and Furniture at 10% and 15% respectively
vi) The interest on fixed deposit that has not yet been received E1 ,500

Required:

i) Prepare the necessary adjusting entries to record the above transactions

(Narrations are not required) (3 marks)
ii) Prepare a Statement of Comprehensive Income for the year ended 31 st
March 2015, and (12 marks)
 ACF 1112015/16 SEM I
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iii) A Statement of Financial Position as at the same date. (10 marks)

Total (25 marks)

QUESTION 2:

Enter the following transactions in the three-column cash book of a Computer Peripheral Shop
located in Bunu Mall, Manzini.

2015
Oct 1 Balances brought forward: Cash E840; Bank E4,940
2 The following paid us by cheque, in each case deducting a 5%
"
cash discount; S Brandi El,640; L Pope E640; G Harold E880; .
M Roy E2,080 . I
3 Cash sales paid direct into the bank E 1,480
"
5 Paid rent by cash E680
"
6 We paid the following accounts by cheque, in each case
" deducting 2 per cent cash discount: M Poke E720; G Geroy
I E1,920; F Ball E800
8 Withdrew cash from the bank for business use E800
"
10 Cash sales E2,520 I
" 12 B Brahrna paid us their account of E560 by cheque less E8 cash
"
discount i
14 Paid wages by cash El,080 I
"
16 We paid the following accounts by cheque: R Tony E620 less
" cash discount E15; F Fatima E824 less cash discount E24
i
" 20
" 24
" 29
" 30
I ,,30

Note: Round off decimal places to nearest integer

Required: Balance off the cash book at the end of the month and show the discount
accounts in the relevant ledger.
(20 Marks)
 ACF 111 2015/16 SEM I
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QUESTION 3:

a. Journalise the following transactions

2015 I

I Oct 1 Assets: Buildings E20,000; Car E20,000; Inventory E10,250; •

Receivables E 1,240
Liabilities: Payables E2,480; Loan E10,000

" 5 A debt owing to us by F Franklin ofE500 is written off as bad

,,10 Bought a van on credit from Suzuki Motors E40,OOO
" 12 We take goods costing E680 out of the business stock without
paying for them
" 15 Purchased office equipment on credit from OK Furniture. For
E2,240
" 18 H Ram owes us E5,450. He is unable to pay his debt. We agree
to take some computer equipment from him at that value in
settlement of the debt
" 19 Some of the office equipment bought from OK Furniture, E250
worth, are found to be unsuitable and are returned to them for
full allowance
i " 20 Cash drawings El,500
" 30 Sold goods E2,000 for cash
I " 31 Paid Business rates by cheque E250

(10 * 1.5=15)

h. The Statement of Financial Position as at 30 June 2014 of Gum Traders Limited included
a provision for doubtful debts of E2,566. The Company's accounts for the year ended 30
June 2015 are now being prepared. The company's policy now is to relate the provision
for doubtful debts to the age of receivables outstanding. The debts outstanding at 30 June
2015 and the required provisions for doubtful debts are as follows.

Debts Outstanding Amount Provision for

doubtful debts
Up to 1 month E 25,000 1%
More than 1 month and up to 2 months 15,000 2%
More than 2 months and up to 3 months 7,000 3%
More than 3 months 2,500 5%
 ACF 111 2015 f 16 SEM I
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Customers are allowed a cash discount of 3% for settlement of debts within one month. It
is now proposed to make a provision for discounts to be allowed in the company's
accounts for the year ended 30 June 2015.

Required:

Prepare the following accounts for the year ended 30 June 2015 in the books of Gum
Traders Limited to record the above transactions.

a) Provision for doubtful debts

b) Provision for discounts to be allowed on receivables
(15 marks)
Total (30 marks)

QUESTION 4:

Write short note on the following;

a. Businesses often create an allowance for doubtful debts of which concept is this an
example? Explain your answer. (5 marks)
b. Discuss how the reissued lAS 1Presentation ofFinancial Statements affects the
publication of financial statements (5 marks)
c. Distinguish Cash Discount and Trade Discount (5 marks)
d. How do you identify Capital Expenditure and Revenue Expenditure. Give examples.
(5 marks)
e. Pass rectification entries for the following transactions (Narrations are not required)

i) A sale of fittings E482 had been entered in the sales account

ii) Extra capital ofElO,OOO paid into the bank had been credited to sales account
iii) A payment of cash ofE300 to M Shongwe has been entered on the wrong side of
the cash book as well as M Shongwe
iv) Purchase of goods from T Zondi E252 had been entered in the books as E522

(4*1.25 = 5 marks)
Total (25 marks)

END OF QUESTION PAPER