THE 53RD MATHEMATICAL ASSOCIATION OF TANZANIA ANNUAL MEETING.
VENUE: MARIAN UNIVERSITY COLLEGE (MARUCO)
DURATION: 17TH TO 22ND SEPTEMBER 2018
TOPIC: ACCOUNTING
PRESENTER: ZAKAYO H. MKUBURO
ACCOUNTS
- INTRODUCTION
Accounts refers to broad term that involves various concepts of accounting that people carry out in the process of making life easier through buying and selling commodities. Actually people cannot survive if they do not involve themselves in buying and selling for their families.
Why the topic is involved in Mathematics subject instead of being taught to students who take accounts only?
Firstly, mathematics as a compulsory subject tends to solve problems in the society that may some ways or another have no solutions. And it is believed that if students are taught and understand mathematics well, then they can perform other business more easily than those who have no idea in mathematics.
Secondly, accounts involve operations that are basically mathematics. For instance, adding and subtracting amounts can only be performed by a person who is having ability to make those operations clearly, otherwise the business entity will by then incur loss and finally closed simply because people are unable to operate on addition and subtraction.
Therefore, people who are involved in accounting disciplines are those whose abilities in mathematics are proved to be good and of course these people are doing even better in any business they may wish to perform daily.
On the other hand, the situation within the process of teaching and learning on the topic is somehow different because in many cases the topic is not taught to some schools having either no students who opt on the subject or the teachers are not competent enough to teach the topic.
Now, due to these reasons, the topic is either taught at the end of the year or not taught at all, and that make students concentrations on the topic become less compared to topics that are taught significantly earlier and with maximum revisions and at the end few students attempt the question and just few of them may get it right.
So if we teachers expect to get good results on the topic, we need to teach the topic confidently and encourage more students to engage in studying the topic because even if they will not take accounting subject for their further studies, it will be helpful to them in taking business activities in their respective areas and fields.
Though the topic seems to be difficult to teach and learn but I think that, if teachers are trained by those who have idea on the topic and students encouraged to learn it, we will find many students attempting the question on accounts and bringing positive results on the topic.
2.0 SPECIFIC OBJECTIVES
By the end of the topic each student should be able to:
- Record business transactions in their respective ledgers by completing the double entry system
- Describe different types of ledger, construct ledgers and post the given entries into their respective ledgers
- Extract the trial balance, post entries from ledgers to the trial balance and check their balances and finally give the importance of trial balance in business account
- Construct trading, profit and loss account, ascertain gross and net profit/loss and interpret information from trading, profit and loss account
- Construct balance sheet, post entries in a balance sheet, interpret information from the balance sheet
- Definitions
Accounting is the process of keeping and analyzing financial record of business transactions in the books of accounts. This process involves two types of transactions namely: Cash account and Credit account. In this session we are going to consider only the cash account according to the syllabus of accounts in ordinary level.
- DOUBLE ENTRY SYSTEM
The double entry system is the situation that involves recording business transaction into two sides, the Debit side (Dr) and into the Credit side (Cr). The principle of double entry system states that: Every business transaction should be recorded twice. I.e. Every debit entry should have its corresponding credit entry.
Note: The debit side (Dr) is the receiving side while Credit side (Cr) is the giving side
- Format of Cash account
- Format of Cash account
The cash account is recorded in the book called CASH BOOK which is used to original entries for cash transactions. It contains two sides, the debit side (Dr) and the credit side (Cr). Each side is made up of four similar columns namely, date, particulars, folio and amount.
The format of cash account is given in the table below
NAME/TITLE OF A/C
Dr. Cr.
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
The above format is sometimes referred to as T – Account
Example.01
Record the following transactions in cash book of Mr. Juma
Feb 1: Started business with capital in cash sh. 15,000/=
Feb 2: Purchased goods for cash sh. 10,000/=
Feb 5: Paid cash for transport sh. 2,000/=
Feb 10: Sold goods for cash sh. 12,000/=
Feb 18: Received cash from Mr. Said sh. 8,000/=
Feb 25: Cash purchases sh. 14,000/=
Solution:
The transactions are recorded in the cash book of Mr. Juma as follows
Mr. JUMA CASH ACCOUNT
Dr | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Feb 1 | Capital | 1 | 15,000/= | Feb 2 | Purchases | 2 | 10,000/= |
Feb 10 | Sales | 4 | 12,000/= | Feb 5 | Transport | 3 | 2,000/= |
Feb 18 | Mr. Said | 5 | 8,000/= | Feb 25 | Purchases | 2 | 14,000/= |
Feb 28 | Balance | c/d | 9,000/= | ||||
35,000/= | 35,000/= | ||||||
March 1 | Balance | b/d | 9,000/= |
Example. 02
You are provided with business record of Mwembeyanga’s company. Record them into Mwembeyanga’s cash book then post them to ledgers and close.
On 1st February, Mwembeyanga started business with capital in cash of sh. 60,000/=
February 2, Purchased goods for cash sh. 50,000/=
February 3, Paid cash for transport sh. 10,000/=
February 10, Sold goods for cash sh. 90,000/=
February 20, Bought furniture for cash sh. 30,000/=
February 28, Paid cash for carriage sh. 5,000/=
Solution:
MWEMBEYANGA’S COMPANY CASH ACCOUNT (1)
Dr | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Feb 1 | Capital | 2 | 60,000/= | Feb 2 | Purchases | 3 | 50,000/= |
Feb 10 | Sales | 5 | 90,000/= | Feb 3 | Transport | 4 | 10,000/= |
Feb 20 | Furniture | 6 | 30,000/= | ||||
Feb 28 | Carriage | 7 | 5,000/= | ||||
Feb 28 | Balance | c/d | 55,000/= | ||||
150,000/= | 150,000/= | ||||||
March 1 | Balance | b/d | 55,000/= |
- Types of ledger
A ledger is the principle book of account in which the double entry of all transactions are completed. The structure of the ledger is like that of the cash account. There are three types of ledger which are: general ledger, purchases ledger and sales ledger.
The general ledger – Is the account which keeps all accounts of the business.
Purchases ledger – Is the ledger which keeps supplies accounts (credit balance).
Sales ledger – Is a ledger that keeps customers’ accounts (debit balance)
Recall example 02 above, the appropriate ledgers are as follows
CAPITAL ACCOUNT (2)
Dr. | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Feb 28 | Balance | c/d | 60,000/= | Cash | 60,000 | ||
60,000/= | 60,000/= | ||||||
March 1 | Balance | b/d | 60,000/= |
PURCHASES ACCOUNT (3)
Dr. | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Cash | 50,000/= | Feb 28 | Balance | c/d | 50,000/= | ||
50,000/= | 50,000/= | ||||||
March 1 | Balance | b/d | 50,000/= |
TRANSPORT ACCOUNT (4)
Dr. | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Cash | 10,000/= | Feb 28 | Balance | c/d | 50,000/= | ||
10,000/= | 10,000/= | ||||||
March 1 | Balance | b/d | 10,000/= |
SALES ACCOUNT (5)
Dr. | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Feb 28 | Balance | c/d | 90,000/= | Cash | 90,000/= | ||
90,000/= | 90,000/= | ||||||
March 1 | Balance | b/d | 90,000/= |
FURNITURE ACCOUNT (6)
Dr. | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Cash | 30,000/= | Feb 28 | Balance | c/d | 30,000/= | ||
30,000/= | 30,000/= | ||||||
March 1 | Balance | b/d | 30,000/= |
CARRIAGE ACCOUNT (7)
Dr. | Cr | ||||||
Date | Particulars | Folio | Amount | Date | Particulars | Folio | Amount |
Cash | 5,000/= | Feb 28 | Balance | c/d | 5,000/= | ||
5,000/= | 5,000/= | ||||||
March 1 | Balance | b/d | 5,000/= |
Exercise. 01
The following were transactions undertaken by Mr. Chilubya’s Account on January 2010.
January 1. Started business with capital in cash sh. 500,000/=
January 2. Bought office machines for cash sh. 150,000/=
January 5. Purchased goods for cash sh. 200,000/=
January 12. Paid cash for transport sh. 30,000/=
January 16. Sold goods for cash sh. 150,000/=
January 18. Received a cash loan from Ms. Asha sh. 100,000/=
January 22. Sold goods for cash sh. 140,000/=
January 25. Paid electricity bill in cash sh. 50,000/=
January 27. Paid house rent in cash sh. 30,000/=
You are required to record the transactions in the cash book and then post them to their appropriate ledgers.
Exercise. 02
Record the transactions below for Ms. Nyandaro Business in the cash book, then post them to the ledgers and balance them.
January 1, 2007. Started business with capital in cash ……………..sh. 600,000/=
January 2, 2007. Bought goods for cash ……………………………sh. 50,000/=
January 2, 2007. Paid transport charges …………………………….sh. 5,000/=
January 3, 2007. Bought parking materials for cash ………………..sh. 10,000/=
January 4, 2007. Sold goods for cash ……………………………….sh. 30,000/=
January 5, 2007. Sold goods for cash ……………………………….sh. 10,000/=
January 6, 2007. Purchased goods for cash …………………………sh. 15,000/=
January 8, 2007. Paid wages …………………………………………sh. 3,800/=
January 10, 2007. Cash sales…………………………………………..sh. 20,000/=
January 12, 2007. Cash purchases……………………………………..sh. 15,000/=
January 15, 2007. Cash sales…………………………………………..sh. 25,000/=
January 20, 2007. Paid rent…………………………………………….sh. 5,000/=
- Trial balance
A trial balance is a list of balances extracted from the cash book and the ledger to check mathematical accuracy of entries.
The trial balance is used as
- The checklist of mathematics balances in the cash book and the ledger
- The mathematical correctness in the cash book and the ledger
- It gives the total amount in the debit side and credit side
- It enables business owners to review the entries when the Dr and Cr do not balance
The format of trial balance is given as follows
(NAME)……TRIAL BALANCE AS AT (TIME)………
S/NO | PARTICULARS | FOLIO | DR | CR |
Example. 01
From example 02 of Mwembeyanga’s account above, the trial balance can be extracted as follows:
MWEMBEYANGA’S TRIAL BALANCE AS AT 31 MARCH
S/NO | PARTICULARS | FOLIO | DR | CR |
1. | Cash | 1 | 55,000/= | – |
2. | Capital | 2 | – | 60,000/= |
3. | Purchases | 3 | 50,000/= | – |
4. | Transport | 4 | 10,000/= | – |
5. | Sales | 5 | – | 90,000/= |
6. | Furniture | 6 | 30,000/= | – |
7. | Carriage | 7 | 5,000/= | – |
Total | 150,000/= | 150,000/= |
Note: From the trial balance above, it can be clearly observed that both Dr and Cr have 150,000/= in their total and for that case, the transactions were correctly recorded
- FINAL ACCOUNTS
- Trading, profit and loss accounts
- Trading, profit and loss accounts
Trading, Profit and loss accounts are accounts prepared at the end of financial period to ascertain the gross profit or loss. The gross profit is obtained when there is excess of sales over the cost of goods sold while the gross loss is obtained when there is a deficit of sales over the cost of goods sold. And mathematically they can be obtained as follows:
Gross Profit = Sales – Cost of goods sold
Gross Loss = Cost of goods sold – Sales
The format for trading account
Particulars | Amount | Amount | Particulars | Amount | Amount |
Opening stock | xxx | Sales | xxxx | ||
Purchases | xxx | Less: return inward | xx | ||
Less: return outward | xx | Net sales | xxxx | ||
xxx | |||||
Add: carriage inward | xx | xxx | |||
Cost of goods available for sale(cogas) | xxx | ||||
Less: closing stock | xx | ||||
Cost of goods sold | xxx | ||||
Gross profit c/d | xx | ||||
xxxx | xxxx | ||||
Gross profit b/d | xx |
The format for profit and loss account
Particulars | Amount | Particulars | Amount |
All expenses will be | Gross profit b/d | xx | |
written under this | Any received | xxx | |
Section (e.g.) | Will be written | ||
Transport | xxx | Under this section | |
Advertising | xxx | ||
Net Profit | xx | ||
xxxx | xxxx |
When trading, profit and loss account are combined together, its format will be as follows
TITLE (NAME)……TRADING AND PROFIT AND LOSS ACCOUNT AS AT (TIME)………
Particulars | Amount | Amount | Particulars | Amount | Amount |
Opening stock | xxx | Sales | xxxx | ||
Purchases | xxx | Less: return inward | xx | ||
Less: return outward | xx | Net sales | xxxx | ||
xxx | |||||
Add: carriage inward | xx | xxx | |||
Cost of goods available for sale(cogas) | xxx | ||||
Less: closing stock | xx | ||||
Cost of goods sold | xxx | ||||
Gross profit c/d | xx | ||||
xxxx | xxxx | ||||
Gross profit b/d | xx | ||||
Expenses | |||||
e.g. | Any received | xxxx | |||
Rent | xxx | ||||
Office expenses | xxx | ||||
Carriage | xxx | ||||
Net Profit | xxx | ||||
xxxx | xxxx |
Example. 01
Use the balances given below to prepare the trading and profit and loss account of Mr. Msemakweli for the year ended 30th June 2009.
Open stock -sh. 150,000/=, Closing stock -sh. 10,000/=, Salaries –sh. 50,000/=,Carriage inward –sh. 12,000/=, Carriage outward –sh. 20,000/=, sales return –sh. 8,000/=, purchases return –sh. 11,000/=, discount on sales –sh. 6,000/=, discount on purchases –sh. 30,000/=, purchases –sh. 200,000/=, sales –sh. 310,000/=, rent –sh. 13,000/=, office expenses –sh. 22,000/=, commission received –sh. 10,000/= and bad debts –sh. 27,000/=.
Solution:
MR MSEMAKWELI TRADING AND PROFIT AND LOSS ACCOUNT AS AT 30th JUNE 2009
Particulars | Amount | Amount | Particulars | Amount | Amount |
Opening stock | 50,000/= | Sales | 370,000/= | ||
Purchases | 200,000/= | Less: return in | 8,000/= | ||
Less: return on purchases | 11,000/= | 362,000/= | |||
189,000/= | |||||
Add: carriage inward | 12,000/= | 201,000/= | |||
Cost of goods available for sale (COGAS) |
251,000/= | ||||
Less: closing stock | 10,000/= | ||||
Cost of goods sold (COGS) |
241,000/= | ||||
Gross profit c/d | 121,000/= | ||||
362,000/= | 362,000/= | ||||
Salaries | 5,000/= | Gross profit b/d | 121,000/= | ||
Carriage out | 20,000/= | Discount received | 30,000/= | ||
Discount allowed | 6,000/= | Commission received | 10,000/= | ||
Rent | 13,000/= | ||||
Office expenses | 22,000/= | ||||
Bad – debts | 27,000/= | ||||
Net profit | 68,000/= | ||||
161,000/= | 161,000/= |
- Interpretation of Trading and profit and loss accounts
The trading and profit and loss account can be interpreted as follows:
- Gross profit = Net Sales – Cost of goods sold(This occurs when income is greater than the expenses and therefore the business will generate profit)
- Gross loss = Cost of goods sold – Net Sales (This occurs when income/sales is less than the expenses and therefore the business will generate loss)
- Net profit = Gross profit – Expenses (i.e. income is greater than expenses)
- Net loss = Expenses – Gross profit (i.e. income is less than expenses)
- Cost of goods sold = Opening stock + Net purchases
- Net purchases = Purchases + carriage inward +Direct wages – return outwards
- Average stock = or
Note: When income is greater than expenses the business will generate Net profit but when the income is less than the expenses, the business will generate Net loss.
Example. 02
You are provided with the following transactions
Sales for 2009……………………………..sh. 51,000/=
Stock at start………………………………sh. 9,000/=
Purchases …………………………………sh. 34,500/=
Stock at end ………………………………sh. 6,500/=
Return on sales ……………………………sh. 1,000/=
Return on purchases ……………………….sh. 1,500/=
From the above information, calculate:
- Net sales
- Average stock
- Net purchases
- Cost of goods sold
Solution:
- Net sales = Sales – Return on sales(return inwards)
= 51,000/= – 1,000/=
= 50,000/=
Net sales is 50,000/=
- Average stock =
=
=
= 7,750/=
- Net purchases = Purchases + carriage inward +Direct wages – return outwards
= 34,500/= +0 +0 – 1,500/=
= 33,000/=
- Cost of goods sold = Opening stock + Net purchases
= 9,000/= + 33,000/=
= 42,000/=.
Exercise. 03.
The following trial balance was extracted from the businessman books’ of
Chericho Ramaji, at 31st December 2006.
1. Capital 830,000/= 2.Purchases 1,200,000/= 3. Sales 1,750,000/= 4. Return inwards 55,000/= 5.Return outwards 64,000/= 6. Plant and machine 240,000/=
7. Furniture and fittings 75,000/= 8. Sundry debtors 137,000/=
9. Sundry creditors 86,000/= 10. Wages 228,000/= 11.Bad debts 36,000/=
12. Discount received 27,000/= 13. Opening stock 500,000/=
14. Insurance 16,000/= 15. Commission receivable 43,000/=
16. Trade expenses 22,000/= 17. Cash in hand 17,000/=
18. Cash at bank 274,000 Total 2,800,000
Prepare Trading and Profit and Loss account for the year ended 31st December 2006
Exercise. 04
Prepare trading and profit and loss account of ABC Traders for the year ended 31st December 2010.
Stock at start……………………sh. 230 000/=
Purchases……………………….sh. 480,000/=
Sales …………………………….sh. 720,000/=
Carriage inwards ……………….sh. 72,000/=
Returns inwards ………………..sh. 112,000/=
Returns outwards ………………sh. 105,000/=
Wages and salaries …………….sh. 60,000/=
Rent …………………………….sh. 20,000/=
Insurance ……………………….sh. 10,000/=
Discount allowed ………………sh. 10,000/=
Transport ………………………sh. 5,000/=
Discount received ……………..sh. 70,000/=
Commission received …………sh. 109,000/=
Office expenses ……………….sh. 10,000/=
Advertisement …………………sh. 5,000/=
Closing stock …………………sh. 190,000/=
- Balance sheet
A balance sheet is a statement prepared at the end of financial period normally one year, to show the financial position of the business in terms of Assets and Liabilities.
Assets are properties/possessions owned by the business. They consist of current and fixed assets.
Current assets are those properties that can easily be converted into cash. Examples of current assets include, stock, debtors, cash at bank, cash in hand etc.
Fixed assets are those properties that cannot easily be converted into cash. Examples of fixed assets include, Furniture, fixture and fitting, motorcars, land, buildings etc.
Liabilities are claims against business assets. They are debts owed by the business. Liabilities consist of Current/short term liabilities and long term liabilities.
Short term liabilities are those debts that are to be paid back within a short period of time, normally not more than one year of trading period. Example include Creditors, bank overdraft etc.
Long term liabilities are debts to be repaid within a long period of trading period normally more than one year.
The structure for a balance sheet can be seen as shown below,
TITLE (NAME) …………BALANCE SHEET AS AT (TIME)………………………
LIABILITIES | ASSETS | ||||
Particulars | Amount | Amount | Particulars | Amount | Amount |
Capital | xxxxx | Fixed Assets | |||
Add: Net profit | xxxx | Furniture | xxxx | ||
xxxx | Motor cars | xxx | |||
Less: drawings | xx | xxxxx | Buildings | xxxx | xxxx |
Long term | Current Assets | ||||
Loan from bank | xxx | Stock | xxx | ||
Debtors | xx | ||||
Cash at bank | xxx | ||||
Short term | |||||
Bank overdraft | xxx | ||||
Creditors | xxx | xxxx | Cash in hand | xxx | xxxx |
Total | xxxxx | xxxxx |
Example. 01
From the balances given below, prepare a balance sheet as at 31st December 2010.
Capital sh. 205,000/=, furniture sh. 50,000/=, cash in hand sh. 16,000/=, net profit sh. 70,000/=, motor van sh. 30,000/=, loan from bank 80,000/=, stock sh. 110,000/=, drawings sh. 24,000/=, shop fittings sh. 20,000/=, debtors sh. 180,000/=, creditors sh. 45,000/= and bank overdraft 30,000/=.
Solution:
BALANCE SHEET AS AT 31ST DECEMBER 2010
LIABILITIES | ASSETS | ||||
Particulars | Amount | Amount | Particulars | Amount | Amount |
Capital | 205 000 | Fixed Assets | |||
Add: Net profit | 70 000 | Furniture | 50 000 | ||
275 000 | Motor van | 30 000 | |||
Less: Drawings |
| 251 000 | Shop Fittings | 20 000 | 100 000 |
Long term liabilities | |||||
Loan from bank | 80 000 | ||||
Current liabilities | Current Assets | ||||
Creditors | 45 000 | Stock | 110 000 | ||
Bank overdraft | 30 000 | 75 000 | Debtors | 180 000 | |
cash |
| 306 000 | |||
Total | 406 000 | 406 000 |
Example. 02
Below is the trial balance of Mr. TRY AGAIN as at 31st December 2008. From these informations, prepare trading and profit and loss account and a balance sheet for the given time.
MR. TRY AGAIN TRIAL BALANCE AS AT 31ST DECEMBER 2008
S/no | Particulars | Dr. | Cr. |
1. | Free hold land and building | 275 000 | |
2. | Plant and Machinery | 133 000 | |
3. | Stock 1st January 2008 | 412 300 | |
4. | Purchases and sales | 1 273 400 | 2 078 400 |
5. | Carriages | 47 200 | |
6. | Wages and salaries | 122 700 | |
7. | Bad debts | 22 500 | |
8. | Commission received | 67 500 | |
9. | Debtors and creditors | 544 000 | 245 000 |
10. | Discounts | 82 300 | |
11. | Furniture | 19 200 | |
12. | Returns | 8 400 | 81 700 |
13. | Capital | 998 200 | |
14. | General expenses | 133 800 | |
15. | Rates | 18 800 | |
16. | Bank balance | 187 400 | |
17. | Drawings | 185 800 | |
18. | Closing stock | 442 000 | |
Total | 3 470 800 | 3 470 800 |
Solution:
MR. TRY AGAIN TRADING AND PROFIT AND LOSS A/C AS AT 31ST DEC. 2008
DR. CR.
Particulars | Amount | Amount | Particulars | Amount | Amount |
Opening stock | 417 300 | Sales | 2 078 400 | ||
Purchases | 1 273 400 | Less return in | 8 400 | ||
Less: return out | 81 700 | 1 191 700 | 2 070 000 | ||
Cost of goods available for sale(cogas) |
1 609 000 | ||||
Less closing stock | 442 000 | ||||
Cost of goods sold (cogs) |
1 167 000 | ||||
Gross profit c/d | 903 000 | ||||
2 070 000 | 2 070 000 | ||||
Carriage | 47 000 | Gross profit b/d | 903 000 | ||
Wages and salaries | 122 700 | Commission received | 67 500 | ||
Bad debts | 22 500 | ||||
Discounts | 82 300 | ||||
General expenses | 133 800 | ||||
Rates | 18 800 | ||||
Net profit | 543 200 | ||||
|
|
MR. TRY AGAIN TRADING AND PROFIT AND LOSS A/C AS AT 31ST DEC. 2008
LIABILITIES | ASSETS | ||||
Particulars | Amount | Amount | Particulars | Amount | Amount |
Capital | 998 200 | Fixed Assets | |||
Add: Net profit | 543 200 | Land and building | 275 000 | ||
1 541 400 | Plant and Machinery | 133 000 | |||
Less: Drawings | 185 800 | Furniture | 19 200 | ||
1 355 600 | 427 200 | ||||
Current liabilities | Current Assets | ||||
Creditors | 245 000 | Stock | 442 000 | ||
Debtors | 544 000 | ||||
Bank balance | 187 400 | ||||
1 173 400 | |||||
1 600 600 |
|
- Interpretation of the Balance sheet
The informations given in the balance sheet can be interpreted as follows,
- Working capital – This is the excess of current assets over current liabilities,
I.e. Working capital = Current assets – current liabilities
- Current ratio – This is a ratio of current assets to current liabilities
I.e. Current ratio =
Example. 03
You are provided with the balance sheet below, use to answer the questions that follow
BALANCE SHEET AS AT 31ST DECEMBER 2009
LIABILITIES | AMOUNT | ASSETS | AMOUNT |
Capital | 330 000 | Equipment | 60 000 |
Creditors | 100 000 | Furniture | 90 000 |
Balance overdraft | 60 000 | Premises | 30 000 |
Machines | 70 000 | ||
Stock | 100 000 | ||
Debtors | 40 000 | ||
Cash at Bank | 60 000 | ||
Cash in hand | 40 000 | ||
490 000 | 490 000 |
Calculate:
- Total current assets
- Total current liabilities
- Total fixed assets
- Working capital
- Current ratio
Solution:
- Total current assets = 100 000 + 40 000 + 60 000 + 40 000 = 240 000
- Total current liabilities = 100 000 + 60 000 = 160 000
- Total fixed assets = 60 000 + 90 000 + 30 000 + 70 000 = 250 000
- Working capital = 240 000 – 160 000 = 180 000
- Current ratio = = 3:2
Exercise. 05
The following were the informations extracted from the books of account of Umwema Group as at 28th February 2010.
Cash in hand ………………………………………sh. 900 000
Creditors ……………………………………………sh. 1 020 000
Debtors ……………………………………………sh. 137 200
Prepaid expenses ………………………………….sh. 67 500
Outstanding expenses ……………………………..sh.16 200
Plant ………………………………………………..sh. 150 000
Land and buildings…………………………………sh. 120 000
Loan from bank ……………………………………sh. 840 000
Motor vehicle ………………………………………sh. 180 000
Calculate:
- Total current liabilities
- Total current assets
- Total fixed assets
- Working capital
- Current ratio
- Total long term liabilities
Exercise. 06
From the trial balance of MC & Company Ltd below, prepare trading and profit and loss account and the balance sheet for the year ended 30th June 2007.
PARTICULARS | DR | CR |
Sales | 1 860 000 | |
Purchases | 1 155 600 | |
Opening stock | 377 000 | |
Carriage outwards | 32 600 | |
Carriage inwards | 23 400 | |
Return inwards | 44 000 | |
Wages and salaries | 244 700 | |
Return outwards | 35 500 | |
Motor expenses | 66 400 | |
Rent | 57 600 | |
Sundry expenses | 120 200 | |
Motor Vehicles | 240 000 | |
Fixtures and fittings | 60 000 | |
Debtors | 457 700 | |
Creditors |
| 304 500 |
Cash at bank | 387 600 | |
Cash in hand | 12 000 | |
Drawings | 205 000 | |
Capital | 1 284 400 | |
Total | 3 484 400 | 3 484 400 |
Closing stock (30th June 2010n was sh. 499 800
- REVISION EXERCISES
- From the transactions below, open up the cash book, post the entries in their appropriate ledgers and balance them.
Jan 1. Started business with capital in cash sh. 150 000
Jan 2. Bought goods for cash sh. 70 000
Jan 6. Sold goods for cash sh. 85 000
Jan 7. Purchased goods for cash sh. 25 000
Jan 10. Cash sales sh. 80 000
Jan 12. Cash purchases sh. 30 000
Jan 17. Paid rent by cash sh. 40 000
Jan 19. Received cash from Herman sh. 70 000
Jan 24. Paid water bills sh. 20 000
Jan 27. Sold goods for cash sh. 55 000
Jan 28. Received loan from CRDB Bank sh. 150 000
- John started business on January, 2000 with capital of sh. 5 000 000 in cash.
Jan 2. Purchased goods and paid in cash sh.1 000 000
Jan 3. Bought goods for cash sh. 500 000
Jan 5. Paid wages in cash sh. 50 000
Jan 7. Sold goods in cash sh. 300 000
Jan 8. Bought goods in cash sh. 800 000
Jan 9. Received loan from C.R.D.B sh. 70 000
Jan 12. Bought parking materials in cash sh. 20 000
Jan 28. Paid transport charges sh. 30 000
Jan 28. Drew cash for himself sh. 10 000
Enter the above transactions in the cash book and complete double entry system.
- Record the following in the ledgers, balance and close the accounts.
Ms. Joel commenced business on 1st Jan, 2007 with cash sh. 600 000
Jan 2. Purchased goods for cash sh. 300 000
Jan 4. Paid office cleaners sh. 20 000
Jan 5. Sold all the goods for cash sh. 340 000
Jan 7. Purchased goods for cash sh. 200 000
Jan 8. Paid carriage on goods sold sh. 40 000
Jan 10. Sold goods for cash sh. 300 000
Jan 15. Paid wages sh. 10 000
- Mrs. Hamsini started business as follows
March. 1, 2004 Capital in cash sh. 260 000
2 Purchased goods for cash sh. 70 000
3 Sold goods for cash sh. 90 000
7 Purchased goods for cash sh. 30 000
13 Bought packing materials for cash sh. 5 000
19 Paid transport charges sh. 3 500
21 Bought more goods for cash sh. 20 000
24 Paid insurance for cash sh. 6 000
27 Sold goods for cash sh. 60 000
Open the ledger accounts to record the above informations, balance off the accounts and extract the trial balance as at 31st March, 2004.
- At the beginning of the year 2006, Mazengo high school shop started business with capital of sh. 5 000 000
Jan. 2 Paid electricity for previous month sh. 15 000
4 Paid telephone bills sh. 10 000
5 Bought office stationaries for cash sh. 50 000
7 Bought four chairs for cash sh. 100 000
14 Total cash on sales sh. 300 000
17 Sold goods for cash sh. 400 000
20 Cash sales sh. 500 000
24 Sold timber for cash sh. 250 000
25 Mr. Juma paid back the loan sh. 120 000
26 Paid salaries to workers sh. 150 000
27 Cash sales sh. 80 000
30 Paid house rent sh. 180 000
Enter the above transactions in the cash book and open the ledger for sales and purchases.
- The following is the trial balance of Mtakuja business company Ltd. From it prepare trading and profit and loss account and a balance sheet as at 31st May, 1975.
Particulars | Dr | Cr |
Sales | 18 600 | |
Purchases | 11 556 | |
Stock 1st June, 2015 | 3 776 | |
Carriage outwards | 326 | |
Return inwards | 234 | |
Return outwards |
| 355 |
Carriage inwards | 440 | |
Salaries and wages | 2 447 | |
Motor expenses | 664 | |
Rent | 576 | |
Sundry expenses | 1 202 | |
Motor vehicles | 2 400 | |
Fixtures and fittings | 600 | |
Debtors | 4 577 | |
Creditors | 3 045 | |
Cash at bank | 3 876 | |
Cash in hand | 120 | |
Drawings | 2 050 | |
Capital | 12 844 | |
Total | 34 844 | 34 844 |
Stock at 30th April, 1975 was sh. 4 998.
7.0 REFERENCES
- Owondo, V., Said, Mrisho S. And Mwambuli, Juma R. (2018). MATHEMATICS FOR SECONDARY SCHOOLS, FORM THREE, Student’s Book By Jamana Printers Ltd – Tanzania.
- South Carolina State University and Ministry of Education and Vocational Training -Zanzibar (2011); MATHEMATICS FOR SECONDARY SCHOOLS. By EXPO Holdings- Malaysia and Uhuru Media Ltd.
- Masinde, W. (2010); BASIC MATHEMATICS FOR SECONDARY SCHOOLS, BOOK THREE, By Nyambari Nyangwine Publishers.
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