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I
I'IHITIIBIR UI'IIVERSITY
0F SCIEI‘ICE RI'ID TECHI'IOLOGY
Faculty of Computing & Informatics
Informatics Department
QUALIFICATION: BACHELOUR OF INFORMATICS
QUALIFICATION CODE: 07BA|F LEVEL: 6
COURSE: BUSINESS ACCOUNTING FOR INFORMATICS COURSE CODE: BAI6205
DATE: November 2017 SESSION: 1
DURATION: 3Hours MARKS: 100
FIRST OPPORTUNITY QUESTION PAPER
EXAMINER(S) MR MUNYARADZI MARAVANYIKA
MR CALISTUS MAHINDI
MODERATOR: MR DANIEL KAMOTHO
THIS QUESTION PAPER CONSISTS OF 13 PAGES
(Excluding this front page)
Instructions for the candidate
1. Answer ALL questions.
When writing take the following into account: The style should inform than
impress, it should be formal, in third person, paragraphs set out according to ideas
or issues and the paragraphs flowing in a logical order.
3. Information should be brief and accurate.
4. Please ensure that your writing is legible, neat and presentable.
5. You are allowed to use a calculator
SECTION A: MULTIPLE CHOICE [40 marks]
1. Which of the following is not a step in the accounting process?
A. Identification.
B. Verification.
C. Recording.
D. Communication
2. The cost principle states that:
A. Assets should be initially recorded at cost and adjusted when the fair value changes.
B. Activities of an entity are to be kept separate and distinct from its owner.
C. Assets should be recorded at their cost.
D. Only transaction data capable of being expressed in terms of money be included in the
accounting records.
3. The three types of business entities are:
A. Proprietorships, small businesses, and partnerships.
B. Proprietorships, partnerships, and corporations.
C. Proprietorships, partnerships, and large businesses.
D. Financial, manufacturing, and service companies.
4. Net income will result during a time period when:
A. Assets exceed liabilities.
B. Assets exceed revenues.
C. Expenses exceed revenues.
D. Revenues exceed expenses
5. Performing services on account will have the following effects on the components of the
basic accounting equation:
Increase assets and decrease owner’s equity.
Increase assets and increase owner’s equity.
increase assets and increase liabilities.POP“? Increase liabilities and increase owner’s equity.
6. As of December 31, 2012, Stoneland Company has assets of$3,500 and owner’s equity of
$2,000. What are the liabilities for Stoneland Company as of December 31, 2012?
$1,500.
$1,000.
$2,500.
$2,000..0093?Which of the following events is not recorded in the accounting records?
Equipment is purchased on account.
An employee is terminated.
A cash investment is made into the business.POWPN The owner withdraws cash for personal use.
Which account increases equity?
Expenses
Withdrawals
Treasury stock.UDFDPs» Revenues
5° The accounting principle that states companies and owners should be account for
separately.
Business entity concept
Going concern concept
Monetary unit assumption.0090? Periodicity assumption
10. Companies not disclosing an immanent bankruptcy would violate the:
Business entity concept
Going concern concept
Monetary unit assumption.0090? Periodicity assumption
.0090?13.
POP”?
.0090?
. Recording expenses and revenues in the same period in which they occur.
Objectivity principle
Matching principle
Historical cost principle
Industry practices constraint
. A credit to a liability account
indicates an increase
indicates a decrease
is an error
must be accompanied by a credit to an asset account
After a business transaction has occurred, journal entries are recorded in the:
General ledger
General journal
Expense accounts
Statement of financial position
. Once journal entries are recorded, they can be posted to:
General journals
Ledger accounts
Statement of profit or loss
Expense reports
. A trial balance
is a list of accounts with their balances at a given time
proves the mathematical accuracy ofjournalized transactions
will not balance if a correct journal entry is posted twice
proves that all transactions have been recorded
16.
.0090?
POP“?
.0090?
Entries that are made at the end of a period to correct accounts before financial statements
are prepared.
Closing entries
Adjusting entries
Reversing entries
Journal entries
. Prepaid expenses are
shown on the Statement of financial position as assets
shown on the Statement of financial position as liabilities
shown on the Statement of profit or loss as revenue
not shown on a financial statement
. Reports that can be prepared from the adjusted trial balance.
General purpose financial statements
Expense reports
Inventory reports
Payroll spending reports
. Which one of the following is an optional step in the accounting cycle of a business
enterprise?
analyze business transactions
prepare a work sheet
prepare a trial balance
post to the ledger accounts
. What financial statement lists assets from current to long term?
Statement of financial position
Statement of profit or loss
Cash flow statement
Statement of retained earnings
21. Net income equals:
A.
B
C.
D
Total revenues minus cost of goods sold
Total revenues minus total expenses
Operating revenues minus operating expenses
Revenues minus expenses plus income taxes
22. What financial ratio helps management evaluate profits available for dividends?
A.
B
C.
D
Retention Rate
Debt Ratio
Debt Service Coverage Ratio
Cash Ratio
23. An expense has not been paid and has not yet been recognized in the accounts by a routine
entry. To properly adhere to the Matching Principle, which of the following is required:
.0090?Capital Stock Entry
Deferral Entry
Accrual Entry
Inventory Entry
24. Warren, Inc. Has wages that have been earned but not paid at the end of the accounting
period. The entry to properly accrue Wages Expense includes:
.0093?Wages Payable, Debit; Wages Income, Credit
Wages Income, Debit; Wages Payable, Credit
Wages Payable, Debit; Wages Expense, Credit
Wages Expense, Debit; Wages Payable, Credit
25. Gross profit is
.0090?Sales revenue less operating expenses.
Sales revenue less cost of goods sold.
Net income less operating expenses.
Net income less cost of goods sold.
26. Accrued Revenue is recorded when:
A. Services have already been earned and recorded
B. Services have already been paid for in cash and are expected to be earned in the
upcoming accounting period
C. Services have already been paid for in cash
D. Services have been earned but have not yet been recorded
27. The revenue recognition principle dictates that companies recognize revenue in the
accounting period
A. before services are performed
B after services are performed
C. in which services are performed
D in which it is collected
28. At December 31, 2002, interest expense of $960 is owed on a two-year bank note that will
not be paid until July 2003, what is the appropriate accrual at the end of 2002?
A. Interest Expense .................. 960
Cash .................................. 960
B. Interest Payable .................. 960
Interest Expense ................. 960
C. Cash .................................. 960
Interest Expense ................. 960
D. Interest Expense .................. 960
Interest Payable ................. 960
29. Pace's Hardware, a Corporation, pays its employees each Friday for a five-day total
workweek. The payroll is $12,000 per week. If the end of the accounting period occurs on a
Wednesday, the adjusting entry to record Salaries Payable would include a:
A Debit to salary expense of $4,800.
B Debit to salary expense of $6,000.
C. Credit to salaries payable of $2,400.
D Credit to salaries payable of $7,200.
30. A company pays its employees every Friday. The amount paid every week is $120 per day.
September 30, 2000, is a Tuesday. The amount of salary accrued on September 30, 2000, is:
A. $0
B. $240
C. S360
D. $600
31. All of the following are required steps in the accounting cycle except
journalizing and posting closing entries
preparing financial statements
journalizing the transactionsPOP”? preparing a worksheet
32. Current assets are listed
by liquidity
by importance
by longevitypopuy> alphabetically
33. The adjusting entry required to record depreciation on a building for the fiscal period
consists of:
Debit: depreciation expense; credit: building
Debit: depreciation expense; credit: accumulated depreciation
Debit: accumulated depreciation; credit: depreciation expensePCP“? Debit: building; credit: depreciation
34. Depreciation Expense and Accumulated Depreciation are classified, respectively, as:
Depreciation expense: expense; accumulated depreciation: contra asset
Depreciation expense: asset deferral; accumulated depreciation: contra asset
Depreciation expense: expense; accumulated depreciation: asset.0090? Depreciation expense: contra asset; accumulated depreciation: expense
35.
A.
B
C.
D
.0090?
pow»
Each of the following is a subsidiary ledger except the
accounts receivable ledger
accounts payable ledger
customers' ledger
general ledger
. Which of the following types of accounts is not affected by the closing process?
Revenue
Expense
Drawings
Cash
. A Corporation has earned revenues of $3,500. Expenses for the month equal $1,800. The
beginning balance in Capital Stock was $10,000 and in Retained Earnings was $1,000. No
dividends were paid. After closing the balances in the Capital Stock and Retained Earnings
accounts are:
$11,700; $1,000
$10,000; $2,700
$11,700; $2,700
$12,700; $0
. A sole—proprietorship has earned revenues of $4,500. Expenses for the month equal $2,000.
The owner withdrew $500 for personal expenses. The beginning balance in the Capital
account was $10,000. After closing the balances in the Capital and Drawings accounts are:
$12,000; $0
$12,500; $500
$10,000,- $3,000
$13,000; $0
39. Debit postings to the individual accounts in an accounts receivable subsidiary ledger
generally come from the
sales journal
cash receipts journal
purchases journal909°? cash payments journal
40. Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales.
The company uses the percentage-of—sales basis. If the Allowance for Doubtful Accounts has
a credit balance of $15,000 before adjustment, what is the balance after adjustment?
A. $15,000
B. $27,000
C. $23,000
D. $31,000
SECTION B [20 marks]
Question 1 10
Enter the following transactions in the ledger, giving a reason for your entries
Entry 1 The proprietor contributes some cash to the business.
Entry 2 Some cash in the till is paid into the business bank account.
Entry 3 A van is purchased for use in the business; it is paid for by cheque.
Entry 4 Some goods are purchased for cash.
Entry 5 Some goods are purchased on credit terms from Fred.
Question 2 10
The following is the Trading Account of a company as on 3lst December:
Calculate:
1 Mark—up
Margin
Inventory turnover
Net profit marginU'I-bUJN NNNNNNon—current assets turnover ration
Profit and Loss Account for the year ended 28 February 2015
5 $000
Sales 1,200
Cost of goods sold 600
Gross Profit 600
Administration expenses (500)
Loan Interest L12)
Profit on ordinary activities 90
Taxation ($1
60
Dividends (fig)
Retained profit for the year Q
A Limited
Statement of financial position as at 28 February 2015
NSOOO NSOOO
Non-current assets (Net book value) 685
Current assets
Inventory 75
Trade receivables E 275
Total assets m
10
Equity and liabilities
Ordinary share capital
Retained profit
Total shareholder's funds
Non-current liabilities
10% loan
Current liabilities
Trade payables
Bank overdraft
Taxation
Proposed dividend
Total equity and liabilities
11
160
10
30
40
600
20
620
100
240
960
SECTION C [40 marks]
Question 1 40 marks
Wayne has been in business for many years. He has extracted a trial balance as at 21 March 2017
as follows:
Wayne's Trial Balance as at 31 March 2017
S 5
Bank 1200
Capital 33000
Cash 300
Drawings 6000
Insurance 2000
Office expenses 15000
Office furniture at cost 5000
Office furniture: accumulated depreciation at 1 April 2016 2000
Provision for bad and doubtful debts at 1 April 2016 500
Purchases 55000
Salaries 25000
Sales 100000
Sock at 1 April 2016 10000
Trade creditors 4000
Trade debtors 20000
139500 139500
Notes: The following additional notes have to be taken into account:
1. Inventory as at 31 March 2017 was valued at $15000
2. The insurance included $500 worth of cover which related to the year to 31 March 2018
3. Depreciation is charged on office furniture at 10 per cent per annum of its original cost (it is
assumed not to have any residual value)
4. A bad debt of $100 included in the trade debtors balance of $20000 is to be written off
5. The provision for bad and doubtful debts is to be maintained at a level of 5 per cent of
outstanding trade debtors as at 31 March 2017, Le. after excluding the bad debt referred to
in note 4 above
6. At 31 march 2017, there was an amount owing for salaries of $1000
Required
a) Prepare Wayne’s trading and profit and loss account for the year 31 March 2017 [16 marks]
b) Prepare a Statement of financial position as at that date.
c) Show all workings
End of question paper
12
[14 marks]
[9 marks]