Explain the following source documents and give circumstances when they are used in business:

1. (i)Invoice. (1 mark)
2. (ii)Credit note. (1 mark)

Mugenyi started a business trading as MJ Electronics in Mbarara Town dealing in new and second-hand electronics. On 1 October, 2017 MJ Electronics had the following assets and liabilities:

Non-current assets: Shop equipment Transport van Current assets: Trade receivables: Ibanda Traders Mukama Byaruhanga

Cash at hand

Cash at bank

Current liabilities:

Shumar Electronics, Kampala Sure Traders

Shs '000'

3,000 2,500 1,000

Shs '000' 15,000 38,000

6,500

7,000 11,000

7,500

The following transactions relate to the month October, 2017:

Business Accounting - Paper 1

4,000 3,500

Date: Transaction

2 Sold TV sets cash Shs 6,000,000.

4 Bought goods on credit Shs 5,000,000 from Sure Traders, Kampala.

1. 7Paid Shumar Electronics Shs 3,000,000 by cheque.
2. 8Cash Shs 4,000,000 taken to bank.

10 Ibanda Traders settled the amount outstanding by cheque.

1. 12Mukama paid cash Shs 2,000,000 and took goods Shs 1,500,000 on
2. credit.
3. 13Returned goods Shs 500,000 to Sure Traders, Kampala because they
4. were found to be faulty.

20 Mukama cleared his debt by cheque.

1. 23Byaruhanga paid cash Shs 800,000 and took goods Shs 500,000 on
2. credit.
3. 24Shs 6,000,000 cash deposited on bank account.

28 Paid Sure Traders, Kampala Shs 7,000,000 by cheque.

1. 30Withdrew cash for personal use Shs 600,000.
2. 31Paid salaries and wages cash Shs 1,500,000; salaries amounting to
3. Shs 1,000,000 remained outstanding.

Required:

1. (i)Prepare general ledger accounts for the above transactions and balance them off as at 31 October, 2017.
2. (12 marks)
3. (ii)Extract MJ Electronics' trial balance as at 31 October, 2017.
4. (6 marks) (Total 20 marks)

Hint: Do not prepare individual accounts for debtors and creditors. Question 4

1. (a)Explain the circumstances that lead to creation of a suspense account in the books of account. (2 marks)
2. (b)The trial balance of ABC Ltd as at 31 December, 2017 showed a difference of Shs 10,222,000 arising from the credit side being more than the debit side. The draft accounts for the year ended 31 December, 2017 showed a net profit of Shs 87,540,500. The following errors were subsequently
3. discovered:

1. 2. 3. 4. 5. 6.

7. 8. 9.

10.

A credit sale to John Shs 345,500 was debited in Jonathan's account.

A payment of electricity Shs 540,000 was recorded as 54,000 in the electricity account.

Minor repairs of equipment Shs 250,000 was debited in the equipment account.

A cash payment for rent Shs 5,700,000 had only been entered in the cashbook.

A payment Shs 341,000 to Jacob, a supplier had been entered in his personal account as Shs 431,000.

A cash receipt from a customer Shs 435,000 was entered in the cash book as Shs 345,000.

Water bill Shs 165,000 was discovered in a filing tray.

Drawings Shs 2,450,000 was credited in the capital account.

Goods Shs 432,000 returned by a customer posted to the debit side of the customer's account. The corresponding entry was correctly made.

An invoice Shs 456,500 had been entered in the purchases day book as Shs 545,600.

Required:

Prepare for ABC Ltd:

1. (i)journal entries to correct the above errors.
2. (ii)suspense account.

(ii) a statement of corrected net profit.

Question 5

1. (a)Explain any four reasons why a bank may dishonour a cheque.
2. (4 marks)
3. (b)The following information relates to transactions that were passed through

bank for Towakana Enterprises Ltd for

Cashbook (bank column)

Details Shs

the month of March, 2018:

Business Accounting - Paper 1

Balance b/ f

Bank interest Cheque No. 01670 Cheque No. 0077470 Cheque No. 00800 Cash deposit

Cheque No. 108800 Cheque No. 0481

Bank statement Details

Balance b/ f

Bank charges Cheque No. 014024 Cheque No. 014032 Cheque No. 00800 Cheque No. 014027 Excise duty

Cash deposit Cheque No. 014030 Cheque No. 108800 Standing order Cheque No. 0481 Cash deposit

Bank interest

40,000,000 4,000 55,000,000 6,100,000 17,000,000 6,000,000 7,500,000 4,500,000 136,104,000

Cheque No. Cheque No. Cheque No. Cheque No. Cheque No. Cheque No. Cheque No. Balance c/ f

Details 014024 014025 014027 014028 014030 014032 014031

Shs 3,200,000 42,000,000 11,000,000 26,000,000 1,000,000 4,890,000 560,000 47,454,000 136,104,000

Debit (Shs)

12,000 3,200,000

11,000,000 1,200

10,000,000

5,000 4,500,000

Credit (Shs)

8,490,000 17,000,000

6,000,000 7,500,000

17,000,000 4,000

Balance (Shs) 40,000,000 39,988,000 36,788,000 45,278,000 62,278,000 51,278,000 51,276,800 57,276,800 47,276,800 54,776,800 54,771,800 50,271,800 67,271,800 67,275,800

1 June, 2018

Page 5 of 7

Additional information:

1. Cheque numbers 01670 and 014025 were dishonoured by the bank at the time they were presented.
2. All errors, if found, should be deemed to have occurred in the cashbook.

Required:

Prepare, for Towakana Enterprises Ltd for the month of March, 2018:

1. (i)an adjusted cashbook. (11 marks)
2. (ii)a bank reconciliation statement. (5 marks)