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Mzumbe university – Mbeya Campus Collage
Program: BAF 1 (1st semester)
TEST ONE (MARKING SCHEME)
Date : 8 December 2018
Question one
Briefly explain the following elements of reliably as one quantitative characteristics of financial
statements
a. Substance The financial statement to be reliable events and transaction should be
over form reported in economic reality and not merely their legal form.
Substance over form requires that if substance of transaction differs from its
legal form than such transaction should be accounted for in accordance with
its substance and economic reality.
b. Prudence The financial statement to be reliable accountants should exercise a degree
of caution when judgements needed in making the estimates required under
conditions of uncertainty, such that assets or income are not overstated and
liabilities or expenses are not understated.
c. faithfulness To be reliable, information must represent faithfully the transactions and
other events it either purports to represent or could reasonably be expected
to represent. Thus, for example, a balance sheet should represent faithfully
the transactions and other events that result in assets, liabilities and equity
of the enterprise at the reporting date which meet the recognition criteria.
Faithfull representation requires that transactions and events should be
accounted for in a manner that represent their true economic substance
rather than the mere legal form
d. completeness To be reliable, the information in financial statements must be complete
within the bounds of materiality and cost. An omission can cause
information to be false or misleading and thus unreliable and deficient in
terms of its relevance.
e. Neutrality To be reliable, the information contained in financial statements must be
neutral, that is, free from bias. Financial statements are not neutral if, by the
selection or presentation of information, they influence the making of a
decision or judgement in order to achieve a pre-determined result or
outcome.
Question two:
Record the following transactions in three column cash book of Miss Agrippina the trader
date details
1st Nov.2018 She started business with loan 1,000/= USD in his business bank account
2nd Nov.2018 she withdraw for office use 500/=USD
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3rd Nov.2018 she injected additional capital 400/= USD
4th Nov.2018 she made puchases paying cheque 405/= USD gived cash discount 10%.
5th Nov.2018 she made credit sales of 200/= USD to Agriper General trader allowing him trade discount 10%
6th Nov.2018 she make sales of good worth 300/=USD, giving trade discount 6% and cash discount 2%
7th Nov.2018 she made credit sales of 200/= USD to Tipper ltd.
8th Nov.2018 she withdraw for private use 50/=USD from bank
9th Nov.2018 she made cash sales 450/= USD cash discount 10%
10th Nov.2018 she deposited cash 150/= USD into bank
11th Nov.2018 she received a chaque from tipper ltd paying whole of his debt allowing 5% cash discount
12th Nov.2018 Agriper General trader paid his account in full by cheque allowing him 5% cash discount
13th Nov.2018 Paid Agrypnia 10/= USD
14th Nov.2018 she deposited cheque received from tipper ltd together with cash 30/= USD
15th Nov.2018 paid rent 5/= USD, Rates 2/= USD, Electricty 4/= USD by chaque
20th Nov.2018 A cheque from Agriper General trader was dishonoured by the bank, charging disturbance fees
6/= USD
30th nov.2018 5% of all sales she made made was paid as tax in cash
ANSWERS
AGRIPINA CASH BOOK (THREE COLUNM )
FOR THE MONTH OF NOVEMBER 2018
DATE DETAILS LF D.ALL CASH BANK DATE DETAILS LF D.REC CASH BANK
1st Nov.2018 BANK LOAN 1,000.00 2nd Nov.2018 CASH C 500.00
2nd Nov.2018 BANK C 500.00 4th Nov.2018 PURCHASES 45.00 405.00
3rd Nov.2018 CAPITAL 400.00 8th Nov.2018 DRAWINGS 50.00
6th Nov.2018 SALES 5.64 276.36 10th Nov.2018 BANK C 150.00
9th Nov.2018 SALES 45.00 405.00 13th Nov.2018 AGRYPNIA 10.00
10th Nov.2018 CASH C 150.00 14th Nov.2018 BANK C 190.00
11th Nov.2018 TIPPER LTD 10.00 190.00 14th Nov.2018 BANK C 30.00
12th Nov.2018 AGRIPER G T 9.00 171.00 15th Nov.2018
14th Nov.2018 CASH C 190.00 15th Nov.2018 RENT 5.00
15th Nov.2018 CASH C 30.00 15th Nov.2018 RATES 2.00
20th Nov.2018 AGRIPER G T (9.00) 15th Nov.2018 ELECTRICITY 4.00
20th Nov.2018 AGRIPER
BANK G T 171.00
20th Nov.2018 CHARGE 6.00
30th Nov.2018 30th Nov.2018 TAX 47.5
30th Nov.2018 BALANCE C/D 1,343.86 398.00
60.64 1,771.36 1,541.00 45.00 1771.36 1,541.00
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