EXAMINATION NO.__________________
THE PUBLIC ACCOUNTANTS EXAMINATION
COUNCIL OF MALAWI
2012 EXAMINATIONS
ACCOUNTING TECHNICIAN PROGRAMME
PAPER TC 1: ACCOUNTING/1
THURSDAY 7 JUNE 2012
TIME ALLOWED : 3 HOURS
9.00 AM - 12.00 NOON
INSTRUCTIONS
1.
You are allowed 15 minutes reading time before the examination begins during which
you should read the question paper and, if you wish, make annotations on the question
paper. However, you are not allowed, under any circumstances, to open the answer
book and start writing or use your calculator during this reading time.
2.
Number of questions on paper - 7.
3.
FIVE questions ONLY to be answered.
4.
Each question carries 20 marks.
5.
Marks will be awarded for neat presentation and layout.
6.
All workings must be shown.
7.
Begin each answer on a fresh page.
8.
DO NOT OPEN THIS PAPER UNTIL YOU ARE INSTRUCTED BY THE
INVIGILATOR.
This question paper contains 8 pages
This question paper must not be removed from the examination hall.
1
1.
Godfrey Samu set up in business as a plumber a year ago and he has asked you to act as
his accountant. His instructions to you are in the form of the following letter :
Dear Kadaulo wa Business
I was pleased when you agreed to act as my accountant and look forward to your first
visit to check my records. The proposed fee of K250,000 p.a. is acceptable. I regret that
the paperwork for the work done during the year is incomplete. I started the business on
1 January last year, and put K6,500,000 into the business bank account on that date. I
brought my van into the firm at the same time, and I reckon that it was worth K3,600,000
then. I think it will last another three years after the end of the first year of business use.
I have drawn K90,000 per week from the business bank account during the year. In my
trade it is difficult to take a holiday, but my wife managed to get away for a while. The
travel agent‟s bill for K280,000 was paid out of the business account. I bought the lease
of the yard and office for K6,500,000. The lease has ten years to run, and the rent is only
K300,000 a year payable in advance on the anniversary of the date of purchase, which
was 1 April. I borrowed K4,000,000 on that day from Aunt Jane to help pay for the
lease. I have agreed to pay her 10% interest per annum, but have been too busy to do
anything about this yet.
I was lucky enough to meet Miss Prism shortly before I set up on my own, and she has
worked for me as an office organizer right from the start. She is paid a salary of
K3,000,000 p.a. All the bills for the year have been carefully preserved in a tool box, and
we analyzed them last week. The materials I have bought cost me K9,600,000 but I
reckon there was K580,000 worth left in the yard on 31 December. I have not paid for
them all yet. I think we owed the supplier K714,000 on 31 December. I was surprised to
see that I had spent K4,800,000 on plumbing equipment, but it should last me five years
or so. Electricity bills received up to 30 September came to K1,122,000; motor expenses
were K912,000 and general expenses K1,349,000 for the year. The insurance premium
for the year to 31 March next was K800,000. All these have been paid by cheque b ut
Miss Prism has lost the rate demand. I expect the local authority to send a reminder soon,
since I have not yet paid. I seem to remember that the rates came to K180,000 for the
year to 31 March next.
Miss Prism sent out bills to my customers for the work done, but some of them are very
slow to pay. Altogether the charges made were K29,863,000, but only K25,613,000 had
been received by 31 December. Miss Prism thinks that 10% of the remaining bills are
not likely to be paid. Other customers for jobs too small to bill have paid K3,418,000 in
cash for work done, but, of this money, I only managed to bank K2,600,000. I used
K400,000 of the difference to pay the family‟s grocery bills and Miss Prism used the rest
for general expenses, except for K123,000 which was left over in a drawer in the office
on 31 December.
Yours sincerely
David Mpandadzina
2
Required:
(a)
Draw up an income statement for Mpondadzina for the year ended 31 December
2011.
9 Marks
(b)
Prepare a statement of financial position for Mpondadzina as at 31 December
2011.
11 Marks
(TOTAL : 20 MARKS)
Continued/……
3
2.
At the beginning of the financial year on 1 April 2011, a company had a balance of
K372,000 on plant account and K205,400 on the provision for depreciation of plant
account. The company‟s policy is to provide depreciation using the reducing balance
method applied to the non-current assets held at the end of the financial year at the rate of
20% per annum.
On 1 September 2011 the company sold some plant for K13,700 which it had acquired on
31 October 2006 at a cost of K36,000, with installation costs of K4,000. During 2009
major repairs costing K6,300 were carried out on this plant and, in order to increase the
capacity of the plant, a new motor was fitted in December 2009 at a cost of K4,400. A
further overhaul costing K2,700 was carried out during 2010. The company acquired
new replacement plant on 30 November 2011 at a cost of K96,000, inclusive of
installation charges of K7,000.
Depreciation on acquisitions during the year is charged for the full year.
Required:
Calculate:
(a)
the balance of plant at cost at 31 March 2012.
4 Marks
(b)
the provision for depreciation of plant at 31 March 2012.
(c)
the profit or loss on disposal of the plant.
(d)
Define the term “revenue expenditure”.
(e)
Which of the following would you classify as capital expenditure?
10 Marks
3 Marks
1 Mark
(i)
Cost of building extension to factory.
(ii)
Purchase of extra filling cabinets for sales office.
(iii)
Cost of repairs to accounting machine.
(iv)
Cost of installing reconditioned engine in delivery van.
(v)
Legal fees paid in connection with factory extension.
3 Marks
(TOTAL : 20 MARKS)
Continued/……
4
3.
(a)
Name any six types of errors that do not affect the agreement of the trial balance.
Give one example under each type.
3 Marks
(b)
The Chief Accountant of Kupilira Nkwabwino Enterprises extracted a trial
balance and prepared accounts for the half year ended 30 September 2011. There
was a shortage of K292,000 on the credit side of the trial balance. The chief
Accountant then opened a suspense account for that amount.
During the second half of the year, the Chief Accountant located the following
errors:
(1)
K55,000 received from the sale of old office equipment had been entered
in the sales account.
(2)
The purchase daybook had been overcast by K60,000.
(3)
A purchase of K115,000 made by the owner of the business had been
included in the business purchases.
(4)
Bank charges of K38,000 entered in the cashbook had not been posted to
the bank charges account.
(5)
A sale of goods to Mchezo Packers for K690,000 had been correctly
entered in the sales book but had been entered in the personal account as
K960,000.
Required:
(i)
From the errors listed above, indicate those that would affect the
agreement of the trial balance and give the amounts.
3 Marks
(ii)
Prepare the journal entries to correct the errors.
(iii)
Write up the suspense account showing the correction of the errors.
4 Marks
The net profit originally calculated for six months to 30 September 2011
was K1 million.
(iv)
5 Marks
Calculate the correct figure of the net profit (Itemise your calculation).
5 Marks
(TOTAL : 20 MARKS)
Continued/……
5
4.
(a)
Mention any six qualities of useful accounting information.
6 Marks
(b)
State any six areas of interest to the users of financial statements.
6 Marks
(c)
Nanga Nt‟ani is in a business which has a rate of turnover of 40 times. The
average stock is K25,000. Mark-up is 50 percent. Expenses are 40 percent of the
gross profit.
Required:
Calculate the following for Namgantani:
(i)
the cost of goods sold
2 Marks
(ii)
the gross profit
3 Marks
(iii)
turnover
1 Mark
(iv)
total expenses
1 Mark
(v)
the net profit.
1 Mark
(TOTAL : 20 MARKS)
Continued/……
6
5.
(a)
Explain the term „partnership‟.
(b)
Nyang‟ama, Pintchama and Tsimphina are in a partnership and share profits and
losses equally. They have capital of K500,000, K300,000 and K200,000
respectively, on which they are entitled to interest at 5% per annum. The profits
for the year, before charging interest on capital, amounted to K380,000.
2 Marks
Required:
Show how the profits will be shared among the partners.
(c)
There are a number of general provisions affecting the conduct of a partnership
that should be contained in all partnership agreements, apart from any special
circumstances.
Mention any five such provisions.
(d)
6 Marks
5 Marks
Umodzi, Uwiri and Utatu are in partnership carrying on a retail business. The
partnership agreement provides that;
(i)
The partners are to be credited at the end of each year with salaries of
K600,000 to Umodzi and K300,000 each to Uwiri and Utatu, and with
interest at the rate of 5% per annum on the balances at the credit of their
respective capital accounts at the commencement of the year.
The partners‟ capital accounts as at 1 January 2011 were
Umodzi – credit balance of K80,000
Uwiri – credit balance of K50,000
Utatu – credit balance of K30,000
(ii)
No interest is to be charged on drawings.
(iii)
After charging partnership salaries and interest on capital, profit and losses
are to be shared in the proportion: Umodzi 50%, Uwiri 30% and Utatu
20%; with a proviso that Utatu‟s share in any year (exclusive of salary and
interest) should not be less than K600,000. Any deficiency in the profitsharing ratio should be borne by the other two partners.
Required:
Prepare a statement of allocation of the net profit for the partnership,
assuming the partnership‟s net profit for the year ended 31 December
2011 was K3,600,000.
7 Marks
(TOTAL : 20 MARKS)
Continued/……
7
6.
(a)
State three main differences between the deposit and current types of bank
accounts.
3 Marks
(b)
The following is the cashbook record for Dongosolo, a sole trader:
Dr
Cash Book
2011
K
2011
October 4
Miss Mcheni 12,100 October Balance b/f
October 17 Mr Usipa
10,000 October Mrs Utaka
October 27 Dr Chambo
75,000 October Prof Nkholokolo
October 31 Balance c/f
102,900 October Che Malambe
200,000
The bank statement for the month is reproduced here:
2011
Dr
K
October 1
Balance
October 4
Cheque
October 15
Mrs Utaka
October 18
Cheque
October 27
Cheque Prof Nkholokolo
October 27
Cheque
October 30
Standing order
October 31
Bank charges
Required:
(c)
Cr
K
Cr
K
155,000
2,760
18,670
23,570
200,000
Balance
K
155,000 O/D
142,900 O/D
145,660 O/D
155,660 O/D
154,330 O/D
79,330 O/D
89,330 O/D
89,980 O/D
(i)
Show the updated cashbook balance taking into account only the
necessary items.
2 Marks
(ii)
Prepare the bank reconciliation statement as at 31 October 2011. 2 Marks
You are given the following details for a start- up wine wholesaler. It has a
distribution centre along the shores of Lake Malawi.
2011
November 1
Balances brought forward: Cash K200; Bank 4,000.
November 2
The following debtors‟ accounts were paid by cheque after
deducting 5 percent cash discounts: Chithaphwi K100; Chidikha
K200; Mfuleni K300.
November 4
Paid rent by cheque K500.
November 6
Thawale lent the wholesaler K1,000 paying by cheque.
November 8
The wholesaler paid the following accounts by cheque in each case
deducting 2½ percent cash discount: Nyanja K400; Mtsinje K400;
Damu K800 (all amounts are pre-discount).
8
November 10 The wholesaler paid K40 motor expenses in cash.
November 12 Mathithi pays his account of K70, K60 by cheque, deducting K10
cash discount.
November 15 The wholesaler paid wages K120 in cash.
November 18 The following paid their accounts by cheque in each case
deducting 5 percent cash discount: Mvula K200; Madzi K300;
Matalala K400 (all amounts are pre-discount).
November 21 Cash K350 was withdrawn from the bank for business use.
November 24 K120 cash was drawn for personal use.
November 25 The wholesaler paid Chilala his account of K110, by cash K100,
having deducted K10 cash discount.
November 29 The wholesaler bought fixtures for K600, paying by cheque.
November 30 The wholesaler received K80 for commission by cheque.
Required:
Write and total up a three column cash book for the wholesaler.
13 Marks
(TOTAL : 20 MARKS)
7.
Explain, with examples, the following accounting terms:
(a)
Control accounts;
4 Marks
(b)
Prime cost;
4 Marks
(c)
Average Cost Method (AVCO);
4 Marks
(d)
(e)
Prepaid expense;
Deposit accounts (Bank a/c).
4 Marks
4 Marks
(TOTAL : 20 MARKS)
END