UNIVERSITY EXAMINATIONS: 2014/2015
SPECIAL/SUPPLIMENTARY EXAMINATION FOR THE
BACHELOR OF SCIENCE IN INFORMATION TECHNOLOGY
BIT 1309 FINANCIAL MANAGEMENT FOR IT
DATE: DECEMBER, 2014 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and Any Other TWO Questions
QUESTION ONE [30 MARKS]
(i) Define the term accounting and discuss the main branches of accounting.
(4 Marks)
(ii) If annual financial statements are to satisfy the information needs of their users,
the information that they contain must have characteristics related to the needs of
these users.
Identify and describe four desirable characteristics of accounting information.
(8 marks)
(iii) List four basic types of errors that the trial balance fails to disclose and provide an
example of each. (8 marks)
iv) On 1 October 2010, Nduundune had Sh.750,000 in the bank and Sh. 126,000
in hand.
During the month he had the following receipts and payments:
1 October Cash sale – receipt Sh.80,000
4 October Payment to supplier Mondo Sh.120,000
Payment of rent Sh.300,000
6 October Payment from credit customer Kapondi Sh.450,000
Payment from credit customer Bokelo Sh.250,000
10 October Cash sale – receipt Sh. 100,000
Payment to supplier Waswa Sh.500,000
15 October Payment of hire-purchase installment Sh.150,000
17 October Purchase of new machine Sh.1,200,000
19 October Cash sale – receipt Sh.370,000
21 Cash withdrawn from bank for office use 75,000
22 October Payment from credit customer Moseti Sh.600,000
24 October Payment of fuel bill Sh.175,000
26 October Interest received Sh. 25,000
29 Cash taken from cash till to pay fees for daughter Sh. 25,000
Required:
Prepare a two column cashbook and determine bank and cash balances at the end of the
month (10 marks)
QUESTION TWO
The following trial balance was extracted from the books of Maxwell a sole trader, on 31
December 2012:
Notes:
1. Stock at 31 December 2012 was valued at Shs 1,360,000
2. Included in general expenses is sum of Shs 26,400 being expenses on electricity for
domestic use.
3. As at 31 December 2012, wages and salaries outstanding amounted to Shs 66,400.
4. Prepaid rates and insurance as at 31 December 2012 stood at Shs 12,000
5. Interest paid is only a half of the amount due for the year ended 31 December 2012.
6. Provision for doubtful debts is to be adjusted to 5% of the debtors.
7. Rent owing from a tenant who occupies a part of the building was Shs 40,000 as at
December 2012.
Required:
a) Income statement ended 31 December 2012
b) Statement of financial position as at 31 December 2012 (20 Marks)
QUESTION THREE
The following balance was extracted from the books of Sibwor Otoyo as at 1 October
2009.
The following transaction took place in the month of October 2009:
October
1. Paid rent 15,000 by cheque.
2. bought goods on credit from B. Tsuma sh. 76,000 J.Terry sh.107,000
5. Sold goods on credit to K. Onyango sh. 134,000, R. Nguma sh.146, 000 and J. Chege.
Sh 158,000
7. Paid motor vehicle expenses in cash sh. 13,000
8. Sold goods on credit to R. Nguma sh. 22,000, J.Chege. sh.67, 000
8. Cash drawings for personal use sh. 20,000
9. Goods were returned by K. Onyango sh. 16,000 R. Nguma sh. 18,000
11. Bought another vehicle on credit from Africa Motors L.t.d. sh. 1,300,000
14. The following debtors settled their accounts as indicated below by cheque.
G. Oremo sh. 40,000
J. Chege sh. 305,000
K. Onyango total amount owing.
R. Nguma total amount owing
Each of the above debtors received a 5% cash discount since they settled the debt on
time.
19 Sibwor returned goods to J. Terry sh. 9,000.
goods are bought on credit from J. Terry sh 89,000 and P. Torome sh 72,000
22. paid the following creditors by cheque:
B. Tsuma total amount owed
P. Torome sh. 200,000
J. Terry initiated amount owed.
J. Matoke was granted 5% cash discount by each of the creditors.
26. Salaries are paid by cheque sh. 56,000
29. Rates are paid by cheque sh. 66,000
31. Africa Motor L.t.d. are paid by cheque sh. 1,300,000
Required.
Opening journal entry. ( 4marks)
Write up all the accounts and balance them as at 31st October 2009. ( 12 marks)
Extract a trial balance as at 31st October 2002. (4 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) Embakasi Limited makes its accounts on 30 June every year. On July 2009, the company’s balance sheet included the following figures for property plant and equipment:
Cost Accumulated depreciation
A full year charge is made in the year of purchase and non in the year of disposal.
During the year ended 30 June 2010, the following transactions took place:
1. On January 2010 a plant which had cost Shs 3 million was sold for Shs 500,000. Accumulated depreciation on this plant on 30 June 2009 amounted to Shs 2.3 million. A
new plant was then purchased at a cost of Shs 4 million.
2. On 1 April 2010 a new motor vehicle was purchased for Shs 3000,000. To facilitate
the purchase one old motor vehicle acquired in april 2007 at Sh 1800,000 was disposed for Sh. 960,000
3. On 1 July 2009 constructed a building a cost of Sh. 15,000,000. This included the
cost of land Sh. 4500,000
Required:
a) The following ledger accounts to record the above transactions:
(i) Buildings account (2Marks)
(ii) Provision for depreciation: Buildings. (2Marks)
(iii) Plant and machinery account (2Marks)
(iv) Provision for depreciation: Plant and Machinery (2Marks)
(v) Motor vehicles account (2Marks)
(vi) Provision for depreciation: Motor vehicles (2Marks)
QUESTION FIVE
(i) Define the term internal controls (2 Marks)
(ii) Explain how information technology may be used to strengthen the system of internal
controls within an organization (6 marks)
(iii) Explain the benefits of computerized accounting system over a manual accounting
system (6 Marks)
(iv) The following information is provided to you by Wacu Wanderi ;
31st December 2011 31st December 2012
Shs. Shs
Wages in arrears 60,000 67,000
Insurance paid in advance 21,000 25,500
Rates in arrears 7,500 NIL
Rates in advance NIL 9,000
Payments made during 2012 were;
Wages Kshs.715,000
Insurance Kshs.43,500
Rates Kshs.46,000
Calculate the amounts he should transfer to the income statement for wages, insurance
and rates for the year 2012. (6 Marks)
