FACULTY OF BUSINESS AND MANAGEMENT

DEPARTMENT OF BUSINESS STUDIES

BACHELOR OF ACCOUNTING AND FINANCE

BACHELOR OF BUSINESS ADMINISTRATION

YEAR 1 SEMESTER 2 ACADEMIC YEAR: 2019/20

MAY 2021 END OF SEMESTER EXAMINATIONS

BAF 213- INTERMEDIATE ACCOUNTING

INSTRUCTIONS TO CANDIDATES
1. Time allowed: 3 hours
2. Answer only four questions. Each question carries 25 Marks.
3. Be neat
4. Please, read further instructions on the answer booklet.

Question 1

a) Distinguish between a branch and a department in business operations. 8 Marks

b) The following balances were extracted from Bazzekuketta Enterprises Ltd books for the
period ending 31st March 2018 that operates a merchandise under three departments that is
glass ware, Steel utensils and Grocery.
Shs ‘000’ shs ‘000’
Rent and business rates 9,300
Delivery expenses 3,600
Commission 10,000
Insurance 1,800

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 Purchases: Glass ware 101,300
Steel utensils 81,200
Grocery 62,900 245,400
Discount received 2,454
Salaries and wages 91,200
Advertising 2,307
Sales: Glass ware 180,000
Steel utensils 138,000
Grocery 82,000 400,000
Depreciation 4,200
Opening inventory: Glass ware 27,100
Steel utensils 21,410
Grocery 17,060 65,570
Administrative and general expenses 19,800
Closing inventory: Glass ware 23,590
Steel utensils 15,360
Grocery 18,200 57,150

Additional information
i. All expenses are to be apportioned equally between the departments except the following;
 Delivery expenses - proportionate to sales
 Commission 2½% of sales.
 Salaries and wages: Insurance in the proportion 3:2:1
 Discount received - 1% of purchases.
ii. Salaries and wages worth Shs 1,500,000 were outstanding as well advertising costs of shs.
900,000.
iii. Rent paid included Shs .600, 000 paid for the month of April 2018.

Required
Prepare the departmental statement of profit and loss and other comprehensive income for the
period ended 31st March 2018. 17 Marks
TOTAL 25 MARKS
Question 2
a) Discuss the reasons why business opt to operate branches. 8 Marks

b) Kirabo Enterprises whose head office is in Kampala operates a branch in Ibanda. All goods
are purchased by the head office and invoiced to and sold by the branch at cost plus 33⅓%.
Other than a sales ledger kept at Ibanda Branch all transactions are recorded in the books of head
office in Kampala.
The following are given as the transactions at branch during the year ended 31st December 2017.
Shs
Inventory in hand at January1st 2017 at invoice price 88,000
Accounts receivable January 1st 2017 78,920

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Inventory on hand 31st December 2017 at invoice price 78,960
Goods sent to Ibanda Branch at invoice price 496,000
Credit sales 420,000
Cash sales 48,000
Cash discount allowed to customers 8,560
Normal loss at invoice price 2,000
Returns to head office at invoice price 20,000
Cash from customers 448,000
Invoice value of goods stolen 12,000
Bad debts written off 2,960

Required:
Using adjustment method, write up the necessary branch ledger accounts in the head office
books for the year ended 31st December 2017. 17 Marks
TOTAL 25 MARKS

Question 3
a) Write short notes on the following terms as used in royalty accounts
i. Minimum rent 2 Marks
ii. Sub tenant 2 Marks
iii. Short workings 2 Marks
iv. Recoupment of short workings 2 Marks
v. Royalty receivable 2 Marks

b) Aristock made an agreement with Omunuk, an author for reference book named
“Fundamentals of Accounting”, to sell every book printed. The following was the agreement
between both of the parties until year 2017:
Royalty would be paid at Shs.5000 for each book sold, minimum rent of shs. 5,000,000 will be
charged annually.
Any short workings are recoupable only in 3 years following after they occurred.
The calculation of royalty made at the end of every year and will be paid on 1 February the
following year.

Sales are as follows:

Year 2012 2013 2014 2015 2016 2017

Required
Prepare the following accounts in the books of grantee:

i. Royalty Payable Account 5 Marks

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 iii. Short Workings Account 5 Marks
TOTAL 25 MARKS

Question 4
a) Distinguish between the following terms as used in company accounts.
i. Rights issues and bonus shares 3 Marks
ii. Issue at discount and Issue at a premium 3 Marks
iii. Forfeited shares and call in arrears. 3 Marks
b) Nabukenya PLC has an authorized capital of Shs. 10,000,000 divided into 20,000 ordinary
shares of Shs. 500 each. These were issued and payment was to be made as follows:
Shs per share
Payable on application 100
On allotment (including Premium) 200
First call 200
Second call 100
Applications were received for 36,000 shares. It was decided to refund the monies on 6,000
shares and to allot the remaining shares on basis of two for every three applied for. The excess
on application monies were to be applied on allotment.
The calls were made and paid for except for one member holding 200 shares who paid neither
calls and another member who did not pay the 2 nd call on 25 shares. These shares were then
forfeited. After considerations by directors all the forfeited shares were re-issued to one
Namukasa at a price of shs. 400 per share.
Required: Prepare:
i. The necessary ledgers to record above transactions
ii. Statement of financial position of the company on completion of above transactions.
16 Marks
TOTAL 25 MARKS

Question 5
a) Using examples explain the reasons why organizations prepare of cash flow statements. 5 Marks

b) The following shows a set of financial information obtained from Books of Kalesto Enterprises
Limited (KEL) for the trading period ending 30th June.
Statement of financial position at 30th June.
2017 2018
Non-Current assets ‘000’ ‘000’
Tangible assets 750,000 975,000
Accumulated depreciation (300,000) (450,000)
450,000 525,000
Investment at cost 300,000 75,000
750,000 600,000
Current assets

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Inventory 600, 000 1,050,000
Accounts receivables 2,025,000 2,325,000
Cash in hand 150,000 -
2,775,000 3,375,000
Current liabilities
Trade account payables (975,000) (1,185,000)
Bank overdraft - (90,000)
Taxation (345,000) (285,000)
Proposed dividends (225,000) (195,000)
Net current assets 1,230,000 1,620,000
Total assets less liabilities 1,980,000 2,220,000
Capital and reserves
Share capital (100 per share) 750,000 1,125,000
Share premium 225,000 300,000
Profit and loss A/c 1,005,000 795,000
1,980,000 2,220,000
The following information is also available;
i. The proceeds of sale of non-current assets investments amounted to Shs.225,000
ii. Tangible assets with an original cost of Shs. 37,500,000 and net book value of Shs.
22,500,000 were sold for Shs. 30,000,000 during the year.
iii. The taxation balances disclosed in above balances represent actual amounts agreed with
Uganda Revenue Authority. All taxes were paid on their due dates.
iv. No interim dividend was paid during the year to 30th June 2018.
v. During the year to 30th June 2018, the company made a 1 to 2 rights issue of ordinary
shares at shs. 120 per share.
vi. 50,000 Shs.1 ordinary shares were issued during the year at a premium of Shs 200/
share.
Required
Prepare the cash flow statement of KEL for the year ended 31st December 2017. 20 Marks
TOTAL 25 MARKS
Question 6
a) Using examples differentiate between a joint venture and a consignment. 10 Marks

b) Stone consigned goods to Rock on 1 January 2018, their value being Shs 12,000,000 and it
was agreed that Rock should receive a commission of 5 percent on gross sales. Expenses
incurred by stone for freight and insurance amount to Shs 720,000/=. Stone’s financial year
ended on 31 March 2018 and an account sales made up to that date was received from rock.
This showed that 70 percent of goods had been sold for Shs 10,600,000 but up to 31 March
2018, only Shs 8,600,000 had been received by Rock in respect of these sales. Expenses in
connection with the goods consigned were shown as being Shs 350,000 and it was also
shown that Shs 245,000 had been incurred in connection goods sold. With the account sales,
Rock Sent a sight draft for the balance shown to be due and Stone incurred bank charges of
Shs 12,000 on 10 April 2018 in cashing the same.

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 Stone received a further account sales from Rock made up to 30 June 2018, and this showed
that the remainder of the goods had been sold for Shs 4,800,000 and that Shs. 200,000 had
been incurred by way of selling expenses. It also showed that all cash due had been received
with the exception of a debt for Shs 120,000 which was proved to be bad. A sight draft for
the balance due was sent with the account sales and bank charged Stone Shs 9,000 on 1 July
2018 for cashing the same.
Required:
Prepare the necessary accounts in Stone’s books to record these transactions. 15 Marks
TOTAL 25 MARKS
Question 7
a) Explain the features of a joint venture. 5 Marks
b) Using illustrations, distinguish between a partnership and a joint venture. 10 Marks
c) White of Kampala and Green of Mukono enter into a joint venture. White is to supply the
goods and pay some of the expenses. Green is to sell the goods and receive the cash, and pay the
remainder of the expenses. Profits are to be shared equally. Details of transactions are as
follows:
Shs
White supplied the goods costing 1,800,000
White paid the wages 200,000
White paid for storage expenses 160,000
Green paid transport expenses 120,000
Green paid selling expenses 320,000
Green received cash from sales of all goods 3,200,000
Required.
Prepare the necessary leger accounts showing clearly how to arrive at profit and loss of a joint
venture. 10 Marks
TOTAL 25 MARKS
SUCCESS