CoursHeroTranscribedText: NUMBER ONE Distinguish between the accounting treatment of normal losses and abnormal losses with respect to consignments. (4 marks) (b) On I" January 2003, Kamau Traders, based in Nairobi consigned 10,000 bapp of sugar to Obote Traders in Busia. The sugar was invoiced at Sh. 100 per bag, being cost plus 6016. Kamau paid Sh.500,000 for freight and Sh.300,000 for insurance in transit. During transit 500 bags were accidentally damaged resulting in a major loss. On 28 February 2003, insurance company paid directly to Kamau Traders Sh.150,000 in full settlement of the claim. Obote traders took delivery of the sugar on 5th January 2003 and accepted a bill drawn on them for Sh.2 million for 30 days. On 31* March 2003, Obote Traders reported a shortage of equipment of 500 bags due to loading and unloading spillage expected for this commodity. Sale of 4,000 bags for Sh.3,240,000 and 4,450 bags for Sh.3,577,800 Sale of damaged bags for Sh.200 per bag Expenses: . Clearing charges and carriage to warehouse carriage outward Sh.160,000, warehouse rent Sh.90,000 and insurance Sh. 75,000. Obote Traders are entitled to a commission of 5% on sales per bag not exceeding invoice price and at 25% of any surplus price realized. All non recurring expenses incurred ate attributable to good as well as damaged or split bags. The amount owing to Kamau Traders was paid by cheque on 31 March 2003. Required: In the books of Kamau Trackers prepare the following ledger account in the books of Kaman traders for the three months ended 31" March 2003: Consignment. ( marks) Personal Account of Obote Traders (4 marks) Accidental loss account (4 marks) (Total: 20 marks) NUMBER TWO Jubilation Insurance Company is well known fire risk insurance company having started business in the early 1940" s. In accounts are made up to 31" December each year. The balances below have been extracted from the books of account as at 31 December 2003 She. '000" Clamps paid Outstanding claims 1.1.2003 40,000 Claims intimated and accepted but not paid on 31 December 2003 70.000 Premiums recurred 1,210.060 Re-Imurance premium paid 120,000 Commission 200,000 Commission on re insurance coded 4000 Commission on re insurance accepted Expenses of management 102000 Provisions for un-expired risk on 1.1.2003 40 0.060 Additional provision for un-expired risk on 1.1.2063 20,000 Homs utilized in reduction of premium 12000 Re-Insurance recoveries of claims 8,400 Medical expenses regarding claims 5,000 Low on sale for motor car 3.500Refund for double taxation 4,500 Interest + dividends 8.000 Income tax deducted thereon 1.500 Legal expenses relating to claims 4.000 Profit on sale of investments 3.500 Rent of staff quarters deducted from salaries 2,400 Depreciation of furniture 4,600 The management would wish to provide for additional reserve for unexpired risk of 1% of the net premium in addition to the opening balance of additional reserve while 40% general reserve for unexpired risk will be maintained. Required: (a) Prepare a revenue account in respect of fire insurance business carried out by Jubilation Insurance Co. Led for the year ended 31" December 2003. (15 marks) (b) Explain the concept of "self-insurance" and how it works in businesses. (5 marks) (Total: 20 marks) NUMBER THREE Kanjung" Advocates have been in practice for several years. The books of accounts show the following information: Balance Sheet as at 30th April 2001 Sh.'000' Sh.'000' Fixed Assets Sh.'000' Sh.'000" Capital 827 Furniture & Finings 24 Equipment 71 Current Liabilities Motor vehicles 376 471 Clients A/c 782 Fees arrears 120 Accrued rent 34 Cash at bank Accrued salaries 33 849 Office a/c 303 Client a/c 782 1.205 1676 1.676 The details of receipt and payments for the year ended 30 April 2002 is as given below: Receipts Sh.'000' Payments Sh.'000" Fees for services 888 Office rent 224 rendered Salaries and 230 Disbursements: 12 wages 149 15 Equipment 73 Stationery Transport 23 52 purchased Telephone 384 35 Miscellaneo postage 38 us Miscellaneous 56 Deposit for land buying for client 324 expenses Water and 98 Deposit for a criminal case from electricity Printing 18 client and stationery Transport 230 Motor vehicles 150 expenses Office repairs Deposit on land sale contract for client Drawings Additional Information: Interim fee note of Sha.125,000 was debited to the client accounts for the criminal case. Disbursement for stationery, Sh.5,000, transport Sh.3,000 and miscellaneous Sh.1,000 have been charged to the clients a/c. Accrued expenses amounted to Sh.5,000, Sh.27,000 and Sh.28,000 for telephone, rent and salaries respectively. (iv) Depreciation is provided for on reducing balance method at 12.5%, 15% and 25% on furniture and fittings, equipment and motor vehicles respectively. Fees in arrears amounted to Sh.320,000Additional Information: Interim fee note of Sha.125,000 was debited to the client accounts for the criminal case. Disbursement for stationery, Sh.5,000, transport Sh.3,000 and miscellaneous Sh.1,000 have been charged to the clients a/c. Accrued expenses amounted to Sh.5,000, Sh.27,000 and Sh.28,000 for telephone, rent and salaries respectively. Depreciation is provided for on reducing balance method at 12.5%, 15% and 25% on furniture and fittings, equipment and motor vehicles respectively. (v) Fees in arrears amounted to Sh.320,000 Required (2) Advicate"'s income and expenditure account for the year ended 30 April 2002. (8 marks) (b) The client" s account for the year ended 30 April 2002. (6 marks) Balance sheet as at 30 April 2002. (6 marks) (Total: 20 marks) NUMBER FOUR Write brief and concise notes on the following: (a) Committee of ways and means (b) Controller and auditor general (c) Public Accounts Committee (d) Trust funds (e) Sinking funds. (Total 20 Marks) NUMBER FIVE D and R were doing business as engineering contractors. They undertake in 1999 jointly to build and install new machinery for a company for a contract price of Kish.134m, Sh.84m payable in instalments in cost and the balance as fully paid shares in the company. A bank account was opened as joint, D paying in Sh.45m and R Sh.20m. They were to share profits and losses in the ratio 3:2 respectively. The following transactions took place in 1999:Sh.'000" Amount advanced to suppliers for material supplied 52,000 Value of materials supplied by suppliers 89.000 Balance paid to suppliers in full and final settlement 35,500 Wages paid 36.000 Materials purchased in cash 2.500 Materials supplied by D from personal stock 9.50 Engineering consultant fees paid 3.250 Value of stock lost in fire but not covered by insurance 3,500 The contract was completed and the price dully received. D took all the shares at an agreed value of Sh.47m and ,,R" took the balance of stock (cost 3.5m) for Sh.2.75m. Required: Ledger accounts to record the above transactions. (Total 20 Marks)