1. Question one

Nick Hailey is a sole proprietor who keeps records of his cash and bank transactions. His transactions for the month of march were as follows:

March 1 cash in hand Shs. 400,000, cash at bank shs. 600,000 4

March 4 Hailey received a cheque for shs 1,200,000 from W. Abbot which was paid directly into      the bank. This represented sales

March 6 paid wages in cash shs 60,000

March 8 sold goods for cash shs 300,000

March 10 received cheque from G Smart for shs 600,000 in full settlement of a debt of shs. 640,000; this was paid directly into the bank

March 11 paid sundry expenses in cash shs 48,000

March 14 purchased goods by cheque for shs 1,400,000

March 18 paid J. Sanders a cheque of shs 190,000 in full settlement of a debt of shs. 210,000

March 23 withdrew shs 25,000 from the bank to pay the office cleaning company

March 24 paid wages in cash shs 60,000

March 26 sold goods for cash shs 380,000

March 28 paid salaries by cheque shs 240,000

March 31 retained cash amounting to shs 600,000 and paid the remainder into the bank

a) Prepare Mr. Hailey’s two column cashbook for the month ended 31 march. (10mks)

Prepare the cashbook in a word document and send to aimscollegekenya@gmail.com

2. Question One

b) Explain what is meant by: (10 marks)

Historical cost convention

Going concern convention

Does traditional financial accounting, using historical cost convention, make the going concern convention unnecessary? Explain your answer fully.

Which do you think a shareholder is likely to find more useful a report on the past or an estimate of the future? Why?

3. Question two (a) Click the link to download question 2(a)

Work on it in word document and send via email to aimscollegekenya@gmail.com

When done, move to the next question

4. Question Three

A building firm has a branch in Isiolo which operates on an imprest issued by the head office in Nairobi. On 31 Oct 2019, the branch cashier reported that he had run out of cash and had to borrow from a friend to pay of expense as follows:

October

27 – Casuals shs 350, water shs 102; stationery shs 33; machine hire sh. 3000

28 – Machine hires shs 3,500; water shs 150; cement shs. 750; casuals shs 620

29 – Stationery shs 100; casuals shs 450; cement shs 550

30 – Machine hires shs 2,800; water shs 120; casual shs 400; cement shs 300

31 – Casuals shs 180; water shs 80; machine hire shs 500

Required

Record the above transactions through a petty cash register kept on an imprest system and indicate the amount of money the cashier should receive from the head office in order to settle the debt and to restore the imprest to shs 20,000.                                                                                                                                                                          (10marks)

5. Question 3

b)Explain the qualitative characteristics of financial statements. (10marks)