KENYA METHODIST UNIVERSITY

END OF1ST TRIMESTER 2014 (PT) EXAMINATION

SCHOOL

MEDICINE & HEALTH SCIENCES

DEPARTMENT
UNIT CODE

:
:

HEALTH SYSTEMS MANAGEMENT

HSMU 211

UNIT TITLE

FUNDAMENTALS OF HEALTHCARE ACCOUNTING

TIME

2 HOURS

SECTION A (40 MARKS)

All four questions are compulsory

All questions carry equal marks.

SECTION B

Answer any two questions.

All questions carry equal marks

SECTION A
Question One
State the relevant accounting concept that best describes each of the following
statements;
(a) Overstatement of sales revenue by managers in order to reflect a profit.
(b) Operating expenses incurred in 2013 but paid in 2014.
(c) The organization is insolvent and unlikely to meet creditors obligations.

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(d) The proprietor has included personal expenses in the businesses Income
and Expenditure Account
(e) In the figure of annual cost of sales (Kshs. 700m) sundry purchases of Kshs.
5,200 was entered as Kshs. 2,500.

(10 marks)

Question Two
Classify the following assets and liabilities on the basis of either: Non Current
Assets, Current Assets, Long Term Liabilities and Current Liabilities.
1.
2.
3.
4.
5.
6.
7.
8.
9.

Accruals
Revenue reserves
Ordinary share capital
Sundry Debtors
Bank Balance
Goodwill
Accumulated Depreciation
Stocks
Capital Reserves
10. Creditors

(10 marks)

Using data below, answer questions 3 and 4.

C. Metha & Sons imported the following items from China.
Item

Quantity

Unit Cost

Discount

BP machines

4,000

4,000.00

Nil

Microscopes

2,000

10,000.00

10%

Additional Costs:
Kshs.

Basis of Absorption

Container and Packaging

6,000,000

Quantity of each item

Insurance and Freight

3,600,000

Gross value of each item

Duty and Agency fees

4,800,000

50 : 50

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Dumping fees

1,600,000

On Microscopes

Question Three
Determine the unit cost of BP Machine.

(10 marks)

Question Four
Determine the unit cost of a microscope.

(10 marks)

SECTION B
Question Five
Ledger balances extracted from the books of TNA Ltd as at 31st December 2013
are as follows:
Share Capital
Trade Debtors
Trade Creditors
Purchases
Sales
Discount Allowed
Discount Received
Buildings (Cost)
Fixtures (Cost)
Cumulative Depreciation:
-Buildings
-Fixtures & Fittings
Stocks (1st Jan 2013)
Returns Outwards
Selling & Dist. Expenses
Salary Expenses
Insurance Premiums
Administration Expenses
Bad Debts written of
Provision for Doubtful Debts

Kshs.
20,000
9,900
4,440
107,340
144,000
150
390
15,000
19,200
1,500
7,680
12,600
2,400
5,010
3,900
2,000
1,680
120
540
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Bank Overdraft
Goodwill
Stocks (31st Dec 2013)

750
4,800
5,600

Required:
(a) Prepare Trial Balance as at 31st December 2013.
(b) Prepare Trading Profit & Loss Account for the period ending 31st Dec 2013.

Question Six
Dagoreti Hospital has been run down due to poor management. As a
management consultant you have been hired to advise the Hospital on product
management in delivery of health services. Your initial findings on monthly
costs of running the Hospital are as follows:
Department
Administration
Laboratory

Kshs.
1,200,000
840,000

Theatre

1,450,000

Out-patient

1,550,000

In-patient

1,710,000

Additional findings and proposals include:

1. Monthly profit margins to be estimated as follows:
Kshs.
Laboratory
60,000
Theatre
200,000
Out-patient
250,000
In-patient
300,000
2. Administration costs are absorbed equally by operating departments.
3. Out-patient department is capable of handling 350 patients daily.
4. In-patient has both private and general wards
5. General ward has 80 beds and average occupancy is 80%.

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6. Private ward has 50 beds and average occupancy is 60%. The cost of
private ward is three times that of general ward.
7. Theatre conducts on average of 15 minor operations daily and an estimated
40 major operations every month. The cost of a major operation is five
times that of a minor operation.
8. Daily average samples analyzed in the laboratory comprises 40 simple
analyses and 10 complex analyses. The cost of complex analysis is four
times that of simple analysis.
9. All departments of the hospital operate 30 days in a month.

Required:
Advise the hospital on fee to change for each service rendered.

(30 marks)

Question Seven
The trial balance of Lucky Summer Traders as at 31st Dec 2012 is as follows:
Proprietors Capital
Sales Revenue
Cost of purchases
Electricity
Emoluments
Transport Costs
Overhead Costs
Land & Buildings
Land & Building Accumulated Dep.
Cash at Bank
Plant & Equipment
Plant & Equipment Accumulated Dep.
Motor vehicle
Motor Vehicle Accumulated Dep.
Opening Stocks

Kshs.

550,000
89,300
98,700
56,400
64,300
800,000

Kshs.
500,000
1,610,000

160,000

20,900
400,000
500,000
20,400
2,600,000

80,000
250,000
2,600,000

When preparing financial statements at the end of the year, the Auditor
realized the following omissions:
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1. Among overhead costs, rent of Kshs.25,700 was outstanding.

2. Included in cost of electricity was Kshs. 6,000 refundable deposit.
3. Depreciation is changed at the following rates:

Land & Buildings 10% pa on cost

Plant & Equipment 20% pa on cost
Motor vehicle 25% pa on cost
4. Stocks as at 31st December 2012 is Kshs 14,200

Required:
(a) Trading Profit & Loss Account for Lucky Summer Traders for the period
ending 31st December 2012.
(b) Balance sheet as at date.

(30 marks)

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