Fundamentals of Accounting Mid Semester Exam

Attempt only two question.

Question 1
(a) Explain the following terms as used in accounting:
(i) Returns inwards journal and returns outwards journal (2 marks)
(ii) Debit note and credit note (2 marks)
(iii) Petty cashbook (1 mark)
(b) Describe, with examples, the classification of accounts. (3 marks)
(c) MK and Sons Ltd is a trading company located in Kikuube central business
area. During the month of October 2024, the company carried out the
following transactions:
Date Description
1 Purchased goods from Josephine Shs 12,950,000 paying Shs 8,000,000
cash and balance payable in December 2024.
2 Purchased goods from Ouchokol Shs 1,800,000 on credit, payable after
40 days. The company also sold goods to KKL for Shs 3,980,000,
receiving a cheque of Shs 1,000,000 while the balance was received
after 45 days.
4 Sold goods to Kampala Initiatives Ltd (KIL) for Shs 2,450,000 and received
Shs 450,000 cash and the balance on credit.
6 Sold goods to SMAU–East for Shs 1,200,000 all on credit. On the
same day, purchased goods from JK Shs 900,000 on credit.
11 Purchased goods from Caroline Shs 6,350,000 and received a trade
discount of 5% for bulk purchase and paid Shs 6,000,000 by cheque.
The balance was treated as credit.
13 Sold goods to SMAU–Central for Shs 1,330,000, receiving Shs 100,000
cash and the balance on credit.
15 Sold goods for Shs 450,000 to Addo on credit.
15 Purchased goods from John Patrick, a trader in Kikuubo Shs 2,130,000
on credit. The company sold goods to Party Ltd (PL) Shs 9,450,000.
PL paid Shs 5,000,000 by cheque and the balance was
treated as a receivable.

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16 Sold goods to Brenda Apus Shs 1,500,000 and received cash Shs
1,000,000 and the balance on credit.
17 Purchased goods Shs 1,200,000 from Denis on credit.
18 Sold goods to Amito Shs 850,000 and received Shs 500,000 cash and
the balance to be paid in December 2024.
20 Purchased goods Shs 1,210,000 from Owino Traders all on credit.
On the same day, sold goods for Shs 6,480,000 on credit to Prime
Traders.
20 Purchased goods from City Dwellers Ltd Shs 4,500,000 and paid Shs
2,000,000 cash and the balance on credit.
21 Purchased goods Shs 910,500 from Iron Lady, paying Shs 500,000 cash
and sold goods to Slay Queens Ltd 610,000 on credit.
23 Sold goods to ABC Ltd Shs 2,100,000 on credit and purchased goods
from Nakawa Traders Ltd Shs 4,500,000 paying cash Shs 500,000 and
the balance to be paid later.
25 Purchased goods from: Tukole Ltd Shs 336,450; Namagembe Suppliers
Shs 486,000 and Birungi Suppliers Shs 2,990,650 all on credit.
Sold goods Shs 8,000,000 to Abdul Kiwanuka. Received cash Shs
2,000,000, a cheque Shs 5,000,000 and the balance on notes
receivable.

Required:
Prepare, for the month of October 2024, MK and Sons Ltd.’s:
(i) Sales daybook (6 marks)
(ii) Purchases daybook (6 marks)
(Total 20 marks)
Question 2
(a) The trial balance of Hansel and Sons Ltd as at 30 April 2023 had the credit
side being greater than the debit side by Shs 11,970,000. On further
analysis, it was discovered that the accounts assistant had made the
following errors:
1 Cash payment from a credit customer Shs 173,000 was credited to the
cashbook as Shs 137,000.
2 The discount received on bulky purchases Shs 1,640,000 was debited
to the discount allowed account.
3 The disposal proceeds Shs 4,500,000 from the sale of the old motor
vehicle was debited to the sales account but correctly recorded in the
cashbook.

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 Required:
Prepare Hansel and Sons Ltd.’s:
(i) Journal entries to correct the above errors (6 marks)
(ii) Suspense account (duly balanced) (4 marks)
(iii) Explain any five errors that cannot be revealed by the trial
balance. ( 10 marks)
(i) Qualitative characteristics of accounting information (6 marks)
Question 2
(a) The International Accounting Standard (IAS) 1—Presentation of Financial
Statements sets out the overall requirements for presentation of financial
statements, including how they should be structured and the minimum
requirements for their content. The Standard requires an entity to present
a complete set of financial statements at least annually, with comparative
amounts for the preceding year.
Required:
Explain, in accordance with the Standard:
(i) The components of a complete set of financial statements(10
marks)
(b) Accounting concepts and principles are a set of broad conventions
thathave been devised to provide a basic framework for financial reporting.
As financial reporting involves significant professional judgments by
accountants, these concepts and principles ensure that the users of
financial information are not misled by the adoption of accounting policies

and practices that go against the spirit of the accountancy profession.

Accountants must, therefore, actively consider whether the accounting
treatments adopted are consistent with the accounting concepts and
principles.
Required:
Explain the applicability of the following accounting concepts:
(i) Prudence (2 marks)
(ii) Consistency (2 marks)
(iii) Materiality (2 marks)
(iv) Realisation (2 marks)
(v) Substance over form (2 marks)
(Total 20 marks)

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Question 3
(a) Explain, with examples, the following concepts used in accounting:
(i) Accruals concept. (1 mark)
(b) The following transactions were extracted from the books of Kafeero & Sons
wholesale traders for the month of January 2022.
Date: Details:
1 Started business with Shs 54 million cash in the bank and Shs 2.4
million cash at hand. He also surrendered his personal refrigerator
worth Shs 800,000 to the business.
1 Paid rent equivalent to 4 months Shs 3.2 million by cheque. The
rent agreement with the landlord requires rent to be paid at the
start of the month.
2 Purchased furniture and fittings worth Shs 4.6 million by cheque.
4 Withdrew Shs 25 million from business’ bank account and put in
the business’ cash box. Purchased inventory Shs 24 million by
cash.
6 Purchased additional inventory from Hajji and sons Ltd Shs 8.4
million on terms that the business would receive a cash discount of
4% if payment was made within 10 days.
8 Sold inventory to Maseruka Retail Enterprises for Shs 4.5 million on
terms that Maseruka retail enterprises would be allowed a discount
of 3% if payment is made within 2 weeks.
9 Made cash sales worth Shs 3,560,000.
11 Settled the amount owed to Hajji and Sons Ltd in full. Maseruka
Retail Enterprises also settled their obligations in full. All
transactions were through the bank.
14 Purchased a laptop Shs 4.2 million for his son who was at the
University. This amount was charged to the business’ bank
account.
20 Picked his personal cash Shs 250,000 and contributed towards his
brother’s traditional marriage ceremony.
25 Kafeero paid wages to the shop keepers Shs 500,000 cash and paid
himself salary Shs 1.2 million through the bank.
Required:
(i) Record the transaction in the month of January above in the
respective general ledger accounts and balance them off.(14 marks)
(ii) Prepare a trial balance from the ledgers prepared in (i) above.
(4 marks)

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Question 4
Akello runs a wholesale business in Lira City, buying and selling agricultural produce.
The following transactions were extracted from her records for the month of February
2022.
1. 1 February: Balances brought forward; cash Shs 2.1 million, bank
Shs 23.6 million. Paid the following farmers for stock deliveries;
Okello Shs 2.1 million by cheque, Otim Shs 0.5 million in cash.
2. 2 February: Received Shs 300,000 cash in refunds resulting from
over payment. On the same date, Akello, paid for 50 bags of
maize grains by cheque as full settlement. These bags were
supplied to Akello on 30 January, 2022 on the following terms:
Price per bag Shs 40,000 and a discount of Shs 1,500 per bag
would be allowed by the farmer if full payment was made within
1 week.
3. 5 February: Paid for transport Shs 2.2 million through the bank
and wages for loading and off- loading of bags Shs 650,000 in
cash. These expenses had accrued as at 31 January, 2022.
4. 5 February: Withdrew Shs 10 million from the business’ bank
account and kept it in the business’s money safe. Sold 20 bags
of maize grain at Shs 50,000 per bag to Gaffe Quality Millers on
credit. Additional terms for payment indicated that a 2% discount
would be allowed if payment was made within 1 week.
5. 7 February: Paid Shs 200,000 for trading license through the
bank.
6. 8 February: Settled in full by cheque an amount owed to Mr.
Okullo, a farmer in Otuke. Mr. Okullo had supplied 30 bags of
beans in December 2020 at Shs 180,000 per bag. The payment
terms at time of supply included a 5% discount allowed if full
settlement was made within one month.
7. 9 February: Withdrew Shs 1.4 million from the business’ bank
account to contribute towards her son’s wedding.
8. 10 February: Received a cheque for Shs 50 million from Quality
Cereals Exporters Ltd. On the same date, Akello, advanced Shs
7 million cash to her agent in Kwania district for purchase of soya
beans and simsim to be delivered in first week of March 2022.
9. 15 February: Received a cheque from Gaffe Quality Millers in full
settlement of their account. Sold 20 bags of maize grains to ABC

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 Secondary school worth Shs 1.2 million on credit on terms that a
5% discount would be allowed if the school paid within 1 month.

10. 17 February: Received cash from ABC Secondary School

in full settlement
of their obligation. Sold 60 bags of beans at Shs 360,000 per
bag to Kampala Produce dealers Ltd after allowing a trade
discount of Shs 2,500 per bag. She was paid by cheque.
11. 18 February: Deposited business cash worth Shs 3.6
million into the business bank account.
12. 27 February: Akello was informed about availability of
soya beans and withdrew Shs 13 million from the business bank
account and kept it in the business money safe. Bought soya
beans worth Shs 12.6 million by cash, after earning a trade
discount of Shs 120,000.
13. 27 February: Paid rent Shs 340,000 cash, store keeper’s
wages Shs 250,000 cash and paid herself a monthly salary of Shs
400,000 cash.
Required:
Prepare a cashbook for Akello’s business for the month of February 2022. (20 marks)

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