(a). In the context of Current Cost Accounting (CCA), briefly explain the meaning of the following terms. (i). Monetary working capital adjustment (2 marks) (ii). Gearing adjustment (2 marks)(b). Identify any four limitations of current cost accounting. (4 marks)(c). The summarized accounts of Tosha Ltd. prepared on the historical cost basis for the year ended 31 December 2002 were as follows. Profit and loss account for the year ended 31 December 2002.Sh. million Operating profitInterest payable Net profit before taxation Corporation taxNet profit after taxation Retained profit  1 January 2002Retained profit  31 December 2002355(60)295(150)145180325Balance sheet as at 31 December20012002Sh. millionSh. millionSh. million Sh. million Fixed assets (cost)Less: Depreciation Current assets: Stock (December purchase)Cash in hand Current liabilities: Corporation tax payable Net current assets Finance by: Share capital (Sh.100 par value)Retained earnings15% debentures600 30630(100)1,000 250750 5301,280700180 4001,280900 50950(150)1,000 375625 8001,425700325 4001,425The directors of Tosha Ltd. intended to publish supplementary accounts based on current cost accounting. Additional information: Sales, purchases and other expenses accrued evenly during the year.Tosha Ltd. purchases and sells all goods on an immediate cash basisThe fixed assets were purchased on 1 January 2000 and are depreciated on straight line basis over a period of a eight years assuming a nil residual value. The depreciation charge for year ended 31 December 2002 was accordingly Sh.125,000,000.The following price indices are provided for the companys stock and fixed assets. StockFixed assets1 January 2000Average for December 200131 December 2001Average for year 2002Average for December 2002December 2002-130132136144145100-120124-132The companys stock turnover on average once a month.

Required:

(i). Current cost profit and loss account for the year ended 31 December 2002 (6 marks)

(ii). Current cost balance sheet as at 31 December 2002 (6 marks) (The monetary working capital adjustment is not applicable to the affairs of Tosha Ltd.) (Total: 20 marks)

 

Answer rating: 100% (QA)

a Brief explanation of the terms in the context of Current Cost Accounting CCA i Monetary Working Capital Adjustment Monetary Working Capital Adjustment is a term used in Current Cost Accounting to ac... View the full answer