BIT 1309 BIT 1208  FINANCIAL MANAGEMENT FOR IT KCA Past Paper

UNIVERSITY EXAMINATIONS: 2011/2012
FIRST YEAR EXAMINATION FOR THE BACHELOR OF SCIENCE
IN INFORMATION TECHNOLOGY
BIT 1309 BIT 1208 FINANCIAL MANAGEMENT FOR IT
DATE: JULY, 2012 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and any other TWO

QUESTION ONE
a) The International Accounting Standards Board (IASB) issues International
Accounting Standards (IASs) and is also responsible for the Framework for the
Preparation and Presentation of Financial Statements.
Required:
Describe any Six users of financial statements as identified by the IASB in the
Framework for the Preparation and Presentation of Financial Statements. Within
your description, comment on the needs of each user. (12 Marks)
b) An asset can be defined as ‘a resource controlled by an enterprise as a result of
past events and from which future economic benefits are expected to flow’. The
following transactions occurred in the year ended 30 June 2012 in Soco
enterprise:
i. The acquisition by Soco of goods for sale worth Sh.250,000, on credit. These
goods have not been sold as at 30 June 2012.
ii. The acquisition by Soco of a machine from Rugo enterprise at a rental of Sh.
1,000 per month. The rental is terminable at any time by either Soco or Rugo. The
total cost of the machine is estimated at Sh.50,000
iii. Expenditure of 250,000 by Soco on research to improve one of its products. The
research has not resulted in an improvement in the product.
Required:
State whether or not each of the three transactions above results in assets for
Soco enterprise in accordance with the definition given. Explain and give reasons
for your answers. (6 Marks)

c) Computer technology has greatly improved the way financial information is
prepared and saved. This has also improved the internal control systems, all the
same, information technology can potentially weaken the control systems.
Explore the positive and negative impacts of computers on the internal control
systems of an organization (8 Marks)
d) Differentiate between direct and indirect costs in the context of manufacturing
accounts (4 Marks)
QUESTION TWO
The following trial balance was extracted from the books of Ababu, a sole trader, as at 30

Additional information:
1. Closing inventory as at 30 April 2010 was valued at Sh. 2,160,000.
2. Allowance for doubtful debts is to be adjusted to 3% of trade receivables.
3. Accrued wages as the end of the year amounted to Sh. 276,000 while insurance
was prepaid by Sh.68, 000
4. Depreciation is to be provided as follows:
Premises 2% on straight line method
Plant and machinery 10% on straight line method
Required:
i. Income statement for the year ended 30 April 2010 (10 Marks)
ii. Statement of financial position as at 30 April 2010 (10 Marks)
QUESTION THREE
Mr Willy Sitati started his business on 1st January 2010. Prepare the necessary accounts
balance them off and extract a trial balance from the following information.
January 2010
1st Started his firm with capital in cash of Sh. 250,000
2nd Bought goods on credit from the following persons. D Kamau Sh. 54,000, C
Maina Sh.87,000, G Kuria Sh.25,000 D Bosire Sh.76,000 and L Mwangi
Sh.64,000
4th Sold goods on credit to C Malli Sh.43,000, B Munro Sh.62,000, H Thuku Sh.
176,000
6th Paid rent cash Sh. 12,000
9th Malli paid by cheque Sh. 43,000
10th H Thuku paid by cheque Sh.150,000
12th Paid by cheque to G Kuria Sh. 25,000, D Kamau Sh.54,000
15th Paid carriage cash Sh.53,000
18th Bought goods on credit from C.Maina Sh 43,000 and D Bosire Sh. 110,000
21st Sold on credit to B Munro Sh. 67,000
31st Paid rent by cheque Sh.18,000
(20 Marks)
QUESTION FOUR
a) Give the accounting definition of the term depreciation (2 Marks)
b) Using a suitable example in each case explain the factors that cause the assets to
depreciate (6 Marks)
c) The following information appeared in the balance sheet as Zahra transporters Ltd
as at 31 December 2010
Motor vehicles Sh. “000”
Cost 13,500
Accumulated depreciation (5750)
NBV 7750
The following is information is relevant for the year 2011
1. Acquired a pick-up KBM at a cost of 15,000,000
2. Disposed off a bus KBA at 750,000. This bus was acquired in the year 2008 at
cost of 3m.
3. Traded in an old truck for a new one making an additional cash payment of 1.2m.
The old truck was acquired in 2008 at a cost 2.4 m and for trading purposes was
valued at 900,000.
4. As per the company’s policy motor-vehicles are depreciated at 15% straight line
basis
5. full depreciation is given in the years of acquisition non in the year of disposal
Required
Prepare
i. Motor-vehicle account (4 Marks)
ii. Provision for depreciation account (4 Marks)
iii. Motor-vehicle disposal account (4 Marks)
QUESTION FIVE
a) Discuss the significant differences between receipts and payments account and
income and expenditure account (8 Marks)
b) The following trial balance was extracted from the books of Books and BookMen society as at 30 September 2011:

Additional information:
1. The bar stock was valued at Sh. 642,800 as at 30 September 2000.
2. It is expected that, of the debtors for subscriptions, Sh. 43,600 will not be collectable.
3. The interest account is net. The loan is at a concessional rate of 4% while 10% has
been earned on the deposit account. No changes have taken place all year in the
principal sums involved.
4. An invoice for Sh. 43,000 of wine had been omitted from the records at the close of
the year although the wine had been included in the bar stock valuation.
5. Depreciation for the year is to be provided as follows:
Furniture and fittings Sh. 194,000
Projectors, cameras, etc. Sh. 19,000.
Required:
i. Bar and restaurant trading account for the year ended 30 September 2011
(6 Marks)
7
ii. An income and expenditure account for the year ended 30 September 2011
(6 Marks)

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