Kazana Training Institute (KTI) is a vocational training institution offering technical education in engineering courses to high school leavers. The following is their trial balance for the year ended 31 December, 2017:

Tuition fees revenue

Examination fees

Donations from Germany Technical Corporation

Internship income

Sale of branded items

Staff salaries, wages and allowances

Students training materials

Students feeding costs

Repair costs for non-current assets

Motor vehicle costs

Students' accommodation costs

Institute clinic expenses

Utilities

Insurance costs

Examination costs

Co-curricular activities expenses

Council for Higher Education accreditation costs

Internet and other communication costs

Land (cost Shs 98 million) & buildings (cost Shs 300 million)

Motor vehicles (cost Shs 150 million)

Workshop machinery (cost Shs 60 million)

Furniture (cost Shs 30 million)

Cash and bank

Fees debtors

Payables

Capital -

922,281

Additional information:

1. The academic year of the KTI runs from January to December with two terms.

The Institute subscribes Shs 5 million per year to an examination body for technical courses within the East African region. Included in the examinations costs is Shs 10 million subscription for two academic years 2017 and 2018.

Dr. Shs '000'

Cr. Shs '000' 380,000 40,000 10,000 45,000 15,500

98,500 34,500 37,400 32,450 31,900 23,000 26,670 17,500 24,700 18,400 15,000

8,806 11,200 262,230 120,000 45,000 20,000 24,500 70,525

32,000 399,781 922,281

1. A water bill for the month of December, 2017 Shs 675,000 was received in January 2018.
2. Students' feeding costs include Shs 10 million for maize flour and beans which were still in KTI's store by the end of the year.
3. By the end of the year, students with fees balance Shs 5 million at the end of Term I did not report for Term II. This amount should be written off. A further provision of 5% of the remaining fees receivable should be made.
4. The Institute's Board decided that students fees Shs 3 million be refunded because very few students had registered for the mechanical engineering course.
5. In 2017, the Institute entered into collaboration with Mama Ngina, a charity from United the Kingdom for a sponsorship programme. Mama Ngina has sponsored 10 students for their two-year programme and has fully paid their fees for two years (2017 and 2018) Shs 14 million. The entire amount is reflected in fees revenue. Assume that tuition fees are the same for both years.
6. Non-current assets are depreciated as follows:

Buildings

Motor vehicles Workshop machinery Furniture

Required:

5 % on cost.

20 % on cost.

25 % on reducing balance. 10% on cost.

Prepare, for KTI for the year ended 31 December, 2017 a statement of:

1. (i)profit or loss.(15 marks)
2. (ii)financial position as at 31 December.(10 marks)
3. (Total 25 marks)

Question 2

1. (a)Distinguish between a cash discount and a trade discount.(4 marks)
2. (b)A new partner has joined a partnership business and contributed Shs 10 million as goodwill. The policy is to maintain goodwill in the books of account. At the end of period, the new partner discovered that the Shs 10
3. million he contributed as goodwill is not reflected on his capital account.
4. Required:
5. Explain to him the treatment of goodwill and why the goodwill he contributed is not reflected on his capital account.
6. (4 marks)

(c) Jacob and Isaiah run a law firm, Jacob and Co. Advocates. They share profits and losses equally. Their trial balance as at 31 December, 2017 is as follows:

Details

Legal fees

Interest income

Retainer fees

Subscription to Uganda Law Society

Client gifts

Continuing legal education

Rent

Books and reference materials at cost

Legal fees receivable

Health insurance costs

Management consulting costs

Stationery

Website development & maintenance costs

Utilities

Computers, printers, photocopying machines at cost Furniture at cost

Motor vehicles at cost

Accumulated depreciation 1 January, 2017: Computers, printers, photocopying machines Furniture

Motor vehicles

File storage costs

Capital accounts:

Jacob

Isaiah

Current accounts:

Jacob

Isaiah

Expenses payable

Bank loan

Cash and bank balances

Drawings:

Jacob

Isaiah

4,000

5,800 12,400 54,000 50,429

130,000 52,500 7,890 19,800 15,000 24,500 75,000 15,400 85,000

26,500

12,400 3,200 10,500

20,400 15,500

23,400 18,750 18,500 20,000

- 672,919

Dr. Shs '000'

Cr. Shs '000' 481,900 4,869 43,500

19,700

30,000

45,000 672,919

Additional information:

1. The retainer fees include Shs 6 million received from a client for legal services relating to the financial year ending 31 December, 2018.
2. Stationery costing Shs 4 million was outstanding by 31 December, 2017.
3. Non-current assets are depreciated on cost as follows: Computers, printers, photocopying machines 25% Furniture 10% Motor vehicles 12.5% Books and reference materials 10%
4. The partners are entitled to 5% interest on capital per annum and charge 3% interest on drawings per annum.
5. Each partner is entitled to a salary Shs 3 million per month from 1 January, 2017.
6. From the profits to be shared, the partners retain 10% for future expansion of the firm.
7. Required:
8. Prepare, for Jacob and Co. Advocates for the year ended 31 December, 2017 a:

(i) statement of profit or loss and appropriation. (13 marks)

1 2 4

Purchased goods Shs 10 million on credit (Invoice no. 001) from Bombo Traders and Shs 5 million cash from Mamba Traders.

Sold goods to Bweke Enterprises Shs 4.6 million cash and Shs 5 million to Mbu Ltd on credit (Invoice no, 511).

Paid Bombo Traders Shs 9 million by cheque.

(ii) partners' current account.

(4 marks) (Total 25 marks)

Question 3

1. (a)Explain anythreeadvantages andthreedisadvantages of public limited
2. companies.
3. (6 marks)
4. (b)Explain, withtwoexamples for each step, the accounting cycle.
5. (5 marks)
6. (c)The following transactions relate to Tubere Traders for the month of September, 2018:
7. Date: Description

1. 5Purchased goods from Bwana Traders Shs 20 million, paying Shs 5 million cash and the balance later on 25 September, 2018 (Invoice no. 102).
2. 6Received cash from Mbu Ltd Shs 3 million.
3. 7Sold goods to Ngege Enterprises Shs 6 million on credit (Invoice no.
4. 512).
5. 8Ngege Enterprises returned goods worth Shs 250,000 (Credit note
6. no. 01).
7. 9Returned goods worth Shs 1 million to Bombo Traders because they
8. were expired (Debit note no. 62).
9. 10Purchased goods Shs 8 million on credit from Popo Enterprises
10. (Invoice no.205).
11. 12Sold goods to Mamba Traders Shs 7 million on credit (Invoice no.
12. 513).
13. 13Purchased goods Shs 4.8 million from Tata Ltd on credit (Invoice no.
14. 311).

15 Mbu Ltd returned goods Shs 500,000 because they were damaged

(Credit note no. 02).

20 Sold goods to Peter Shs 1 million on credit (Invoice no. 514).

22 Purchased goods Shs 6 million from Bombo Traders on credit

(Invoice no.425).

25 Returned goods to Bwana Traders Shs 600,000 (Debit note no. 68).

1. 25Paid Shs 14.4 million to Bwana Traders by cheque.
2. 26Peter returned excess goods worth Shs 200,000 (Credit note no.
3. 03).
4. 29Sold goods Shs 5.5 million to Bweke Enterprises on credit (Invoice
5. no. 515).
6. 30Returned goods Shs 480,000 to Tata Traders (Debit note no. 70).

30 Paid salaries Shs 4,200,250; rent Shs 2 million and utilities Shs

800,000.

Required:

Prepare, for Tubere Traders, the following books showing the respective ledger accounts to which the totals are to be transferred:

(i) (ii) (iii) (iv)

Sales day book.

Purchases day book. Returns inwards day book Returns outwards day book

Question 4

(a)

(b)

Explain the following terms as they relate to the capital of a limited liability company:

(c)

Kawa Digital Printers Ltd (KDPL), located at Nasser Road, has provided the following information relating to its non-current assets:

1. (i)Issued share capital.
2. (ii)Paid up capital.
3. (iii)Called up capital.

(2 marks) (2 marks) (2 marks)

Financial statements are an outcome of applying a number of accounting concepts and principles.

Required:

Explain the following accounting concepts and their limitations:

1. (i)Business entity.
2. (ii)Money measurement.
3. (iii)Historical cost.

(2 marks) (2 marks) (2 marks)

Asset

Paper cutters

Digital printing press Binding equipment

Further information:

Cost

Shs '000' 165,000 250,000

30,000

Accumulated depreciation 1 Jan 2016 Shs '000'

66,000 80,000 13,500

1. The financial year for KDPL begins on 1 January and ends on 31 December.
2. On 3 March, 2016 paper cutter IV was imported from China. The (cost insurance and freight) (CIF) value was Shs 25 million. The non-refundable taxes on importation totaled to Shs 15 million while transport from Mombasa to Kampala Shs 1.2 million. The annual maintenance fee of a paper cutter is estimated at Shs 3.5 million.
3. Binding equipment purchased on 1 January, 2012 at Shs 6 million was disposed of on 25 July, 2016 at Shs 5 million.
4. On 3 June, 2017 a paper cutter acquired in April 2010 at Shs 65 million was disposed of at Shs 39.8 million
5. The non-current assets are depreciated on cost per annum, as follows:
6. Paper cutter 5% Digital printing press 10% Binding equipment 6.25%

Question 5

6. The depreciation policy is to provide for full year's depreciation in the year of purchase and none in the year of disposal.

Required:

Prepare, for KDPL, a single:

1. (i)non-current assets account.
2. (ii)accumulated depreciation account.
3. (iii)disposal account.

(a) Mambopotea Ltd (dealers in computers and computer accessories) has approached you for advice because their cash book balance (bank column) is more than what the bank has given them in the bank statement for the month of March, 2017. You have been provided with the following information relating to the company's cashbook and bank transactions during the month:

On 31 March, 2017 the cashbook (bank column) had a debit balance Shs 64,251,500, and the bank statement had a credit balance Shs 33,189,144. On close examination, you discovered the following:

1. The bank had directly paid for magazine subscription Shs 400,000.
2. A loan repayment and interest thereon Shs 2,564,125 and Shs 1,450,250 respectively had been directly effected in the bank
3. statement.
4. Push and Pull Ltd, Lock and Open Enterprises, and Come Again
5. Traders had directly paid Mambopotea Ltd Shs 4,150,000, Shs
6. 2,150,200 and Shs 900,500 respectively through the bank.
7. Mambopotea Ltd had deposited cash Shs 15,250,400 and cheques from Ouma & Sons Ltd Shs 1,800,000, Mukamah Traders Shs 3,000,000, Musana Guest House Shs 1,100,000 and Amanya & Co. advocates Shs 2,300,000 in the bank, but these were not credited in
8. the account by 31 March, 2017.
9. NWSC, MTN, UMEME and Computer World had been paid cheques
10. Shs 150,000, Shs 240,000, Shs 351,219 and Shs 3,050,000 respectively, but these cheques had not yet been presented to the bank for payment by 31 March, 2017.
11. A cheque received from Nguvu Enterprises for supply of computer accessories Shs 12,500,000 was returned together with the bank statement unpaid.

1. The accountant of Mambopotea Ltd, by error, entered cheques Shs 560,000 received from MB Beverages as a credit Shs 650,000 and Shs 3,200,000 paid to Computer World as a credit Shs 2,300,000 in the cashbook (bank column).
2. Bank charges and excise duty Shs 45,000 and Shs 4,500 respectively were directly charged to the account.
3. The teller, by error, debited cash deposit by Mambopotea Ltd Shs 2,550,000 in the bank statement.
4. A cheque paid to Computer World Shs 3,150,000 was returned unpaid.
5. Required:
6. (i)Explain, to Mambopotea Ltd, reasons that may cause differences between the cash book balance (bank column) and the bank statement balance.
7. (6 marks)
8. (ii)Prepare, for the company, an adjusted cashbook and thereafter a bank reconciliation statement.
9. (12 marks)

(b) The following non-current assets were revalued in the books of Kwekee Limited as at 31 December, 2017:

Asset Net book value Shs '000'

Machinery 120,000 Furniture & fittings 14,560 Motor vehicles 62,400 Computers 24,600

Revaluation surplus b/ d Shs 4,160,000

Required:

Prepare Kwekee Limited's:

1. (i)Individual non-current asset accounts.
2. (ii)Revaluation account.