KUSHINGA PHIKELELA POLYTECHNIC

BUSINESS STUDIES DEPARTMENT

FINANCIAL ACCOUNTING II

ASSIGNMENTS 2023
Instructions to candidates
1. -Answer all questions
2. -You may loose marks for untidy work
3. -Begin answer to each question on a new page
4. -For theory assignments, cite relevant authorities (IAS) to support your answer and
reference at the end

Theory Assignment one Due date 17 March 2023

a) Briefly give and explain any 5 characteristics of good financial statements in decision
making. (10 marks)
b) When are the following items recognized with the financial statements of an
organization? Assets, Liability, Income, expense and goodwill
(10 marks)
c) Define the following accounting terms:
1. The dual aspect concept 6. The historical cost concept
2. Money measurement concept 7. Uniformity concept
3. Time interval concept 8. Conservatism/Prudence concept
4. Materiality concept 9. Objectivity concept
5. Consistency concept 10. Relevance (2 marks each =20 marks)

FINANCIAL ACCOUNTING 2
Practical one (Due date: 17 March 2023)
Question one (25 marks)
The following information was extracted from the books of BB ltd on 31 December 2022

Ordinary Share capital of $0.5 each 200 000

10% Preference shares of $1 each 100 000
Share premium 50 000
Purchases 330 000
General Reserves 12 000
Retained earnings at 1 January 2021 20 000
Rates, light and heat 24 000
Telephone and postage 6 000
Salaries and wages 21 000
Director’s remuneration 14 000
Carriage inwards 8 000
Carriage out wards 6 000
Returns 8 500 6 500
Motor vehicle expenses 24 000

Page 1 of 6
Sales 600 000
Accounts receivables 120 000
Inventory 31 December 2021 48 000
Freehold property at cost 210 000
Fixtures and Fittings 140 000
Provision for depreciation 60 000
Motor Vehicles at cost 80 000
Provision for depreciation 20 000
Cash at bank 11 000
Accounts payable 12 000
Investment 30 000
1 080 500 1 080 500
Additional information as at 31 December 2022
a) The company’s freehold property was valued at $300 000 on 31 December 2022. The directors
have decided to reflect this in the accounts
b) Depreciation on fixtures and fittings is 20% per annum and on Motor vehicles 15% on reducing
balance method.
c) Bad debts amounting to $20 000 were not accounted for. The accountant believed that a
provision of 5% for bad debts is necessary.
d) Salaries include $4 000 for audit expenses and $6000 for sales personnel.
e) Investments are now valued at $35 000 and investment income received of $2 500 has not been
accounted for.
f) The directors are proposing dividend of 12% on ordinary shares and to transfer $5000 to general
reserve
g) Stock at 31 December 2022 was $30 000
Required: Comprehensive Financial Statements for publication for year ended 31 December 2022 with
accompanying notes (25 marks)

Question two (25 marks)

A B C have been in partnership for more than ten years sharing profits equally. The
previous balance sheet was as follows:

ASSETS
Fixed Assets At Cost Accm Dp NBV
Equipment 20 000 6 000 14 000
Motor Vehicles 10 000 4 000 6 000
30 000 10 000 20 000
Current Assets
Stock 10 000
Debtors 21 000 31 000
51 000

CAPITAL AND LIABILITIES

Capitals = A 5 000
B 5 000
C 2 000 12 000

Page 2 of 6
Current Accounts = A 4 000
B (2 000)
C 3 000 5 000
17 000
Current liabilities
Bank 13 000
Creditors for goods 17 000
Expenses owing 4 000 34 000
51 000

Following unresolved differences partners agreed to dissolve the partnership on the following terms:
a) Stock was sold for $20 000
b) Equipment was sold for $8000 another one was taken over by C at $10000.
c) $14 000 was received from debtors
d) The motor vehicles realized $12000
e) Creditors were settled by paying $14000
f) The dissolution expenses amounted to $6000

Required:
a) Realization account
b) The capital accounts in columnar form to record the dissolution
c) Bank Account

Question three
Below are the financial statement of Shumba ltd and Shana ltd for the year ended 31 December 2015
Income statement for the year ended 31 December 2015
Shumba Shana Ltd
Sales 900 000 400 000
Cost of sales 400 000 200 000
Gross profit 500 000 200 000
Dividends received 35 000 10 000
535 000 210 000
Administration expenses 120 000 40 000
Distribution expenses 80 000 30 000
Profit before taxation 335 000 140 000
Taxation (50 000) (20 000)
Income on ordinary activities after taxation 285 000 120 000
Retained profit b/d 15 000 30 000
300 000 150 000
Dividends (20 000) (20 000)
Transfer to general reserves (10 000) ( 5 000)
Retained profit b/d 270 000 125 000

Statement of Financial Position at 31 December 2015 Shumba Shana ltd

Page 3 of 6
Non-Current Assets 670 000 360 000
Motor Vehicles 390 000 220 000
Furniture and Fittings 130 000 140 000
Investment in Shana td 150 000 -
Current Assets 115 000 90 000
Stock 60 000 25 000
Debtors 30 000 35 000
Bank 25 000 30 000
Total Assets 785 000 450 000
EQUITY AND LIABILITIES
Share Capital and reserves 510 000 345 000
Ordinary shares 150 000 100 000
General reserves 90 000 120 000
Retained Income 270 000 125 000
Current liabilities 275 000 105 000
Creditors 145 000 50 000
Taxation 110 000 35 000
Proposed dividends 20 000 20 000
Total equity and liabilities 785 000 450 000

Additional information:
1. Shumba ltd acquired all of the share capital of Shana ltd on 1 January 2012 when the retained income of
Shana ltd was $40 000 and general reserves $60 000.
2. Sales from Shumba to Shana during the year ended 31 December 2015 amounted to $150 000
3. Cash in transit from Shana to Shumba amounting to $32 000, as at 31December 2015, was received by
Shumba on 10 January 2016.
4. Also stock in transit from Shumba amounting to $18 000 was received by Shana on 12 January 2016
5. Goods bought from Shumba amounting to $30 000 remain unsold in the books of Shana ltd. Shumba mark
up is 25%
6. Creditors amounting to $10 000 in the books of Shana ltd are in respect of intercompany sales from
Shumba lt

Required: Consolidated income statement and a statement of financial position as at 31 December 2015

Theory assignment two Due date 16 June 2023

Question one
Detail the procedure when issuing shares to the public (10 marks)

Question two
Discuss any ten (10) considerations when preparing consolidated financial
statements (20 marks)

Page 4 of 6
Practical Assignment two- Due date: 16 June 2023
Instructions to candidates
1. Answer all questions
2. Begin answer to each question on a new page
Question 1
George ltd has an authorised capital of 3 000 000 ordinary shares of $2 per share of which 2 000 000
have been issued at par and fully paid.

In order to finance an expansion programme the company issued the remainder of its share capital at a
price of $3 per share payable as follows:
On application $1.00 On allotment $0.75
On first call $0.75 On final call $0.50
Applications were received for 900 000 shares. Of these 200 000 were rejected. The remainder were
allotted pro-rata on a 6 for 7 basis.
The calls were duly made and the sums received except that a holder of 20 000 shares paid on
application and allotment but failed to pay the monies due on the first and final call.

After the formalities had been concluded, these shares were declared forfeit but were subsequently re-
issued to another applicant on payment of $1.50 per share.
Required: Journal entries to record the issue and forfeiture of the shares

Question two
The following figures were extracted from the books of Fair Lt
Statement of Financial Position as on 31 December
ASSETS 2017 2018
NON CURRENT ASSETS $ $
Premises 90 000 120 000
Plant and Machinery 42 300 39 000
Investment at cost 25 000 24 000
157 300 183 000
Current Assets
Inventory 58 000 76 600
Accounts receivables 52 000 41 000
Short term investments 5 600 11 400
Cash 2 900 7 300
275 800 310 300
EQUITY AND LIABILITIES
Ordinary Shares of $1 each 89 900 119 900
General Reserves 5 800 -
Land Revaluation Reserve - 30 000
Undistributed profits 35 000 47 000
130 700 196 900
10% Debentures 60 000 50 000
Current liabilities
Bank 43 600 15 900
Accounts payables 35 000 39 000
Taxation 4 000 5 500
Proposed dividends 2 500 3 000
Page 5 of 6
 275 800 310 300

Profit and loss appropriation a/c for the year ended 31 December 2018
$ $
Net profit before tax 16 200
Taxation (6 000)
Profit after tax 10 200
Interim dividend paid 1 000
Final proposed dividend 3 000 4 000
Retained profit 6 200

Additional information
i. Profit before tax for the year is after charging
-Depreciation on plant and machinery for $9000
-Provision for bad debts $2000
ii. During the year plant with a book value of $6 000 was sold for $12 800. The original cost of
the asset was $22 000
iii. The redemption of debentures was on 31 December 2018

Required: A Cashflow statement for the year ended 31 December 2018 using the indirect method IAS.

Question three

KK ltd has taken a lease for a coal from ABC ltd on the following terms:
The lease period is for 100 years. Royalties are payable at the rate of 50 cents for every tonne of coal
mined. Minimum rent per annum is $30 000. The lessee can recoup any short workings for a period of 3
years after the year in which the shortworkings will have occurred.
The following figures indicate production of coal for K Kltd for 6 years in tonnes
Year 2010 10 000 Year 2011 20 000
2012 40 000 2013 80 000
2014 90 000 2015 120 000
2016 100 000 2017 80 000
Required
Royalty, landlord and short workings accounts in the books of KK Coal ltd

Question four
B Ltd purchased three lorries each costing $18 000. Robert, the manager, negotiated hire purchase
finance to fund this expansion. The company entered into a hire purchase agreement with Thomas
Garages on 1 Janaury 2015. The agreement states that B ltd will pay a deposit of $9 000 on 1 January
2015 and two annual instalments of $24 000 on 31 December 2015 and final instalment of $20391 on 31
December 2016.

Interest is to be calculated at 25% on the outstanding balance on 1 January each year and payment on
31 December each year. B ltd writes off the vehicles over a four-year period using the straight line
method and assuming a scrap value of $1000 for each vehicle.

Required Account for the above transactions in the books of B ltd ltd showing entries in the Profit
and loss account and Balance Sheet for the 4 years

Page 6 of 6