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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]