Question 1

(a) Define the following and indicate its normal balance:

1. Asset. [1 mark]
2. Liability. [1 mark]
3. Capital. [1 mark]
4. Expense. [1 mark]
5. income 1 mark

b. Write up the asset, capital and liability accounts in the books of M Crash to record the following transactions:

June 1	Started business with RWF 5,000 in the bank.
2	Bought motor van paying by cheque RWF 12,000.
5	Bought fixtures RWF 4,000 on credit from Office Master Ltd.
6	Bought a van on credit from Motor Car Ltd. RWF 12,000.
7	Took RWF 1,000 out of the bank and put it in cash.
8	Bought fixtures paying by cash 600.
10	Paid Motor Car Ltd. by cheque 8,000.
13	A loan of RWF 10,000 received from Marcus.
14	Paid RWF 8,000 cash in hand into bank.
17	Bought more fixtures at RWF 3,000 by cheque.

Extract the balance sheet. Show your workings clearly. [5 marks]

(c) Discuss the advantages of using LIFO method over FIFO method in stock valuation. [5 marks]