CASE KENSUN LTD KenSun Ltd is a recently established State Corporation to co-ordinate research and development of solar energy

in the Republic of Kenya. The Corporation is wholly owned by the Government of Kenya with funding from donors. KenSun has a management structure with various departments among them, the Finance Department headed by the Finance Manager. Some Departments generate revenue through sales and services whereas others are purely service oriented. The Finance Department has not had a proper accounting system a result of limited skills and knowledge on the officer who has been handling transactions. The officer has only been able to prepare Payment Vouchers and cheques with very limited details; regular management accounts, cash books, reconciliations and Financial statements have not been prepared to-date. Assume you have recently been employed as the Accountant reporting to the Finance Manager and your are required to set-up a simple accounting system which can utilize some of the Microsoft Office (MS office) products to enable the department to start generating the missing reports. Required You are required to write a brief (in form of a memo) to the Finance Manager highlighting to outline the steps will take to generate the following reports; 1. 2. 3. 4. The Trial Balance and General Ledger. The Cash book Budget reports outline the formats by column The P & L and Balance sheet

Your response to be typed in aerial font 12, clearly sticking to key issues/points.

Time available 1.00 HOUR

Response Kensun Ltd Internal Memo To: The Finance Manager From: The Accountant RE: ACCOUNTING SYSTEM IMPROVEMENT AREAS Following my thorough analysis of the current accounting system, I have come up with the areas of weakness and possible improvements to ensure reliable reporting as well as controls within the system. I have also come up with a summary of requirements to start off a simple accounting system within the limits of the available resources. The following are some of the key records and reports we need to maintain towards achieving this goal: Trial Balance We need to effect daily journals to enable capture all the transactions and balances. To achieve this, all the departments will need to furnish the finance department with details and summary of their transactions regularly. The totals to the journals will then be compiled together to form the trial balance. Below is a sample of trial balance: Particulars Consultancy income Power and fuel Creditors Debtors Debit 1,550,000 2,400,000 1,220,000 Credit 10,000,000

The General ledger will also be required to maintain key accounts such debtors, creditors. Cashbook In order to ensure accountability of the Corporations cash resources, we need to maintain a cashbook. This will capture all transactions relating to cash in and out of the bank as well as the cash float.

Debit Date

Particulars Bank

Cash

Credit Date

Particulars Bank

Cash

The closing cash at hand should always tally with the balance of the cash column in the cashbook. The bank statement balance should be reconciled to ensure that it tallies with the bank column in the cash book. Budget reports Based on the financial data collected from the simple accounting system, we should be in a position to forecast future expenditure of various departments and the Corpor ation. We shall also factor the projected growth in income and expenditure, financing as well as investment activities as guided by the corporate strategic plan and its implementation plans by the various departments. Once we are operating with a budget, we will need to report on the actual income and expenses against the budget figures and compute the variance to budget. Each significant variance should be justified. Below is a sample budget report that we can adopt Budget item Budgeted Actual Variance Percent Variance Variance Justification

The P & L and Balance sheet From the trial balance generated, we should produce the financial statements constitution the P&L and the balance sheet. The P&L will give us the profitability position. The balance sheet will give the position of the Corporations assets and liabilities.

We can run the above reports on Microsoft office applications as we plan for a future implementation of a proper system such as ERP.