INSTITUTE OF CHARETERED SECRETARIES AND

ADMINISTRATORS IN ZIMBABWE

SUGGESTED SOLUTIONS: MAY 2017

INTRODUCTION TO FINANCIAL ACCOUNTING

QUESTION 1

(i) D
(ii) D
(iii) C
(iv) B
(v) A
(vi) C
(vii) B
(viii) C
(ix) D
(x) C
(xi) C
(xii) B
(xiii) C
(xiv) C
(xv) B
(xvi) A
(xvii) D
(xviii) C
(xix) D
(xx) D

QUESTION 2

Farai and Fungai

Statement of Comprehensive Income for the year ended 30 September 2016
$ $ $
Sales 363 111
Less: Cost of goods sold:
Opening inventory 62 740
Add: Purchases 210 000
272 740
Less: Closing inventory (74 210) (198 530)
Gross Profit 164 581
Add: Reduction in provision for doubtful debts 150
164 731
Less: Salaries and wages (57 809 + 720) 58 529
Office expenses (4 760 + 215) 4 975

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Introduction to Financial Accounting Suggested Solutions: May 2017 Page 2 of 7
Carriage outwards 3 410
Discounts allowed 620
Bad debts 1 632
Loan interest 3 900
Depreciation : Fixture 600
Buildings 5 000 5 600 (78 666)
Net Profit 86 065
Add: Interest on drawings : Farai 900 _____
Fungai 600 1 500
87 565
Less: Interest on Capitals : Farai 5 000
Fungai 3 750 ______
Salary : Farai 30 000 (38 750)
Balance of profits 48 815
Shared : Farai 29 289
Fungai 19 526 (48,815)

Statement of Financial Position as at 30 September 2016

$ $ $
Non-current assets Cost Depreciation Net Book
Value
Buildings 210 000 55 000 155 000
Fixtures 8 200 4 800 3 400
218 200 59 800 158 400

Current assets
Inventory 74 210
Trade receivables 61 400
Less: Provision for doubtful debts 1 250 60 150
Bank 6 130 140 490
298 890
Financed By
Capital Accounts : Farai 100 000
Fungai 75 000 175 000

Current Accounts Farai Fungai

Balance 1.10.2014 4 100 1 200
Add: Interest on capital 5 000 3 750
Salary 30 000
Balance of profit 29 289 19 526
68 389 24 476
Less: Drawings (31 800) (28 200)

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Interest on drawings: (900) (600) _______
35 689 (4 324) 31 365
206 365
Loan 65 000
Trade and other payables (26 590 + 935) 27 525
298 890

QUESTION 3
Manufacturing and Trading Account for the six months ended 30 September 2016
$ $
Raw materials
Opening Inventory 2 990
Purchases 15 630
Carriage Inwards 126
18 746
Less: Closing inventory (4 200) ______
(a) Cost of raw materials consumed 14 546
Direct wages 48 648
(b) Prime cost of production 63 194
Overheads
Factory general expenses 7 048
Depreciation- Factory equipment 4 200
Rent and Business rates 2 100 13 348
Add: Opening work in progress 3 900
80 442
Less: Closing work in progress (3 600)
(c) Production cost of finished goods 76 842
Sales 112 410
Less: Cost of goods sold
Opening inventory of finished goods 15 300
Add: Production cost of finished goods 76 842
92 142
Less: Closing inventory of finishing goods (17 700)
(74 442)
(d) Gross Profit 37 968

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QUESTION 4

Shereni Sneil
$ $ $ $
Bank 3 016 Balance b/d 3 175 Balance c/d 200 Balance b/d 200
Discount 159 _____ 200 200
3 175 3 175 Balance b/d 200

Makoti Central Stores

$ $ $ $
Balance c/d 500 Balance b/d 500 Bank 2 500 Inventory 2 500
500 500 2 500 2 500
Balance b/d 500

Alpha Kling Brothers

$ $ $ $
Sales 1 500 Bank 1 500 Bank 2 800 Fixtures 3 500
1 500 1 500 Discount 700
3 500 3 500

Vehicle Expenses Bank

$ $ $ $
Bank 10 000 Balance c/d 10 000 Balance b/d 17 500 Shereni 3 016
10 000 10 000 Alpha 1 500 Kadodo 2 800
Repairs 10 000
Balance b/d 10 000 Central Stores 2 500
_____ Bal c/d 684
19 000 19 000
Bal b/d 684

Cash Inventory
$ $ $ $
Bal b/d 375 F & F 3 500 Bal b/d 15 000 Bal c/d 17 500
Kadodo 5 000 Bal c/d 1 875 Central Stores 2 500
5 375 5 375 17 500 17 500
Bal b/d 1 875 Bal b/d 17 500

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 Sales Fixtures & Equipment
$ $ $ $
Bal c/d 6 500 Cash 5 000 Bal b/d 20 000 Bal c/d 23 500
____ Alpha 1 500 Cash 3 500 _____
6 500 6 500 23 500 23 500
Bal b/d 6 500 Bal b/d 23 500

Capital Discount Received

$ $ $ $
Bal b/d 49 000 Bal c/d 159 Shereni 159
159 159
Bal b/d 159

KYZ Enterprises
Trial Balance as at 31 October 2015
$ $
Bank 684
Capital 49 000
Cash 1 875
Fixtures 23 500
Inventory 17 500
Sales 6 500
Discount received 159
Sneil 200
Makoti 500
Vehicle Expenses 10 000
56 359 56 359

QUESTION 5

(a) Per IAS 2, Inventories are assets;

 Held for sale in the ordinary course of business;
 In the process of production for such sale; or
 In the process of materials or supplies to be consumed in the production process or in the rendering of
services.
 Net Realisable Value is the estimated selling price in the course of business less the estimated costs of
completion and estimated costs necessary to make the sale.
 Inventories should be measured at the lower of cost and net realisable value.

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(b) WAC WAC per
Units Cost Unit Total Cost
$ $ $ $
Balance B/F 01/03/2015 4 000 8.00 32 000
Received from Factory 08/03/2015 3 800 7.00 26 600
7 800 7.51 58 600
Sale 10/03/2015 5 000 7.51 37 550
2 800 21 050
Sale 17/03/2015 2 000 7.51 15 020
800 6 030
Received from factory 22/03/2012 6 000 9.00 54 000
6 800 60 030
Sale 29/03/2015 3 000 8.83 26 490
3 800 33 540

The closing value of 3 800 shovels using WAC is $33,540

“End of Suggested Solutions”

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