KENYA UTALII COLLEGE

FIFTH SEMESTER FINAL EXAMINATION

BUSINESS ADMINISTRATION DEPARTMENT

INTRODUCTION TO PRINCIPLES OF ACCOUNTING

TTM - 2014

TIME ALLOWED: TWO HOURS

DATE: ___________________________

INSTRUCTIONS

 This paper has two sections (Section A: Question 1 is compulsory and MUST be
attempted. Section B: Two questions ONLY to be answered).
 Write clearly and legibly on the examination booklet provided.
 Mobile phones are PROHIBITED in the examination room.
 Do NOT write on this question paper.
 Remember that you will receive an “F” and your studies at Kenya Utalii College be
discontinued if you are caught CHEATING in the examination.

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SECTION A: Question 1 is compulsory and MUST be attempted.

Question 1

(a) Identify five users of accounting information and briefly explain their Financial
and other interests in the hospitality and tourism industry. (10 marks)

(b) The umbrella hotel has the following trial balance as at 31st December, 2013.

$ $
Capital 1,000,000
Purchases 400,000
Fixtures $ Fittings 85,000
Motor Vehicle 250,000
Sales 650,000
Discount Allowed 500
Discount Received 450
Rent Paid 15,500
Rent Received 550
Insurance 35,400
Transport 28,100
Electricity 2,500
Debtors 250,000
Creditors 84,450
Rates 1,500
Opening Stock 38,000
Salaries and wages 22,000
Bad debts 4,400
Drawings 1,500
Cash at bank 590,000
Cash at hand 11,050
1,735,450 1,735,450

The following information is available

(a) Closing stock at 31st December, 2013 was $22,000.

(b) Provide for depreciation on Fixtures & Fittings at 20% p.a. and on Motor vehicle at
15% p.a.
(c) Of electricity paid, $200 was in advance and for rates paid $100 was in advance.
(d) $1,600 was outstanding in respect of insurance.

Required
(i) Prepare a trading & profit and loss account for the period ended 31st
December, 2013. (10 marks)
(ii) Prepare a balance sheet as at 31st December, 2013. (10 marks)

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SECTION B: Answer ONLY TWO questions from this section.

Question 2

a. Name four common reasons for differences between the cash book and the bank
statements balances. (8 marks)

b. Milimani Hotel cash book showed credit balance of $36,080 on 30 th June, 2013
whereas the Bank statement received from the bank showed a credit balance of $
49,320 on the same date. The following differences were discovered.

(a) Cheque totaling $ 61,450 issued by Milimani Hotel did not appear in the bank
statement.

(b) Cheque totaling $39,450 deposited on the last day of the month were credited
by the bank on 5th July, 2013.

(c) Bank charges for the month amounted to $2,410.

(d) The bank made payments of $8,000 to Milimani Hotel landlord and another
$2,000 to an insurance company as per its standing order.

(e) A cheque for $6,050 deposited on June 23rd, 2013 was returned unpaid by
the bank on July 4th 2013.

(f) A debtor remitted $9,700 direct to Milimani bank account.

Required
Prepare Milimani Hotel Bank Reconciliation Statements. (12 marks)

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Question 3

Mr. J. Okey commenced trading as a wholesaler for catering equipment. On 1 st May,

2013 with a capital of $15,000 with which he opened a bank account for his business.
During May the following transactions took place.

May 1st Bought shop fitting and fixtures for cash from store fitments Ltd for $2,000.
2nd Purchased goods on credit from Abel $500.
4th Sold goods on credit to Brian $700.
9th Purchased goods on credit from Green $300.
11th Sold goods on credit to Hill $580.
13th Cash sales paid intact into bank $200.
16th Received cheque from Brian in settlement of his account.
17th Purchased goods on credit from Kaye $800.
18th Sold goods on credit to Nador $360.
19th Sent cheque to Abel in settlement of his account.
20th Paid rent by cheque $200.
21st Paid delivery expense by cheque $50.
24th Received from Hill $200 on bank account.
30th Drew cheques for personal expense $200 and assistant’s wages $320.
31st Settled the account of Green by cheque.

Required

(i) Enter the above transactions in J. Okey ledger accounts, balance off the
accounts and bring down the balances as at 1st June, 2013. (12 marks)

(ii) Extract a trial balance as at 31st May 2013. (8 marks)

Question 4

(a) Using relevant explanations state five errors which do not affect the balancing of a
trial balance. (10 marks)

(b) At year ended of T Down & Co., an imbalance in the trial balance was revealed
which resulted in creation of a suspense account. Investigations revealed the
following errors.

i) A machine purchased for $12,000 had been debited to the purchases

account.
ii) Goods purchased from A. Burton for $15,000 were credited to the account
of G. Burton.
iii) An invoice from A. Smith for$27,000 was omitted.
iv) Goods sold to A. White for $17,500 were entered in the sale account as $
15,700.
v) The salaries and wages account was over-stated by $3,500 and rent
received account had also been over-sated by $3,500.
Required

Prepare journal entries to correct each of the above errors. (10 marks)
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