ACC 206 - Accounting for Manufacturing and alternatives entities
TEST 1
Time: 2 hours 7th March 2023
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All [ 3] Three questions are compulsory. Total Marks: 40
Question 1. Answer all multiple-choice questions on the answer booklet. [1 mark for each]
1.1 In case of net worth/Capital Method, profit is determined by:
a. Preparing an income statement.
b. Comparing the capital in the beginning with the capital at the end of the accounting period.
c. Comparing the net assets in the beginning with the net assets at the end of the accounting period.
d. None of above.
1.2 Materials that form an integral part of the finished product are called:
a. Direct Material
b. Indirect Material
c. Direct labour cost
d. Advertising cost
1.3 The total cost of indirect material, indirect labour, and other manufacturing expenses is the:
a. Total Manufacturing cost
b. Factory overheads cost
c. Period cost
d. All the above
1.4 How does a manufacturing business calculate the production costs of completed goods.
a. Prime cost + Factory overheads + opening work -in-progress – closing work -in-progress.
b. Prime cost + Factory overheads - opening work -in-progress + closing work -in-progress.
c. Prime cost + Factory overheads + opening work -in-progress + closing work -in-progress.
d. Prime cost + Factory overheads + cost of finished goods
1.5 Which cost is part of prime cost for a manufacturing business?
a. Factory rent.
b. Carriage inwards
c. Fuel charges
d. Factory supervisor’s salary
1
1.6 Which item would be included in the statement of financial position of manufacturing business
but not in a wholesale business?
a. Cash at bank
b. Furniture at book value
c. Work-in-progress
d. Accounts payable
1.7 A manufacturer calculated cost of Production for the year at P 57,000. It was found that Insurance cost
P 2,000 had been omitted from the financial statement. Insurance is allocated 75% to factory and 25% to
administration. What was the correct cost of production?
a. 55,000
b. 56,500
c. 58,500
d. 59,000
1.8 Opening capital is ascertained by preparing __________.
a. Income statement
b. Statement of financial position
c. Opening Statement of Affairs
d. None of the above
1.9 If the closing capital is less than the opening capital. It shows:
a. Net profit
b. Net loss
c. No profit no loss
d. Loss, if there is no introduction of new capital.
2.0 Incomplete records are also known as………
a. Systemic accounting
b. Double entry system
c. Single entry system
d. None of the above.
Question 2. [14 Marks]
Mr. S. Matome runs a furniture making business in Kasane. The following balances are available
concerning the year ended 31 st December 2022.
[P]
Land and Buildings at cost 143,000
Plant and Machinery at cost 105,000
Accumulated depreciation on plant and machinery 23,000
2
Purchase of raw materials 130,100
Sales 317,500
Factory rent 3,000
Factory heating and lighting 6,500
Accounts receivable 37,200
Accounts payable 30,900
Wages (including P 15,700 for supervision) 63,000
Direct factory expenses 9,100
Selling expenses 11,000
Office salaries and general expenses 43,000
Cash at bank 24,500
General reserve 30,000
Retained profits 18,000
Inventory on 1st January 2022
Raw materials 20,000
Work-in-progress 2,500
Finished goods 38,000
Capital 20,000
Note:
The closing inventory as at 31 st December 2022 was: Raw materials P 22,000; Work-in-progress P
3,000 and for finished goods 35,600.
Salaries include P 6,700 for director’s salaries.
Depreciation is to be charged at 10% on cost of plant and machinery.
Required: Prepare a manufacturing account and an income statement for the year ending 31 st December
2022.
Question 3. [16 Marks]
The Income tax officer on assessing the income of J. Ramatu for the financial year 2022 noticed that Mr.
Ramatu has not maintained full set of his accounts. From his records following details of assets and
liabilities are given below as at 31/12/2021 and 31/12/2022
31/12/2021 31/12/2022
Assets: [P] [P]
Land and buildings at cost 95,000 95,000
3
Furniture at book value 20,000 18,000
Inventory 9,500 16,000
Sundry Debtors 41,500 60,000
Cash in hand 25,000 35,500
Liabilities:
Sundry Creditors 40,000 34,500
Loan from Ramatu’s Brother 20,000 15,000
Outstanding rent - 1,000
During this financial year, Ramatu used some stock worth of P 12,500 for personal use and in the second
of year, supplied P 8,000 as capital to the business. Depreciation has been charged on land and buildings
@ 10% on cost.
a. On basis of above information, prepare statement of affairs to calculate the Net Profit
for Mr Ramatu business to charge the income tax for the year.[14]
b. Explain any two disadvantages of having incomplete records? [2]
END OF TEST
ACC206 test1 2023
Marking key
Question 1
4
1.1 –b 1.6 - c
1.2 -a 1.7 – c
1.3 -b 1.8 - c
1.4 -a 1.9 - d
1.5 -b 2.0 - c
Question 2.
Manufacturing Account for the year ended 31 st December 2022
Particulars Amount [P] Amount [P]
Cost of raw materials
Opening inventory 20,000 √
+ purchases 130,100 √
150,100 √
Less: closing inventory (22,000) √
Cost of raw materials consumed. 128,100 √
Direct wages [ 63,000 – 15,700] 47,300 √
Direct factory expenses 9,100 √
Prime cost: 184,500 √
+ factory overheads expenses
Factory Rent 3,000 √
Heating and lighting 6,500 √
Supervision charges 15,700 √
Depreciation on plant and machinery 10,500 √ 35,700 √
Cost of production: 220,200 √
Add: opening work-in-progress 2,500 √
Less: closing work -in-progress 3,000 √
Cost of production of completed goods. 220,700 √
Income statement for the year ended 31st December 2022
Particulars Amount [P] Amount [P]
5
Sales/sales revenue 317,500 √
Less: cost of goods sold
Opening inventory of finished goods 38,000 √
Production cost of finished goods 220,700 √
258,700 √
Less: closing inventory of finished goods (35,600) √
(223,100) √
Gross Profit 95,400 √6
Less: operating expenses
Office salaries 36,300 √ 54,000 √
Director’s fees 6,700 √
Selling expenses 11,000 √ 41,400 √
Total expenses
Net profit
Marking = ½ mark for each tick
Question 3.
Statement of affairs for Net Worth/ Capital as at 01/01/2022
Particulars Amount [P] [P]
Assets:
Land and buildings 95,000 √
Furniture 20,000 √
Closing Stock 9,500 √
Sundry Debtors 41,500 √
Cash in hand 25,000 √
Total Assets 191,000 √
Less liabilities
Creditors 40,000 √
Loan from brother 20,000 √ (60,000)
Capital /net worth at 1 January 2022 131,000 √
6
Statement of affairs for Net Worth/ Capital as at 31/12/2022
Particulars Amount [P] [P]
Assets:
Land and buildings [95,000 – 9,500] 85,500
Furniture 18,000
Closing Stock 16,000
Sundry Debtors 60,000
Cash in hand 35,500
Total Assets 215,000
Less liabilities
Creditors 34,500
Loan from brother 15,000
Accrual rent 1.000 (50,500)
Capital /net worth at 31 December 2022 164,500
Income statement for the year ended 31/12/2022
[P]
Value of Net Worth/ capital on 31/12/2022 164,500 √
Less: Net worth/ capital at 01/01/2022 131,000 √
Apparent profit of the year 33,500 √
Less: additional capital ( 8,000) √
25,500
Add : Drawings: stock 12,500 √
Net Profit for the year 2022 38,000 √
