CPA
Foundation Leval
Financial Accounting November 2018
Suggested solutions

W1

Statement of affairs
Assets Bank Inventory Land Sports Pavilion Equipements Subscription owing Liabilities Canteen expense Canteen suppliers Accumulated funds	Sh 000 676 9,882	Sh 000 3,910 13,488 120,000 60,000 7,500 4,200 209,098 (10,558) 198,540

W2

Subscription a/c
Bank BAl c/d	115,860 13,020 128,880	Bal b/d Purchases	9,882 118,998 128,880

(i) Canteen income statement for the year ended 30 June 2018.

Mapezi social club income statement for the year ended June 2018
Sales Less: Cost of sales Opening stock Purchases Less: Closing stock Gross Profit Less: Expenses Canteen expenses: 702 - 676 + 1,008 Canteen wages Net profit	Sh 000 13,488 118,998 (16,674)	Sh 000 183,840 (115,812) 68,028 (1,034) (25872) 41,122

(ii) Income and expenditure statement for the year ended 30 June 2018.

Mapozi social club Income and expenditure for the year ended 30th June 2018
Incomes Subscription Profit Donation Expenditure Depreciation sports pavilion 10% × 60,000 Depreciation equipement 20% × 7,500 Transport 7,260 + 796 Groundsman wages Repairs Secretary's allowances Surplus	Sh 000 6,000 1,500 8,056 65,304 2,220 2,814	Sh 000 48,300 41,122 2,400 91,822 (85,894) 5,928

(iii) Statement of financial position as at 30 June 2018.

Mapozi Social club statement of financial position as at 30th June 2018
Assets Land Sport pavilion 60,000 - 6,000 Equipement 7,500 - 1,500 Subscription owing Canteen closing stock Bank Funded by: Accumulated fund Surplus Subscription in advance Canteen expense owing Transport Owing Owing to canteen supplies	Sh 000 120,000 54,000 6,000 5,250 16,674 20,968 222,892 198,540 5,928 3,600 1,008 796 13,020 222,892

W1

Partners' capital A/c
Goodwill write off Bal c/d	Mercy Sh 000 1,800 9,300 11,100	Nelly Sh 000 1,080 8,520 9,600	Onyango Sh 000 720 5,880 6,600	Bal b/d Goodwill Revaluation	Mercy Sh 000 7,500 1,200 2,400 11,100	Nelly Sh000 6,000 1,200 2,400 9,600	Onyango Sh 000 3,000 1,200 2,400 6,600

W2

Goodwill a/c
Capital (Recognition)	3,600 3,600	Capital (Write off)	3,600 3,600

W3

Land a/c
Balance b/d Revaluation	Sh 000 3,000 3,000 6,000	Balance c/d	Sh 000 6,000 6,000

W4

Building a/c
Bal b/d Revaluation	Sh 000 15,000 4,200 19,200	Bal c/d	Sh 000 19,200 19,200

W5

Revaluation a/c
Capital	Sh 000 7,200 7,200	Land Building	Sh 000 3,000 4,200 7,200

W6

M N O

Interest on capital First month 7,500 × 5% x 6 / 12 = 187.5 6,000 × 5% x 6 / 12 = 150 3,000 × 5% x 6 / 12 = 75

Next 6 months 9,300 × 5% x 6 / 12 = 232.5 8,520 x 5% x 6 / 12 = 213 5,880 × 5% x 6 / 12 = 147

(a) Income and appropriation statement for the year ended 30 September 2018.

Mercy Nelly and Onvango Income statement and appropriation account for the year ended 30 September 2018
	First 6 months Sh 000		Next 6 months Sh 000		Entity as a whole Sh 000
Sales (60,000 - 1,800) Less: Cost of sales Opening inventory Add: purchases Less: closing stock(7,200 + 600) Gross profit Less: Expenses Interest on loan N - 3,000 x 10% O - 6,000 × 10% Operating expenses Net profit Less: Interest on drawings M N O Less: Salaries to partners N	150 300 9,600 187.5 150 75 60 x 6	29,100 (16,050) 13,050 (10,050) 3,000 (412.45) (360)	150 300 9,600 232.5 213 147 30 x 6 = 180 30 x 6 = 180	29,100 (16,050) 13,050 (10,050) 3,000 (592.5) (360)	9,000 30,900 (7,800) 19,200 420 363 222 540 180	58,200 (32,100) 26,100 300 600 (20,100) 6,000 (1,005 (720)
Profit to be shared Share of profit M- N- 0- Balance	2,227.5 1 / 3 x 2,227.5 = 742.5 1 / 3 x 2,227.5 = 742.5 1 / 3 x 2,227.5 = 742.5 0		Ratio 5:3:2 1,023.75 614.25 409.5	2,047.5 2,047.5	1,766.25 1,356.75 1,152	4,275 (4,275) 0

(b) Partners' current accounts as at 30 September 2018

Mercy, Nelly & Onyango Partners current account as at 30th sept 2018 Partners capital a/c
Drawings Balance c/d	Mercy Sh 000 900.00 11,886.25 2,786.25	Nelly Sh 000 1,200.00 1,959.75 3,159.75	Onyango Sh 000 600 1,554 2,154	Balance b/d Interest on capital Salaries to partners Shares of profit	Mercy Sh 000 600.00 420.00 - 1,766.25 2,786.25	Nelly Sh000 900.00 363.00 540.00 1,356.75 3,159.75	Onyango Sh 000 600 222 180 1,152 2,154

(c) Statement of financial position as at 30 September 2018.

Mercy, Nelly & Onyango Statement of financial position as at 30/4/2017

Non Current Assets Land Buildings Plant & Machinery (21,000-12,000) Current Assets Inventory Account receivable (12,000-1,800) Total Assets Capital & Liabilities Capital a/c :- M 9,300 :- N 8,520 :- O 5,880 Current a/c :- M- 1,886.25 :- N- 1.959.75 :-O- 1,554 Non-Current liabilities Loan - :- N-3,000 :- O-6.000 Current liabilities Account payables Bank overdraft Interest payable Total capital and liabilities

Sh 000 6,000 19,200 9,000 7,800 10,200 52,200 23,700 5,400 9,000 9,900 3,300 900 52,200

(a) Income statement for the year ended 31 December 2017.

Zam Zam Ltd Income Statement for the year ended 31st December 2017
Sales Less: cost of sales Opening inventory Add: purchases Goods available for sale Less: Closing stock Gross profit Investment income Revaluation surplus Expenses: Debenture interest 450 + 450 Insurance premiums 750-240 Depreciation plant and machinery 10% × 34,000 Depreciation motor vehicles 20% x [16,000 - 7,200] Depreciation computer hardware 25% x 5,000 Increase in allowance for bad debt 7,500 - 5,300 General expenses Preliminary expenses Salaries Director fees. Auditor fees Profit before tax Income tax expense Profit after tax Retained profit balance b/d Less: preference: Paid Proposed Ordinary-proposed 6% × 50,000 Transfer to general reserves Retained profit balance c/d	Sh 000 25,200 164,764 189,964 (28,247) 900 510 3,400 1,760 1,250 2,200 11,020 2,400 24,210 7,000 2,500 - - - - 320 320 3,000 2,000	Sh 000 233,384 (161,717) 71,667 1,125 1,500 (57,150) 17,142 (4,750) 12,392 8,470 (5,640) 15,222

(b) Statement of changes in equity for the year ended 31 December 2017.

Zam Zam Limited statement of changes in equity for the periods ended December 2017
Balance b/d Profit after tax Proposed dividend Paid dividend Transfer to general reserves Total	Ordinary share capital 50,000 50,000	Preferen ce share 8,000 8,000	Retained profit 8,470 12,392 (3,320) (320) (2,000) 15,222	General reserves 2,000 2,000

(c) Statement of financial position as at 31 December 2017.

Zam Zam limited statement of financial position as at 31st December 2017

Non Current Assets Plant and machinery 34,000 - 16,000 - 3,400 Motor vehicles 16,000 - 7,200 - 1,760 Computer hardware 5,000 - 1,750 - 1,250 Investment 13,500 + 1,500 Computer software Current Assets Inventory Trade receivables 34,980 - 7,500 Prepaid Bank Capital and liabilities Ordinary share capital Preference share capital General reserves Retailed profits Non current liabilities Debentures Current liabilities Tax 4,750 + 1,970 Proposed dividend 320 + 3000 Accrued interest Accounts payable

Sh 14,600 7,040 2,000 15,000 1,500 28,247 27,480 240 14,505 110,612 50,000 8,000 2,000 15,222 9,000 6,720 3,320 450 15,900 110,612

Workings

Determination of bank balance to be reconciled
Balance as per cash book Uncredited cheques Unpresented cheques Standing order Direct banking Returned goods Insurance Balance as per bank statement	6,440,000 (4,980,000) 7,420,000 (3,600,000) 2,340,000 (480,000) 40,000 7,180,000

(i) Adjusted cash book as at 31 December 2017

Adjusted cashbook
Balance b/d Direct credit Insurance	6,440,000 2,340,000 40,000 8,820,000	Standing order Returned goods Balance c/d	3,600,000 480,000 4,740,000 8,820,000

(ii) Bank reconciliation statement as at 31 December 2017.

Bank reconciliation statement
Adjusted cash book balance Add: unpresented cheques Less: Uncredited cheques Balance as per bank statements	4,740,000 7,420,000 (4,980,000) 7,180,000

(iii) Statement of corrected net profit for the year ended 31 December 2017.

Statement of corrected net profit
Reported net profit Omitted rent (3,600,000 × 2) / 3 Discount allowed (2,400,000 - 2,340,000) Sales Stock Insurance	49,360,000 (2,400,000) (60,000) (480,000) 320,000 40,000 46,780,000

(iv) Explain how the bank balance will be reported in UTE's final accounts.

From the ledger balance, items recorded in the ledger but not accounted by the bank are deducted as uncredited checks, and items deducted but not processed by the bank are added as bounce checks.
Similarly, items deducted from the bank and not yet posted to the cash book are deducted from the cash book. Standing orders also add items to your bank balance that have been credited by the bank but not posted on the debit side of the cash book.