SCHOOL OF LAW

L 413- FINANCIAL ACCOUNTING

FINAL EXAMINATION PAPER
TUESDAY, 12 DECEMBER 2023

14:00 HOURS – 17:00 HOURS

TIME ALLOWED: 3 HOURS PLUS 5 MINUTES READING TIME

INSTRUCTIONS TO CANDIDATES

1. Check that you have the correct examination paper in front of you.

2. The paper consists of THREE QUESTIONS. ANSWER ALL QUESTIONS.

3. All answers must be written in the answer booklet(s) provided only.

4. Write down the number of questions attempted on the cover page.

5. Begin answering each question on a new page.

6. Candidates are NOT permitted to bring into the examination room statute(s)
only calculators.

7. There shall be no communication among students during the examination. Any

attempt to make such communication will lead to disqualification.

DO NOT TURN THIS PAGE UNTIL TOLD TO DO SO BY THE INVIGILATOR

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QUESTION 1 (MULTIPLE CHOICE)
1. If one needed to know how much the business is worth, which financial
statement would be of help
a. Statement of compressive income
b. Statement of financial position
c. Statements of cash flows
d. Statements of changes in equity
[1 MARK]

2. If one needed to know how much the financial performance of a business,

which financial statement would be of help
a. Statements of compressive income
b. Statements of financial position
c. Statements of cash flows
d. Statements of changes in equity
[1 MARK]

3. If one needed to know how much the actual inflow and outflow of cash in a
business is, which financial statement would be of help
a. Statements of compressive income
b. Statements of financial position
c. Statements of cash flows
d. Statements of changes in equity
[1 MARK]
4. Which of the following are liabilities?
(i) Business premises
(ii) Bank overdraft
(iii) Money owed by others to the business
(iv) Equipment owned by the business
(v) Mortgage on premises
(vi) Cash held at the Bank.
(vii)Unpaid bill.
(viii) Money owed to other businesses

a. i ,ii and iii

b. viii, vii, vi and ii
c. v,vii, ii and iii
d. ii,iii,iv,v and vii
[1 MARK1]
5. Revenue expenditure refers to the expenditure that :
a. That changes the method of depreciation
b. That adds value to the asset

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 c. those expenses which do not add value to the fixed assets of the business
and are incurred on a day-to-day basis
d. where a firm spends money on the purchase of a fixed asset or in the adding
of value to an existing fixed asset
[1 MARK]

6. Capital expenditure refers to the expenditure:

a. That changes the method of depreciation
b. That adds value to the asset
c. those expenses which do not add value to the fixed assets of the
business and are incurred on a day-to-day basis
d. where a firm spends money on the purchase of a fixed asset or in the
adding of value to an existing fixed asset
[1 MARK]

7. Joint expenditure refers to the expenditure:

a. That changes the method of depreciation

b. That adds value to the asset
c. those expenses which do not add value to the fixed assets of the
business and are incurred on a day-to-day basis
d. that part of the total expense would be classified as capital
expenditure with the remainder classified as revenue expenditure.
[1 MARK]
8. The going concern concepts is the concept that :
a. Business will come to an end at some point
b. Business will continue to run for a while
c. Business has been projected to run for a particular time in the future
d. The business will continue trading into the future, and that the business and its
assets are not expected to be sold off in the near future.
[1 MARK]

9. When an asset is sold at a price higher than the Net Book value then
a____________ on disposal will be recorded.
a. Higher value
b. Lower value
c. Loss
d. Profit
[1 MARK]

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 10. When an asset is sold at a price lower than the Net Book value then a
______________ on disposal will be recorded.
a. Higher value
b. Lower value
c. Loss
d. Profit
[1 MARK]

TOTAL MARKS: [10]

QUESTION 2
PART A
True /False
1. An increase in inventory means that cash resources were used to purchase
additional stock. [2 MARKS]
2. Trade receivable-An increased movement means that resources where
advanced to the debtors and this is a negative impact on the cash flow.
[2 MARKS]

3. Non- current assets- When there is an increased movement, it implies that

additional asset was purchased. This will be recorded in the additional notes.
An increase means that it is a Cash outflow and will be recorded in brackets.
[2 MARKS]

4. Trade payables -An increase means that resources were advanced to the
company. This has a positive impact on the cash flow. This will be recorded
as CASH IN FLOW. [2 MARKS]

5. Capital- An increased movement implies cash was received and that is a

positive impact and it is a cash Inflow. [2 MARKS]

TOTAL MARKS: [10]

PART B
1. State the accounting equation and its meaning. [3 MARKS]

2. What does the business entity concept mean? [3 MARKS]

3. What is other name for the accrual concept? [3 MARKS]

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 4. Define the consistency concept [3 MARKS]

5. Define the prudence concept [3 MARKS]

TOTAL MARKS: [15]

QUESTION 3 (i)
PRIM E SUPPLIERS LIM ITED
STATEM ENT OF COM PREHENSIVE INCOM E
FOR THE YEAR ENDED - 31s t De ce mbe r, 2019

KWACHA

REVENUE 228,650

LESS:
COST OF GOODS (95,650)

GROSS PROFIT 133,000

LESS: EXPENSES

SALARIES 24,500
INSURANCE 6,500
UTILITIES 3,500
DEPRECIATION 12,000
ADVERTISING 7,500
ADMIN COST 22,000
RENT 15,000 (91,000)

NET INCOM E 42,000

OTHER ACTIVITIES

GAIN ON EQUIP SALE 5,000

LOSS ON MV SALE (2,500)
INTEREST (3,200)
TAXES (7,150) (7,850)

NET INCOM E AFTER 34,150

Othe r Activitie s

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 PRIME SUPPLIERS LIMITED
STATEMENT OF FINANCIAL POSITION
FOR AS AT 31st December 2019 & 2018
NON CURRENT ASSETS 2019 2018
LAND 100,000 30,000
PLANT &
EQUIPMENT 240,000 70,000
ACC.DEPRECIATION -16000 224000 -38000 32000

MOTOR VEHICLE 220,000 250,000

ACC.DEPRECIATION -33000 187000 -34000 216000

TOTAL NON CURRENT

ASSETS 511,000 278000

CURRENT ASSETS

CASH 170,450 90,000

PREPAID
INSURANCE 25,000 12,000

INVENTORY 22,000 15,000

TRADE
RECEIVABLES 30,000 18,000

TOTAL CURRENT ASSETS 247,450 135,000

TOTAL ASSETS 758,450 413,000

LIABILITIES & CAPITAL

LIABILITIES
CURRENT
LIABILITIES
TRADE PAYABLES 37400 45000
INTEREST PAYABLE 20,000 32500
SALARIES PAYABLE 26900 51500
84,300 129,000
NON CURRENT LIABILITIES
BONDS PAYABLE 70,000 0
MORTGAGE 150,000 0
220,000 0
TOTAL LIABILITIES 304,300 129,000

CAPITAL 586,000 250000

RETAINED
EARNINGS 68,150 34000

TOTAL LIABILITIES & CAPITAL 758,450 413,000

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 REQUIRED: Prepare the cash flow statement for Prime Suppliers limited for
the period ending 31 December 2019. [30 MARKS]
(ii)

Prepare the trial balance for KCL Enterprises [20 MARKS]

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 (iii)
A) What is depreciation and why does it occur? [10 MARKS]
B) List four different methods of calculating depreciation. [5 MARKS]
TOTAL MARKS: [15]

END OF EXAMINATION PAPER