Differentiate between the following terms as used in accounting

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Question One (a) Differentiate between the following terms as used in accounting.

(i) A debit entry and credit entry (2 marks)

(ii) Return inwards and return outwards (2 marks)

(iii) An asset account and liability account (2marks)

(iv) An expense account and revenue account (2 marks)

(v) A trail balance and a balance sheet (2 marks)

b) The following is a trial balance of ABC Ltd. Kshs Kshs Stock 1 Jan 2009 2,368,000 Carriage inwards 200,000 Carriage outwards 310,000 Return outwards 205,000 Return outwards 322,000 128 Purchases 11,870,000 Sales 18,600,000 Rent 3,862,000 Salaries & Wages 304,000 Insurance 78,000 Motor expenses 216,000 Lighting and heating expenses 166,000 General expenses 314,000 Premises 500,000 Motor vehicles 1,800.000 Debtors 3,896,000 Fixture and fittings 350,000 Creditors 1,731,000 Cash at Bank 482,000 Drawings 1,200,000 Capital 8,132,000 28,785,000 28,785,000 Stock at 30 December 2009 was Sh. 2,946,000 Required: Draw up a statement of comprehensive income for the year ended 31st Dec. 2009 and statement of financial position as at 31/12/2009. (20 marks) Question Two Write a two-column cash book from the following detail and balance off as at the end of the month. 2009 Oct 1: Started business with capital in cash Sh. 1,000,000 Oct 2: Paid rent by cash Sh. 100,000 Oct 3: Loan from Mary- Sh. 500,000, paid by cheque. Oct 4: Paid B. Peter by cheque Sh. 65,000 Oct 5: Cash sales made Sh. 98,000 129 Oct 7: Mitter, owe of debtor paid by cash Sh.62, 000 Oct 9: Paid Den (creditor) in cash 22,000 Oct 11: Cash sales paid direct into the bank Sh. 53,000 Oct 15: George (the creditor) paid as by cheque Sh. 65,000 Oct 16: Repaid Mary by cheque Sh.100, 000 Oct 19: Took Sh.50, 000 out of the cash till and paid it into the bank accounts. Oct 22: Paid motor expenses by cheque Sh. 12,000 Oct 26: Withdrew Sh. 100,000 cash from the bank for business use. Oct 31: Paid wages in cash Sh. 97,000. Question Three The following transaction to Best Sales (K) Ltd for the month of March 2009. March 1: Started business with Sh. 800,000 in the bank. March 2: Bought goods on credit from the following persons Ndichu- Sh. 76,000 Omolo- Sh. 27,000 Tina- Sh. 56,000 March 5: Cash sales Sh. 87,000 March 6: Paid wages in cash Sh. 14,000 March 7: Sold goods on credits to Emma-Sh.35, 000 Jane- Sh. 42,000 Juma- Sh. 72,000 March 9: Bought goods for cash Sh. 46,000 March 10: Bought goods on Credits from Omolo- Sh. 57,000 Ndebu-Sh. 98,000 March 12: Paid wages in cash Sh.465, 000 March 13: Sold on credit to: Jane- Sh. 32,000 Juma- Sh. 23,000 March 15: Bought fix tires on credit from Beta Ltd Sh. 50,000 March 17: Paid Omolo by cheque Sh. 84,000 130 March 18: Returned goods to Ndebu Sh.20, 000 March 24: Jane returned some of the goods sold to her Sh.11, 000 March 31: Bought a motor van paying by cheque Sh. 400,000 Required: Record the above transaction in the ledger of Best Sales Ltd and balance off the account; henceforth, extract a trial balance as at 31 March 2009.

Question Four (a) Define the following terms as used in Business.

(i) Business transactions (2 marks)

(ii) Credit transaction (2 marks)

(iii) Initial capital (2 marks)

(iv) Final capital (2 marks)

(v) Drawings (2 marks)

(b) Outline 4 circumstances under which the capital of a business may change (4 marks)

(c) The following information was extracted from the book of LIMA Ltd. For the year 2006.

(i) Initial capital as at 1/01/2006 – Sh.200,000

(ii) Made a net loss of Sh. 50,000

(iii) The proprietor invested into the business from her personal saving Sh. 600,000

(iv) The proprietor withdraws in cash for her personal use Sh. 250,000 Required: Using the final capital formula, determine the final capital as at 31/12/06 (4 marks)

Question Five Write notes on any 5 basic accounting concepts (20 marks)

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