BSc (Hons) Actuarial Science

Cohort: BAS/10B/FT, BAS/10A/FT & BAS/09/FT

Examinations for 2010 2011 / Semester 1

Resit Examinations for 2010 / Semester 1
Resit Examinations for 2009 - 2010 / Semester 1
MODULE: ACCOUNTING
MODULE CODE: ACCF 1101C
Duration: 2 Hours
Reading time: 15 Minutes
Instructions to Candidates:
1.

Number of questions Four (4)

2.

Section A is compulsory and carries 40 marks.

3.

Section B: Three questions, each carries 30 marks.

Attempt any two (2) questions

4.

All workings must be shown

5.

Always start a new question on a fresh page

6.

Total Marks:100

This question paper contains 4 questions and 8 pages.

Page 1 of 8
2010/S1

SECTION A: COMPULSORY
QUESTION 1: (40 MARKS)
The following ledger balances have been extracted from the ledger books of
Moorfoot, a limited company, as at 31 December 2009
Dr

Cr

Ordinary share capital

1,000,000

Other reserves

1,400,000

Leasehold Land and Building at cost

Motor Vehicles at cost
Plant and Machinery at cost

1,310,000
213,000
1,088,000

Trade Payables
Cash and cash equivalent
Inventory at 01 January 2009

788,000
1,968,200
212,800

Sales
Purchases

5,610,400
3,650,600

Salaries and wages

389,120

Selling Expenses

328,560

Administrative expenses

447,840

Accumulated profit at 01 January 2009

Trade Receivables

584,920
1,135,000

Page 2 of 8
2010/S1

Interim Dividend paid

50,000

Provision for Depreciation:

Leasehold Land and Building

655,000

Motor Vehicles

128,400

Plant and Machinery

605,800

Provision for bad debts

20,600
10,793,120

10,793,120

The following information is relevant.

1. Inventory at 31 December 2009 amounted to Rs 229,000.
2. Provision for bad debts is to be adjusted to 2% of the outstanding receivables as
on 31 December 2009.
3. Provision is to be made for:
-

Audit fees Rs 20,000

Depreciation on leasehold land and building at 5% on cost, plant and

machinery 10 % on cost and motor vehicles at 20% on cost.

4. Administrative expenses include insurance payments of Rs 40,000 which cover

a 15 months period to 31 March 2010.

Required:
(a) Prepare the following statements for the year ended 31 December 2009 in accordance
with the functional format of the IAS 1 (International Accounting Standards 1)
Presentation of Financial Statements.
(i)

The Statement of financial position

(16 Marks)

(ii)

The Statement of comprehensive income.

(18 Marks)

Page 3 of 8
2010/S1

(b) Briefly explain any three of the following accounting concepts:

(i)

Going concern

(ii)

Accruals/Matching

(iii)

Materiality and aggregation

(iv)

Consistency of presentation

(v)

Offsetting
(6 Marks)

Page 4 of 8
2010/S1

SECTION B: ANSWER ANY TWO QUESTIONS

QUESTION 2: (30 MARKS)
Extracts of the financial statements of Renada, a limited company, at 31 October 2008
and 2009 are given below:

Credit sales

31 October 2008
Rs

31 October 2009
Rs

1,050,000

1,100,000

Cost of sales
Opening inventory

2,500

2,000

650,000

850,000

652,500

852,000

(1,500)

(4,000)

651,000

848,000

399,000

252,000

Expenses

85,000

95,000

Trade receivables

50,000

75,000

Trade payables

75,000

150,000

Interest payable

10,000

15,000

785,000

1,060,000

Purchases

Closing inventory

Gross profit

Equity

Page 5 of 8
2010/S1

Required:
(a) Calculate the following ratios for the last two years:
(i)

Gross profit margin

(ii)

Inventory turnover ratio

(iii)

Accounts receivable collection period

(iv)

Accounts payable payment period

(v)

Return on equity

(15 marks)

(b) What is the purpose in using each of the following ratios:

(i)

Current ratio

(ii)

Interest cover

(iii)

Asset turnover

(10 marks)

(c) State three limitations of ratio analysis as a method of evaluating

performances of a company.

(5 marks)

QUESTION 3: (30 MARKS)

PART A
The following information relates to the business of Mr N.Morris. The opening cash
balance on 01 January was expected to be Rs 30,000. The sales were budgeted as
follows:
Rs
November

80,000

December

90,000

January

75,000

February

75,000

March

80,000

Page 6 of 8
2010/S1

Analysis of records shows that debtors settle their accounts according to the following
pattern: 60% within the month of sale, 25% the next month and 15% the month
following.
Extracts from the purchases budget were as follows:
Rs
December

60,000

January

55,000

February

45,000

March

55,000

All purchases are on credit and past experience shows that 90% are settled in the
month of purchase and the balance settled the month after.

Wages are Rs 15,000 per month and overheads of Rs 20,000 per month (including Rs
5,000 Depreciation) are settled monthly.

Taxation of Rs 8,000 has to be settled in February and the company will receive
settlement of an insurance claim of Rs 25,000 in March.

Required:
(a) Prepare a cash budget for January, February and March.

(15 marks)

(b) What is the objective of a cash budget?

(3 marks)

(c) Briefly explain what you understand by Incremental budgeting

(3 marks)

PART B
(a) What is the distinction between fixed, variable and semi-variable costs? (5 marks)

(b) List and explain three of the attributes of good accounting information.

(4 marks)

Page 7 of 8
2010/S1

QUESTION 4: (30 MARKS)

PART A
The following transactions, for March 2009, are shown in the records of C.William. You
are required to write up ledger accounts to record the following transactions:
2009
March 01 Started business with cash Rs15,000
March 02 Bought goods on credit from A. Hanson Rs 2960
March 03 Paid rent by cash Rs 2800
March 04 Paid Rs5,000 of the cash of the firm into a bank account.
March 05 Sold goods on credit to E. Linton Rs 5400
March07

Bought stationery Rs1500 paying by cheque

March 11 Cash sales Rs 4900

March 14 Goods returned by us to A.Hanson Rs1700
(16 marks)
PART B
(a) Differentiate between capital expenditure and revenue expenditure, giving one
example for each of them.

(7 marks)

(b) Briefly elaborate on the users of financial statements stating why they might be
interested in using the information contained in the financial statements.
(7 marks)

***END OF QUESTION PAPER***

Page 8 of 8
2010/S1