FINANCIAL ACCOUNTING
BFC 3125
MAIN EXAM
Answer Question One and Any Other Two
QUESTION ONE
a) Briefly explain the nature and purpose of accounting for depreciation. (10 marks)
b) The following trial balance has been extracted from the ledger of Herbert Howell, a sole
trader, as at 31 May 2019, the end of his most recent financial year.
HH
Trial Balance As At 31 May 2019
Dr Cr
sh sh
Property at cost 90,000
Equipment at cost 57,500
Provision for depreciation (as at 1 June
2018)
• Property 12,500
• Equipment 32,500
Stock as at 1 June 2018 27,400
Purchases 259,600
Sales 405,000
Discounts allowed 3,370
Discounts received 4,420
Wages and salaries 52,360
Bad debts 1,720
Loan interest 1,560
Carriage out 5,310
Other operating expenses 38,800
Trade debtors 46,200
, Trade creditors 33,600
Provision for bad debts 280
Cash on hand 151
Bank overdraft 14,500
Drawings 28,930
13% loan 12,000
Capital, as at 1 June 2018 ______ 98,101
612,901 612,901
The following additional information as at 31 May 2019 is available:
(a) Stock as at the close of business was valued at sh25,900.
(b) Depreciation for the year ended 31 May 2019 has yet to be provided as follows:
Property -1% using the straight-line method
Equipment -15% using the straight-line method
(c) Wages and salaries are accrued by sh140.
(d) Other operating expenses include certain expenses prepaid by sh500. Other expenses
included under this heading are accrued by sh200.
(e) The provision for bad debts is to be adjusted so that it is 0.5% of trade debtors as at 31
May 2019.
(f) Purchases include goods valued at sh1,040, which were withdrawn by Mr H for his own
personal use.
Required:
Prepare Mr. H’s income statement for the year ended 31 May 2019 and his balance sheet as at
31 May 2019. (20 marks)
QUESTION TWO
On 10 January 2019, Frank Mercer received his monthly bank statement for December 2019.
The statement showed the following.
MIDWEST BANK
F Mercer: Statement of Account
BFC 3125
MAIN EXAM
Answer Question One and Any Other Two
QUESTION ONE
a) Briefly explain the nature and purpose of accounting for depreciation. (10 marks)
b) The following trial balance has been extracted from the ledger of Herbert Howell, a sole
trader, as at 31 May 2019, the end of his most recent financial year.
HH
Trial Balance As At 31 May 2019
Dr Cr
sh sh
Property at cost 90,000
Equipment at cost 57,500
Provision for depreciation (as at 1 June
2018)
• Property 12,500
• Equipment 32,500
Stock as at 1 June 2018 27,400
Purchases 259,600
Sales 405,000
Discounts allowed 3,370
Discounts received 4,420
Wages and salaries 52,360
Bad debts 1,720
Loan interest 1,560
Carriage out 5,310
Other operating expenses 38,800
Trade debtors 46,200
, Trade creditors 33,600
Provision for bad debts 280
Cash on hand 151
Bank overdraft 14,500
Drawings 28,930
13% loan 12,000
Capital, as at 1 June 2018 ______ 98,101
612,901 612,901
The following additional information as at 31 May 2019 is available:
(a) Stock as at the close of business was valued at sh25,900.
(b) Depreciation for the year ended 31 May 2019 has yet to be provided as follows:
Property -1% using the straight-line method
Equipment -15% using the straight-line method
(c) Wages and salaries are accrued by sh140.
(d) Other operating expenses include certain expenses prepaid by sh500. Other expenses
included under this heading are accrued by sh200.
(e) The provision for bad debts is to be adjusted so that it is 0.5% of trade debtors as at 31
May 2019.
(f) Purchases include goods valued at sh1,040, which were withdrawn by Mr H for his own
personal use.
Required:
Prepare Mr. H’s income statement for the year ended 31 May 2019 and his balance sheet as at
31 May 2019. (20 marks)
QUESTION TWO
On 10 January 2019, Frank Mercer received his monthly bank statement for December 2019.
The statement showed the following.
MIDWEST BANK
F Mercer: Statement of Account
