METROPOLITAN

INTERNATIONAL UNIVERSITY

REVISION FUNDEMENTAL OF ACCOUNTING

QUESTIONS AND ANSWERS

QUESTION ONE (Accounting Equation)

On 1st January 2024 Moreen a business woman in Biharwe Trading Centre, Mbarara City started
business with cash worth Shs. 25,000,000
2nd January from the cash resources she purchases a lorry for Shs. 15,000,000
6th She bought stock of goods for Shs. 10,000,000 on credit
12th She sold half of the goods for Shs. 6,000,000 on credit
17th She paid five million shillings cash to the suppliers of the goods
20th She sold the remaining balance of stock at Shs. 5,500,000 cash.
21st She received Shs. 4,000,000 cash from debtors, paid advertising bill of Shs. 1,000,000 cash
and paid accountant her salary Shs. 300,000 cash.
26th She obtained a long-term loan of Shs. 10,000,000 from a bank and deposited it on the bank
account.
30th She used Shs. 100,000 of the business cash to campaign for a local election.
Required:
(i) Construct accounting equations for each of the above transactions. (15 marks)
(ii) Prepare a Simple Balance Sheet at the end of all the transactions. (10 marks)

SOLUTION
i)
RULE 1: Before constructing the accounting equations identify the assets, liabilities and owner’s
equity in the transaction.
RULE 2: Sum up the total assets and equate it to the sum up of thetotal Liabilities and owner’s
equity.

1st/ January 2024

ASSET = LIABILITIES + OWN EQUITY
Cash 25,000,000 = 00 + Own equity 25,000,000
25,000,0000 = 25,000,000

2nd/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Lorry 15,000,000 = 00 + Owner’s equity 25,000,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Cash 10,000,000
25,000,000 = 25,000,000

6th/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Stock 10,000,000
Lorry 15,000,000 = Creditor 10,000,000 + Owner’s equity 25,000,000
Cash 10,000,000
35,000,000 = 35,000,000

12th/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Lorry 15,000,000
Cash 10,000,000 = Creditor 10,000,000 + Owner’s equity 25,000,000
Stock 5,000,000 Add profit 1,000,000
Debtor 6,000,000
36,000,000 = 36,000,000

17th/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Lorry 15,000,0
00
Cash 5,000,000 = Creditor 5,000,000 + Owner’s equity 25,000,000
Stock 5,000,000 Add profit 1,000,000
Debtor 6,000,000
31,000,000 = 31,000,000

20th/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Lorry 15,000,000
Cash 10,500,000 = Creditor 5,000,000 + Owner’s equity 25,000,000
Debtor 6,000,000 Add profit 1,500,000
31,500,000 = 31,500,000

21st / January 2024

ASSET =LIABILITIES + OWN EQUITY

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Lorry 15,000,000
Debtors 2,000,000 = Creditor 5,000,000+ Owner’s equity 25,000,000
Cash 13,200,000 Add profit 200,000
30,200,000 = 30,200,000

26th/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Lorry 15,000,000
Debtors 2,000,000 = long term loan 10,000,000 + Owner’s equity 25,000,000
Cash 13,200,000 Creditor 5,000,000 Add profit 200,000
Bank 10,000,000
40,200,000 = 40,200,000

30th/ January 2024

ASSET =LIABILITIES + OWN EQUITY
Lorry 15,000,000
Debtors 2,000,000 = long term loan 10,000,000 + Owner’s equity 25,000,000
Cash 13,100,000 Creditor 5,000,000 Add profit 200,000
Bank 10,000,000 less Drawings 100,000
40,100,000 = 40,100,000

ii) RULE 3: While preparing the extracted balance sheet you only consider the assets,
owner’s equity and liability at last accounting equation (equation on 30th/ January
2024) from you prepared equation.
MOREEN’S
EXTRACTED BALANCE SHEET AT THE END OF ALL TRANSACTIONS

ASSETS
NON-CURRENTS/FIXED ASSETS SHs
Lorry 15,000,000
CURRENT ASSETS
Cash 13,100,000
Debtor 2,000,000
Bank 10,000,000
Total Assets 40,100,000
OWNER’S EQUITY AND LIABILITIES
OWNER’S EQIUTY
Capital 25,000,000
Add profit 200,000
Less Drawings (100,000)

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Total Owner’s equity 25100,000
LIABILITIES
NON-CURRENT LIABILITIES
Long term loan 10,000,000
CURRENT LIABILITIES
Creditor 5,000,000
Total liabilities 15,000,000
Total owner’s equity & liabilities 40,100,000

QUESTION TWO (Double entry system)

The following transactions are for Mr. Tikobiguma a business man in Biharwe trading centre,
Mbarara City for the month of July 2024.
July 1st Bought goods on credit from Ivan for 400,000/=
July 2nd Bought goods on credits from Derrick for 200,000/=
July 3rd Sold goods to John on credit for 1,000,000/=
July 4th Sold goods to Mary on credit for 400,000/=
July 5th returned goods worth 50,000/= to Ivan because they were defective.
July 10th Received part payment of 800,000/= cash from John for goods taken on credit
July 12th Made part payment to Ivan 80,000/= cash.
July 14th Purchased goods for 60,000/= on credit from Derrick
July 15th Mary rejected and returned goods worth 40,000/=
July 16th Received a cheque of 150,000/= from Mary as part payment for goods taken on credit.
July 17th paid rent cash 100,000/=
July 18th returned goods worth 50,000/= to Derrick because they were defective
July 19th Paid Derrick 150,000/= by cheque
July 20th Sold goods to John on credit for 800,000/=
July 22nd Bought goods for 100,000/= paying cash
July 23rd Sold goods cash 500,000/=
July 24th Sold goods for 400,000/= receiving payment by cheque immediately
July 25th Purchased goods 100,000/=from Ivan on credit
July 26th Paid Ivan 80,000/= cash
July 27th John rejected and returned goods worth 100,000/=
July 28th Received a cheque of 200,000/= from John for goods sold to him on credit
July 29th Paid or electricity 50,000/= by cheque and 100,000/= cash
July 30th Paid rent 60,000/= by cheque
July 31st Paid salaries 150,000/= cash and 160,000/= by cheque.
Required:
i) Enter Mr. Tikobiguma’s transactions into the general journal? (5 Marks)
ii) Prepare the ledger accounts for each of the above transactions? (10 Marks)

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
iii) Extract Mr. Tikobiguma’s trial balance and his cash book? (10 Marks)

SOLUTION
RULE 1: Before tackling the preparation of the general journal, you must identify the accounts
in each transaction.
RULE 2: Determine whether the account is increasing or decreasing

July 1st Bought goods on credit from Ivan for 400,000/=

Explanation
Purchases increased expenditure by 400,000/= and therefore the Purchase A/C is debited while
Ivan, a creditor also increased by 400,000/= and therefore Ivan A/C is credited.
July 2nd Bought goods on credits from Derrick for 200,000/=
Explanation
Purchase, increased expenditure by 200,000/=and therefore the Purchase A/C is debited while
Derrick, a creditor increased by 200,000/=and therefore Derrick A/C is therefore credited.
July 3rd Sold goods to John on credit for 1,000,000/=
Explanation
John a debtor to whom goods are sold increased by 1,000,000 and therefore John A/C is debited
while sales a revenue account also increased by 1,000,000 and therefore Sale A/C is credited.
July 4th Sold goods to Mary on credit for 400,000/=
Explanation
Mary a debtor to whom goods are sold increased by 400,000 and therefore Mary A/C is debited
while sales a revenue account also increased by 400,000 and therefore Sale A/C is credited.
July 5th returned goods worth 50,000/= to Ivan because they were defective.
Explanation
Since goods worth 50,000/= were returned to Ivan, a creditor or supplier such returns are called
returns outwards or purchase returns and they reduce the liability to Ivan and therefore Ivan A/C
is debited. Alternatively, returns outwards A/C which reduces purchases in the trading account
is credited
July 10th Received part payment of 800,000/= cash from John for goods taken on credit
Explanation

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Cash, an asset increased by 800,000 and therefore Cash A/C is debit while John a debtor
decreased by 800,000 and therefore John A/C is credited
July 12th Made part payment to Ivan 80,000/= cash.
Explanation
Ivan a creditor received part payment which decreased liabilities and therefore Ivan A/C is debit
while cash an asset decreases by 80,000 and therefore Cash A/C is credit.
July 14th Purchased goods for 60,000/= on credit from Derrick
Explanation
Purchase, increased expenditure by 60,000/=and therefore the Purchase A/C is debited while
Derrick, a creditor increased by 60,000/=and therefore Derrick A/C is therefore credited.
July 15th Mary rejected and returned goods worth 40,000/=
Explanation
Mary is a debtor, she returned goods to the company. Such return is called returns inwards or
sales returns. Since the Debtor’s Account reduced the amount receivable from Mary’s has
reduced, the debtor’s account also called account receivable is credited. Mary’s A/C is
specifically credited. Returns inwards A/C which reduces sales is debited.
July 16th Received a cheque of 150,000/= from Mary as part payment for goods taken on
credit.
Explanation
Reception of any money by cheque mean the transaction occurred in the Bank, Bank, an asset
increased by 150,000 and therefore Bank A/C is debited while Mary a debtor an asset decreased
by 150,000 and therefore Mary A/C is credited
July 17th paid rent cash 100,000/=
Explanation
Rent paid increase expenditure by 100,000 and therefore rent A/C is debited, while cash an asset
decreases by 100,000 and therefore the Cash A/C is credited
July 18th returned goods worth 50,000/= to Derrick because they were defective.
Explanation
Since goods worth 50,000/= were returned to Ivan, a creditor or supplier such returns are called
returns outwards or purchase returns and they reduce the liability to Derrick and therefore
Derrick A/C is debited. Alternatively, returns outwards A/C which reduces purchases in the
trading account is credited
July 19th Paid Derrick 150,000/= by cheque

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INTERNATIONAL UNIVERSITY
Explanation
Derrick a creditor received payment which decreased liabilities to him and therefore Derrick A/C
is debit while bank an asset decreases by 150,000 and therefore Bank A/C is credit.

July 20th Sold goods to John on credit for 800,000/=

Explanation
John a debtor to whom goods are sold increased by 800,000 and therefore John A/C is debited
while sales a revenue account also increased by 800,000 and therefore Sale A/C is credited.
July 22nd Bought goods for 100,000/= paying cash
Explanation
Purchase, increased expenditure by 100,000/=and therefore the Purchase A/C is debited while
Cash, an asset increased by 100,000/=and therefore Cash A/C is therefore credited.
July 23rd Sold goods cash 500,000/=
Explanation
Cash, an asset increased by 800,000 and therefore Cash A/C is debit while sales increases
revenue and therefore Sales A/C is credited.
July 24th Sold goods for 400,000/= receiving payment by cheque immediately
Explanation
Payment by cheque mean the transaction occurred in the Bank, bank is an asset and increased by
400,000 and therefore Bank A/C is credited while sales increases revenue by 400,000 and
therefore Sales A/C is credited.
July 25th Purchased goods 100,000/=from Ivan on credit
Explanation
Purchases increased expenditure by 100,000/= and therefore the Purchase A/C is debited while
Ivan, a creditor also increased by 100,000/= and therefore Ivan A/C is credited.
July 26th Paid Ivan 80,000/= cash
Explanation
Ivan a creditor received part payment which decreased liabilities by 80,000 and therefore Ivan
A/C is debit while cash an asset decreases by 80,000 and therefore Cash A/C is credit.
July 27th John rejected and returned goods worth 100,000/=
Explanation

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INTERNATIONAL UNIVERSITY
John is a debtor, he returned goods to the company. Such return is called returns inwards or sales
returns. Since the Debtor’s Account reduced the amount receivable from John’s A/C has reduced,
the debtor’s account also called account receivable is credited. John’s A/C is specifically
credited. Returns inwards A/C which reduces sales is debited.

July 28th Received a cheque of 200,000/= from John for goods sold to him on credit
Explanation
Receiving of any money by cheque mean the transaction occurred in the Bank, Bank, an asset
increased by 200,000 and therefore Bank A/C is debited while John a debtor an asset decreased
by 200,000 and therefore John A/C is credited
July 29th Paid or electricity 50,000/= by cheque and 100,000/= cash
Explanation
Electricity is an expenditure and increased by 150,000/=and therefore the Electricity A/C is
debited while Bank, an asset decreases by 50,000/=and therefore Bank A/C is therefore credited.
Also cash, an asset decreases by 100,000 and therefore Cash A/C is also credited.
July 30th Paid rent 60,000/= by cheque
Explanation
Rent is an expenditure and increased by 60,000/=and therefore the rent A/C is debited while
Bank, an asset decreases by 60,000/=and therefore Bank A/C is therefore credited.
July 31st Paid salaries 150,000/= cash and 160,000/= by cheque.
Explanation
Salaries are expenditure and increased by 310,000/=and therefore the Salary A/C is debited while
Bank, an asset decreases by 160,000/=and therefore Bank A/C is therefore credited. Also cash, an
asset decreases by 150,000 and therefore Cash A/C is also credited.
MR. TIKOBIGUMA
GENERAL JOURNAL FOR THE MONTH OF JULY 2024
DATE Particulars Folio Dr. (Shs.) Cr. (Shs.)
July 1st Purchase A/C 1 400,000
Ivan A/C (Creditor) 2 400,000
July 2nd Purchase A/C 1 200,000
Derrick A/C (creditor) 3 200,000
July 3rd John A/C (Debtor) 4 1,000,000
Sales A/C 5 1,000,000
July 4th Mary A/C (Debtor) 6 400,000
Sales A/C 5 400,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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July 5th Ivan A/C (Creditor) 2 50,000
Returns outwards 7 50,000
July 10th Cash A/C 8 800,000
John A/C (Debtor) 4 800,000
July 12th Ivan A/C (Creditor) 2 80,000
Cash A/C 8 80,000
th
July 14 Derrick A/C (Creditor) 3 60,000
Purchases A/C 1 60,000
th
July 15 Returns inwards A/C 9 40,000
Mary A/C (Debtor) 6 40,000
th
July 16 Bank A/C 10 150,000
Mary A/C (Debtor) 6 150,000
th
July 17 Rent A/C 11 100,000
Cash A/C 8 100,000
th
July 18 Derrick A/C (Creditor) 3 50,000
Returns outwards A/C 12 50,000
th
July 19 Derrick A/C (Creditor) 3 150,000
Bank A/C 10 150,000
th
July 20 John A/C (Debtor) 4 800,000
Sales A/C 5 800,000
July Purchase A/C 1 100,000
22nd Cash A/C 8 100,000
July 23rd Cash A/C 8 500,000
Sales A/C 5 500,000
th
July 24 Bank A/C 10 400,000
Sales A/C 5 400,000
th
July 25 Purchase A/C 1 100,000
Ivan A/C (Creditor) 2 100,000
th
July 26 Ivan A/C (Creditor) 2 80,000
Cash A/C 8 80,000
th
July 27 Returns inwards A/C 9 100,000
John A/C (Debtor) 4 100,000
th
July 28 Bank A/C 10 200,000
John A/C (Debtor) 4 200,000
th
July 29 Electricity A/C 13 150,000
Bank A/C 10 50,000
Cash A/C 8 100,000
July 30th Rent A/C 11 60,000
Bank A/C 10 60,000
July 31st Salary A/C 14 310,000
Bank A/C 10 160,000
Cash A/C 8 150,000
6,280,000 6,280,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Note1: All the accounts in the personal accounts will be looked at creditor and debtors under the
ledger accounts.

MR. TIKOBIGUMA
GENERAL LEDGER ACCOUNTS
Dr Purchase A/C Cr.
July 1 Creditors 400,000
July 2 Creditors 200,000
July 14 Creditors 60,000
July 22 Cash 100,000
July 25 Creditors 100,000
July 31st, 2024 Bal. c/d 860,000

𝟖𝟔𝟎, 𝟎𝟎𝟎 𝟖𝟔𝟎, 𝟎𝟎𝟎

1st August Bal. b/d 860,000

Dr Creditor A/C Cr.

July 5 Return outwards 50,000 July 1 Purchases 400,000
July 12 Cash 80,000 July 2 Purchases 200,000
July 18 Return outwards 50,000 July 14 Purchases 60,000
July 19 Bank 150,000 July 25 Purchases 100,000
July 26 Cash 80,000
July 31st, 2024 Bal. c/d 350,000
𝟕𝟔𝟎, 𝟎𝟎𝟎 𝟕𝟔𝟎, 𝟎𝟎𝟎
1st August Bal. b/d 350,000

Dr Sales A/C Cr.

July 3 Debtors 1,000,000
July 4 Debtors 400,000
July 20 Debtors 800,000
July 23 Cash 500,000
July 24 Bank 4,000,000
July 31st, 2024 Bal. c/d 6,700,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

𝟔, 𝟕𝟎𝟎, 𝟎𝟎𝟎 𝟔, 𝟕𝟎𝟎, 𝟎𝟎𝟎

1st August Bal. b/d 6,700,000

Dr Debtors A/C Cr.

July 3 Sales 1,000,000 July 10 Cash 800,000
July 4 Sales 400,000 July 15 Return inwards 40,000
July 20 Sales 800,000 July 16 Bank 150,000
July 27 Return inwards 100,000
July 28 Bank 200,000

July 31st, 2024 Bal. c/d 910,000

𝟐, 𝟐𝟎𝟎, 𝟎𝟎𝟎 𝟐, 𝟐𝟎𝟎, 𝟎𝟎𝟎

1st August Bal. b/d 910,000

Dr Return outwards A/C Cr.

July 5 Creditors 50,000
July 18 Creditors 50,000
July 31st, 2024 Bal. c/d 100,000
𝟏𝟎𝟎, 𝟎𝟎𝟎 𝟏𝟎𝟎, 𝟎𝟎𝟎
1st August Bal. b/d 100,000

Dr Cash A/C Cr.

July 10 Debtors 800,000 July 12 Creditors 80,000
July 23 Sales 500,000 July 17 Rent 100,000
July 22 purchases 100,000
July 26 Creditors 80,000
July 29 Electricity 100,000
July 31 Salaries 150,000

July 31st, 2024 Bal. c/d 690,000

𝟏, 𝟑𝟎𝟎, 𝟎𝟎𝟎 𝟏, 𝟑𝟎𝟎, 𝟎𝟎𝟎
st
1 August Bal. b/d 690,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

Dr Return inwards A/C Cr.

July 15 Debtors 40,000
July 27 Debtors 100,000

July 31st, 2024 Bal. c/d 140,000

𝟏𝟒𝟎, 𝟎𝟎𝟎 𝟏𝟒𝟎, 𝟎𝟎𝟎
st
1 August Bal. b/d 140,000

Dr Bank A/C Cr.

July 16 Debtors 150,000 July 19 Creditors 150,000
July 24 Sales 4,000,000 July 29 Electricity 50,000
July 20 Debtors 200,000 July 30 Rent 60,000
July 31 Salaries 160,000

July 31st, 2024 Bal. c/d 3,930,000

𝟒, 𝟑𝟓𝟎, 𝟎𝟎𝟎 𝟒, 𝟑𝟓𝟎, 𝟎𝟎𝟎

st
1 August Bal. b/d 3,930,000

Dr Rent A/C Cr.

July 17 Cash 100,000
July 30 Bank 60,000

31st July 2024 Bal. c/d 160,000

𝟏𝟔𝟎, 𝟎𝟎𝟎 𝟏𝟔𝟎, 𝟎𝟎𝟎

st
1 August Bal. b/d 160,000

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INTERNATIONAL UNIVERSITY
Dr Electricity A/C Cr.
July 29 Cash 100,000
July 29 Bank 50,000
July 31st, 2024 Bal. c/d 150,000

𝟏𝟓𝟎, 𝟎𝟎𝟎 𝟏𝟓𝟎, 𝟎𝟎𝟎

1st August Bal. b/d 150,000

Dr Salaries A/C Cr.

July 31 Cash 150,000
July 31 Bank 160,000

July 31st, 2024 Bal. c/d 310,000

𝟑𝟏𝟎, 𝟎𝟎𝟎 𝟑𝟏𝟎, 𝟎𝟎𝟎

1st August Bal. b/d 310,000

MR. TIKOBIGUMA
TRIAL BALANCE FOR THE MONTH ENDED 31st JULY 2024

ACCONT Dr. (Shs.) Cr. (Shs.)

Purchase 860,000
Creditors 350,000
Sales 6,700,000
Debtors 910,000
Return outwards 100,000
Cash 690,000
Return inwards 140,000
Bank 3,930,000
Rent 160,000
Electricity 150,000
Salaries 310,000
𝟕𝟏𝟓𝟎, 𝟎𝟎𝟎 𝟕, 𝟏𝟓𝟎, 𝟎𝟎𝟎

BY AMANYA GIBSON AUGUST INTAKE 2024

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QUESTION THREE (Adjustments and final accounts)

Wakanda Ltd deals in assorted merchandise. On 31st December 2023 the following trial balance
was extracted from the company’s Ledger.
Particulars Dr. (Shs.) Cr. (Shs.)
Ordinary Share Capital 10,000,000
6% preference share capital 50,000,000
Land 80,000,000
Building cost 60,000,000
Motor vehicle cost 30,000,000
Accumulated Depreciation 1/1/2023
Building 12,000,000
Motor vehicles 5,000,000
Trade Debtors and Creditor 7,000,000 3,500,00
Cash 4,600,000
Bank 1,280,000
Stock 1/1/2023 5,200,000
Goodwill 1,000,000
Insurance 1,400,000
Rent 1,200,000
Bad debts 100,000
Bad debts provision 1/1/2023 400,000
Creditors (due in excess of 2 years) 13,300,000
Purchases 120,000,000
Carriage on Purchases 3,000,000
Salaries 4,800,000
Discounts 120,000 240,000
Returns inwards and outwards 1,500,000 700,000
Preference dividend paid on 30/9/2023 2,500,000
Sales 200,000,000
Retained earnings 1/1/2023 20,000,000
General reserve 6,000,000
322,420,000 322,420,000
The following information matters must be taken into account before financial statements are
prepared.
i) Stock was valued on 31/12/2023 at Shs. 8,000,000 on FIFO basis
ii) Buildings should be depreciated by 5% on cost and Motor vehicles by 10% on
reducing balance.
iii) December 2023 salaries amounting to Shs. 400,000 were paid on 2/1/2024
iv) Rent was paid on 1/1/2023 for a period up to 30/6/2024.
v) Direct write-off of bad debts of 200,000 should be made while a provision of Shs.
1,000,000 should be made for debts that are doubtful.

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vi) Stock costing Shs. 2,000,000 was given to staff as a bonus at the end of the financial
year.
vii) The directors proposed to pay the remaining dividend due to preference shareholders.
viii) Goodwill should be written off in full against the general reserve.
REQUIRED
a) Enter adjusting information above into a general journal? (10 Marks)
b) Prepare the Wakanda Ltd’s Trading and profit and loss account including appropriation
for the year ended 31/12/2023? (15 Marks)
c) Prepare the Wakanda Ltd’s balance sheets as at 31/12/2023? (10 Marks)

SOLUTION
Workings

Note 1 : RENT
Rent of shillings 1,200,000 paid was for 18 months 1/1/2023 to 30/6/2024
Monthly rent = 1,200,000
18
Rent for 12 months of the financial year = 1,200,000 x 12
18
= 800,000/=
Oly the year’s rent of 800,000 should be taken as operating expense in the profit and loss
account.

Prepaid Rent = 1,200,000 x 6 OR 1,200,000 - 800,000

18
= 400,000/=
Prepaid rent of 400,000 is recorded as a current asset in the balance sheet
NOTE 2: BAD DEBTS
Shs.
Balance as per trial balance 100,000
Debts which have actually become had and written off 200,000
Bad debts but still doubtful 1,000,000
Total to be taken as operating expense in the P & L A/C 1,300,000

NOTE 3: SALARIES

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Balance as per trial balance 4,800,000
Add: accrued salaries paid the following financial year 400,000
Total charged in the P & L A/C 5,200,000

NOTE 4: DEPRECIATION
Building 60,000,000 x 5% = 3,000,000
Motor Vehicles (Reducing balance Method)
= cost – Acc. Depreciation
= 30,000,000 – 5,000,000
= 25,000,000 x 10%
= 2,500,000
NOTE 5: ACCUMULATED DEPRECIATION ON BUILDING
Balance as per trial balance 12,000,000
Add: depreciation of the year 3,000,000
Total accumulated depreciation 15,000,000
NOTE 6: ACCUMULATED DEPRECIATION ON MOTOR VEHICLE
Balance as per trial balance 5,000,000
Add: depreciation of the year 2,500,000
Total accumulated depreciation 7,500,000

NOTE 7 : DEBTORS
Bad debt of shillings 200,000 were directly written off
The debtors figure must be adjusted as follows
Balance as per trial balance 7,000,000
Less: Bad debts written off 200,000
6,800,000
NOTE 8: PROVISION FOR BAD DEBTS
Balance as per trial balance 400,000
Add: provision made for doubtful debts 1,000,000
Total bad debts provision 1,400,000

WAKANDA LTD’S
GENERAL JOURNAL SHOWING ADJUSTING ENTRIES ON 31ST DECEMBER 2023

BY AMANYA GIBSON AUGUST INTAKE 2024

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Account Dr. (Shs.) Cr. (Shs.)
Stock 31/12/2023 8,000,000
Trading 8,000,000
Depreciation expense: Building 3,000,000
Accumulated Depreciation: Building 3,000,000
Depreciation expense: Motor Vehicle 2,500,000
Accumulated Depreciation: Motor Vehicle 2,500,000
Salaries 400,000
Salaries payable (Accrued salaries) 400,000
Prepaid rent Account 400,000
Rent Account 400,000
Profit and Loss (Bad debts written off) 2,00,000
Debtors 200,000
Bad debts Account 1,000,000
Provision for bad debts 1,000,000
Bonus Account – Profit and Loss 2,000,000
Purchases 2,000,000
Profit and loss appropriations 500,000
Proposed dividend payable 500,000
General reserve 1,000,000
Goodwill 1,000,000

WAKANDA LTD’S
INCOME STATEMENT FOR YEAR ENDED 31ST DECEMBER 2023
Particulars (Shs. (Shs. 000) (Shs. 000) (Shs. 000)
000)
Sales 200,000
Less: return in wards 1,500
Net Sales 198,500
Less: Cost of sales
Opening stock 1st January, 2023 5,200
Add: purchases 120,000
Add : carriage on purchases 3,000
123,000
Less: Returns outwards 700
Bonus stock 2,000 2,700
Net Purchases 120,300
Goods available for sale 125,500
Less: Closing Stock 31/12/2023 8,000
Cost of goods sold 117,500
Gross profit 81,000
Add: additional incomes

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Discount received 240
Gross Income 81,240
Less: operating expense
Insurance 1,400
Rent (Note 1) 800
Bad debts (Note 2) 1,300
Salaries (Note 3) 5,200
Discount allowed 120
Depreciation
Building (Note 4) 3,000
Motor Vehicles (Note 4) 2,500
Bonus stock 2,000 16,320
Net Profit 64,920
Add: Profit and loss balance
Retained earnings 1st /1/2023 20,000
84,920
Less: Appropriation
Interim Preference dividend paid 2,500
on 30/9/2023
Proposed final preference dividend 500 3,000
Profit and Loss Account balance
Retained earnings 31/12/2023 81,920
transferred to Balance sheet

WAKANDA LTD’S
BALANCE SHEET AS AT 31ST DECEMBER 2023
ASSETS
FIXED ASSETS Cost ACC. DEP NBV
(Shs. 000) (Shs. 000) (Shs. 000)
Land 80,000 80,000
Building (Note 5) 60,000 15,000 45,000
Motor Vehicle (Note 6) 30,000 7,500 22,500
170,000 22,500 147,500
CURRENT ASSETS
Stock 31/12/2023 8,000
Debtors (Note 7) 6,800
Less: Provision for Bad debts (Note 8) 1,400 5,400
Prepaid rent 400
Cash 4,600 18,400
Total Assets 165,900
OWNERS EQUITY AND
LIABILITIES
OWNERS EQUITY
Ordinary Share capital 10,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Preference share capital 50,000
Retained earnings 5,000
Profit and loss Account 31/12/2023 81,920
Total owner’s equity 146,920
LIABILITIES
Non-Current Liabilities
Creditor 13,300
Current Liabilities
Trade Creditors 3,500
Bank overdraft 1,280
Salaries payable 400
Proposed dividends 500 5,680
Total owner’s equity & Liabilities 165,900

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

QUESTION FOUR (Non-Profit Making Organization)

The following records relates to KUTA-KITE ROTARY club for the year ended 31/07/2024
Receipts and Payments A/C
Bal b/f 2,500,000 Transfer to deposit
account on 31/07/2024 7,000,000
Competition profit 600,000 Part Payment of loan
with the year’ interest 6,000,000
Annual grant 1,500,000 Extension of club house 9,000,000
Bar & Restaurant sales 50,000,000 Electricity expenses 500,000
Annual Subscriptions 18,000,000 Payment to bar creditors 25,000,000
Life membership Subscription 30,000,000 Secretary’s expenses 400,000
Interest from 5,000,000/=
investment at 10% 500,000 Barman’s wage 2,000,000
Balance c/f 53,200,000
103,100,000 103,100,000

Further information
i) Included in the clubs assets and liabilities on 1/8/2023 were the following
(Shs.)
Club house cost 36,000,000
Investment 5,000,000
Bar and restaurant stock 600,000
Annual subscription outstanding 200,000
Bar and Restaurant Creditors 300,000
10% Loan 10,000,000
ii) Bar and Restaurant stock on 31/7/2024 was valued at cost Shs. 500,000, this stock had
a market value of Shs. 790,000.
iii) Bar creditors on 31/7/2024 totaled Shs. 400,000/=
iv) Subscription received on 31/7/2024 for 1/8/2024- 31/7/2025 finance year amounted to
1,200,000/=
v) It was decided to transfer 20% of life subscriptions to the income and expenditure
account for the year ended 31/7/2024
vi) Club house should be depreciated by 5% of its value as at 31/7/2024
REQUIRED

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Prepare a set of final accounts that can be prepared from the above information at the close of
the financial year? (25 Marks)

SOLUTION

KUTA-KITE ROTARY
STATEMENT OF AFFAIRS AS AT 1st AUGUST, 2023
ASSETS Shs Shs
FIXED ASSETS
Club house 36,000,000
Intangible assets
Investment 5,000,000
CURRENT ASSETS
Bar and restaurant stocks 600,000
Annual subscriptions outstanding 200,000
Bank 2,500,000
3,300,000
LES: CURRENT LIABILITIES
Creditor 300,000
Net Current Asset 3,000,000
NET ASSETS 𝟒𝟒, 𝟎𝟎𝟎, 𝟎𝟎𝟎

FINANCED BY
Loan 10,000,000
Accumulated fund 1st August, 34,000,000
2023
𝟒𝟒, 𝟎𝟎𝟎, 𝟎𝟎𝟎

Dr Creditors Control A/C Cr.

(Shs) (Shs)
Receipt and payment 25,000,000 Bal. b/d 300,000
Bal. c/d 400,000 Bar credit purchase 25,100,000

𝟐𝟓, 𝟒𝟎𝟎, 𝟎𝟎𝟎 𝟐𝟓, 𝟒𝟎𝟎, 𝟎𝟎𝟎

Dr Club house Control A/C Cr.

(Shs) (Shs)
Bal. b/d 36,000,000 Bal. c/d 45,000,000
Receipt and payment 9,000,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

𝟒𝟓, 𝟎𝟎𝟎, 𝟎𝟎𝟎 𝟒𝟓, 𝟎𝟎𝟎, 𝟎𝟎𝟎

Dr Annual Subscription A/C Cr.

(Shs) (Shs)
Bal. b/d (Outstanding) 200,000 Receipt and payment 18,000,000
Bal. c/d (Received in advance) 1,200,000
I&E 16,600,000
𝟏𝟖, 𝟎𝟎𝟎, 𝟎𝟎𝟎 𝟏𝟖, 𝟎𝟎𝟎, 𝟎𝟎𝟎

Dr Life Subscription A/C Cr.

(Shs) (Shs)
I&E 6,000,000
Bal. c/d 24,000,000 Receipt and payment 30,000,000
𝟑𝟎, 𝟎𝟎𝟎, 𝟎𝟎𝟎 𝟑𝟎, 𝟎𝟎𝟎, 𝟎𝟎𝟎

Note: Repayments of loan and interest was Shs. 6,000,000

Interest = 10,000,000 x 10% = 1,000,000
Loan repayment = 6,000,000 – 1,000,000 = 5,000,000
Dr Loan A/C Cr.
(Shs) (Shs)
Receipt and payment 5,000,000 Bal. b/d 10,000,000
Bal. c/d 5,000,000
𝟏𝟎, 𝟎𝟎𝟎, 𝟎𝟎𝟎 𝟏𝟎, 𝟎𝟎𝟎, 𝟎𝟎𝟎

KUTA-KITE ROTARY
BAR AND RESTRAURANT TRADING ACCOUNT
FOR YEAR ENDED 31st JULY, 2024
Particulars (Shs.) (Shs.)
Sales
Less; Cost of Sales 50,000,000
Opening stock 600,000
Add: Purchases 25,100,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
25,700,000
Less: Closing stock 500,000
Cost of sales 25,200,000
Gross Profit 24,800,000
Less: Operating expenses
Bar man’s wage 2,000,000
Bar net Profit 22,800,000

KUTA-KITE ROTARY
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31st JULY, 2024
Particulars (Shs.) (Shs.)
INCOMES:
Annual subscriptions 16,600,000
Life subscriptions 6,000,000
Bar & restaurant net profit 22,800,000
Annual grant 1,500,000
Interest from investment 500,000
Competition profit 600,000
48,000,000
LESS: EXPENDITURE
Loan interest 1,000,000
Electricity 500,000
Secretary’s expenses 400,000
Depreciation on club house 2,250,000 4,150,000
Surplus of income over expenditure 43,850,000

KUTA-KITE ROTARY
BALANCE SHEET AS AT 31st JULY, 2024
ASSETS (Shs.) (Shs.) (Shs.)
FIXED ASSETS Cost ACC. DEP NBV
Club House 45,000,000 2,250,000 42,750,000
INTANGIBLE ASSETS
Investment 5,000,000
Deposit account 7,000,000
CURRENT ASSETS
Bar and restaurant stocks 500,000
Receipts and payments 53,200,000 53,700,000
Total Assets 108,450,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
OWNERS EQUITY AND
LIABILITIES
OWNERS EQUITY
Accumulated fund 34,000,000
Surplus of income over expenditure 43,850,000
Total owner’s equity 77,850,000
LIABILITIES
Non-Current Liabilities
Loan 5,000,000
Life Subscription 24,000,000 29,000,000
Current Liabilities
Bar creditor 400,000
Subscription received in advance 1,200,000 1,600,000
Total owner’s equity & Liabilities 108,450,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

QUESTION FIVE (Bank Reconciliation)

Having studied fundamental of accounting course from Metropolitan International University-
Mbarara Campus, your employer the Manager of Kamu-Kamu enterprises submitted the following
to you requiring you to prepare a bank reconciliation statement.

Kamu-Kamu
Bank reconciliation statement for the month ended 31st July 2024
Shs. Shs. Shs.
Balance as per statement 8,500,000
Add: Bank Charge 200,000
Commission 100,000 300,000
Uncredited Cheques
Cheque no. 004 1,000,000
Cheque no. 623 4,500,000 5,500,000 5,800,000
14,300,000
Less; unpresented cheques
Cheque No. 10 5,000
Cheque no. 12 2,500,000 3,000,000
Cashbook mistake on cheque 1,700,000 4,700,000
No. 14
Balance as per bank statement 9,600,000

Kamu-Kamu
Cash book for the month of August 2024
Dr. (Shs) Cr. (Shs)
Bal b/f 9,600,000 Cheque No. 20 800,000
Cheque No. 2515 1,000,000 Cheque No. 21 1,200,000
Cheque No. 1119 500,000 Cheque No. 22 2,000,000
Cheque No. 990 3,000,000 Cheque No. 23 600,000
Cheque No. 224 2,400,000 Cheque No. 24 200,000
Cash 900,000 Cheque No. 26 1,400,000
Cheque No. 414 1,800,000 Cheque No. 27 2,400,000
Cheque No. 666 700,000 Cheque No. 28 700,000
Cash 1,300,000 Cheque No. 30 1,800,000
Cheque No. 804 BE 2,100,000 S.O Insurance 900,000
Cheque No. 707 3,400,000 Bal. c/f 16,900,000
Cheque No. 31CBE 1,300,000
M-Peter 900,000
𝟐𝟖, 𝟗𝟎𝟎, 𝟎𝟎𝟎 𝟐𝟖, 𝟗𝟎𝟎, 𝟎𝟎𝟎

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

Kamu-Kamu
Bank Statement for the month of August 2024
Dr. (Shs) Cr. (Shs) Balance (Shs)
Bal b/f 8,500,000
Cheque No. 22 2,000,000 6,500,000
Cheque No. 24 200,000 6,300,000
Cheque No. 623 4,500,000 10,800,000
Cheque No. 990 3,000,000 13,800,000
C.M- Peter 900,000 14,700,000
Cheque No. 21 2,100,000 12,600,000
Cheque No. 12 2,500,000 10,100,000
Cheque No. 20 800,000 9,300,000
Cheque No. 2515 1,000,000 10,300,000
Cheque No. 1119 500,000 10,800,000
S.O – Insurance 900,000 9,900,000
Cheque No. 224 4,200,000 14,100,000
Cash 900,000 15,000,000
Cheque No. 26 1,400,000 13,600,000
Cheque No. 27 2,400,000 11,200,000
Cheque No. 6001 5,000,000 16,200,000
Cheque No. 414 1,800,000 18,800,000
Cheque No. 804 2,100,000 15,900,000
Cheque No. 31 3,100,000 12,800,000
C.M - John 1,300,000 14,100,000
Cheque No. 28 700,000 13,400,000
Ledger fee 50,000 13,350,000
Dividend 1,500,000 14,850,000

C.M = Credit Memo

S.O = Standing Order

Relevant information
1. Any mistakes in amounts were made in the cashbook by an inexperienced and poorly
motivated bookkeeper.
2. Cheque No. 31 and 804 were entered on the wrong sides of the cash book and bank
statement respectively.
Required:
Prepare the company’s bank reconciliation statement for the month of august 2024

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

SOLUTION
Kamu-Kamu
Adjusted Cash book
Dr. (Shs. 000) Cr. (Shs. 000)
Bal b/d 16,900 Bank charge 200
Error on Cheque No. 224 1,800 Commission 100
Cheque No. 6001 5,000 Ledger fee 50
C.M (John) 1,300 Error on Cheque No. 21 900
Dividend 1,500, Error on Cheque No. 31 4,400
Error on Cheque No. 224 1,700
Bal. c/d 22,550
𝟐𝟖, 𝟐𝟎𝟎 𝟐𝟖, 𝟐𝟎𝟎

Kamu-Kamu
Bank Reconciliation Statement for the month of 31st August 2024
(Shs. 000) (Shs. 000) (Shs. 000)
Balance as per adjusted cash book 22,550
Add: Unpresented Cheques
Cheque No. 10 500
Cheque No. 23 600
Cheque No. 30 1,800 2,900
25,450
Less: Uncredited Cheques
Cheque No. 004 1,000
Cheque No. 666 700
Cheque No. 707 3,400 5,100
Uncredited Cash 1,300
Error on Bank Statement
Cheque No. 804 4,200 10,600
Balance as per bank statement 𝟏𝟒, 𝟖𝟓𝟎

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY

QUESTION SIX (Suspense Accounts)

Musa the accountant of Jogo Enterprises prepared a trial balance for the month of February 2023
but it failed to balance. The totals on the trial balance were as follows:
Total Dr Cr
(shs) (shs)
300,000,000 299,979,000
He opened a suspense account for the difference and proceeded to prepare final accounts. He
reported a net profit of shs.3,600,000 for the month.
Early in March 2023, he discovered the following errors that were made in February 2023,
1 The cash book (bank column) was over credited by shs.2,000.
2. Purchases and accounts payable were each overcast by shs.4,000.
3. A sales invoice of shs.500,000 was correctly entered in the sales day book but was posted to
the ledger as shs.510,000.
4. Payment for a fax bill of shs.15,000 was correctly recorded in the cash book but was recorded
in the wrong side of the fax account.
5. A credit note issued for shs.356,000 was correctly recorded in the customer’s account but was
recorded in the corresponding double entry account as shs.365,000.
6. Purchase of goods for shs.951,000 from Jone was recorded by error in account for Jane as
shs.915,000.
7. Discount received of shs.25,000 was not posted to its account but entered by mistake in the
cash book (credit side of cash column). A correct record was made to the creditors account.
8. Purchase of stationery for shs.352,00 was entered to the business purchases account as
shs.325,000.
9. Bank charges of shs.31,000 was debited to the cash book as shs.13,000. The entry in the bank
charges account in the ledger was alright .
10. Carriage outwards for shs.465,000 was debited to the returns outwards account as
shs.456,000.
Required
a. Journal entries to correct all the errors.
b. Suspense account.
c. A statement of the corrected net profit.

BY AMANYA GIBSON AUGUST INTAKE 2024

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SOLUTION

JOGO ENTERPRISES
GENERAL FOR CORRECTION OF ERRORS

Account Tittles Dr. Cr.

(Shs.) (Shs.)
1. Cash book (Bank) 2,000
Suspense 2,000
2. A/Cs Payable 4,000
Purchases 4,000
3. Sales A/C 10,000
Debtors (A/Cs Receivable) 10,000
4. Fax 30,000
Suspense 30,000
5. Suspense 9,000
Returns Inwards 9,000
6. Jane 915,000
Suspense 36,000
Jone 915,000
7. Cash 25,000
Discount received 25,000
8. Stationery 352,000
Purchases 352,000
Suspense 27,000
9. Suspense 44,000
Cash book (Bank) 44,000
10. Carriage Outwards 465,000
Returns Outwards 456,000
Suspense 9,000

BY AMANYA GIBSON AUGUST INTAKE 2024

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INTERNATIONAL UNIVERSITY
Suspense A/C
(SHS.) (SHS.)
Returns Inwards 9,000 Bal b/f 21,000
(Difference in Trial
balance)
Jone 36,000 Bank 2,000
Bank 44,000 Fax 30,000
Stationery 27,000
Carriage Outwards 9,000
𝟖𝟗, 𝟎𝟎𝟎 𝟖𝟗, 𝟎𝟎𝟎

JOGO ENTERPRISES
STATEMENT OF CORRECTED NET PROFIT
(Shs.) (Shs.)

Original net profit (reported with errors). 3,600,000

Add: Over cast purchases 4,000
Over recorded returns inwards (credit note issue). 9,000
Discount received not recorded 25,000
Returns outwards (debited by error). 456,000

𝟒𝟎𝟗𝟒, 𝟎𝟎𝟎
Less: Over recorded sales 10,000
Fax recorded on wrong side 30,000
Purchase of stationery recorded as a business
Purchase (352,000-325,000)
Understatement of costs 27,000

Carriage outwards
(Not recorded but debited to returns outwards). 465,000 532,000

Corrected net profit 𝟑, 𝟓𝟔𝟐, 𝟎𝟎𝟎

BY AMANYA GIBSON AUGUST INTAKE 2024

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