Case: Show Accounting Expertise as Mid-Manager

The key areas of interest to the financial accountant of the business unit are the capital structure which is an indicator of the business survival in the long run. The issue of shares to raise funds is usually done with befitting effort. One other option is to consider cash management The finance of a company can be classified according to a number of factors including time, repayability, rights among others. In Uganda the securities market is quite shallow and not very popular among the population. Individuals may opt to form partnerships; while partnerships may graduate to companies. On completion of your studies, you are offered a job at FAM Ltd Records of this company as at 30 June 2021 are summarized as follows:

Shs. (000)

Fleet of delivery vehicles, after deducting depreciation 70,000

Furniture and fittings, after deducting depreciation 40,000

Trade receivables 60,000

Bank deposit 130,000

Creditors 10,000

Ordinary Share Capital 190,000

10% Debentures 80,000

Bank Loans 20,000

On 1^st May 2021 management of the company issued additional 10,000 ordinary shares of Shs. 1,000; and 20,000 10% Debenture of Shs. 1,000 each and received all the cash duly banked. The manager of FAM Ltd has a personal business named Gag Ent. where he is suspecting that the in-charge officer is stealing her money and provides you with the data below:

Balances Brought Forward (Shs. 000)
Motor Vehicles	90,000	Cash Balance	100,000
Furniture and fittings,	110,000	Capital	?
Trade receivables	30,000	Additional Capital	150,000
Bank Balance	50,000	Prepaid Insurance	40,000
Inventory at Close	4,000	Umeme Bills Due	24,000
Creditors	70,000	Unpaid Salaries	20,000
Motor Vehicles	110,000	Outstanding Rent	10,000
Bank Loans	130,000	Machinery	240,000
Transactions during the year (Shs. 000)
Sales	670,000	Discount Received	15,000
Purchases	340,000	Discount Allowed	20,000
Transport on Purchases	4,000	Repairs	2,000
General Office Expenses	5,000	Medical Costs	18,000
Payment Trade Payables	120,000	Accountancy	25,000
Receipts -Trade Receivables	180,000	Interest on Loan	19,000

Q.1.

1. Describe how management of FAM Ltd can raise long term finance. (9 Marks)
2. Prepare a statement of affairs at start for the managers personal business. (3 Marks)
3. Discuss 5 principles of internal control related to cash receipts. (8 Marks)
4. Analyse benefits and limitations of equity and debt capital to FAM Ltd. (5 Marks)

Total Marks 25