i. Explain the contents of financial statements as per IAS 1 (2 marks) ii. Distinguish between a…

i. Explain the contents of financial statements as per IAS 1 (2 marks)

ii. Distinguish between a reserves and a provision. (2 marks)

iii. Describe at least four items that must be appear in a published balance sheet for a

company (2 marks) iv.Explain at least four items of information may be included in the Directors Report.

(2 marks) v.Distinguish between a sleeping partner and a limited partner. (2 marks)

b)Mary and Cecilia are in partnership manufacturing confectionery products. Finished products are transferred to the warehouse at agreed prices. Mary manages the factory while Cecilia manages the warehouse. The profits and losses are shared as follows:

	Factory	Trading
Mary	65%	35%
Cecilia	35%	65%

A trial balance extracted from the books of the partnership at 31st December 2010 was as follows:

	Dr. Kshs	Cr. Kshs
Factory land and buildings at cost	5,901,000
Plant and machinery : Cost : Depreciation(Year 2010) : Provision for depreciation(31st December 2010)	3,605,000 360,500	1,207,500
Delivery Vans: Cost : Depreciation(Year 2010) :Provision for depreciation(31st December2010)	1,127,000 225,400	708,400
Stocks as at 31st December 2009: Raw Materials : Work in progress :Completed confectionaries (1,200 at Kshs 5,600)	563,920 476,000 6,720,000
Sales of confectionaries		15,542,800
Purchase of raw materials	2,102,800
Wages: factory : Warehouse	844,200 1,402,800
Provision for bad and doubtful debts		224,000
Accounts receivable and payable	2,520,000	840,000
Bank overdraft		986,720
Capital accounts: Mary Cecilia		6,720,000 6,860,000
Drawings: Mary Cecilia	840,000 700,000
Totals	33,089,420	33,089,420

Additional information:

i)Transactions in respect of the confectionaries during the year ended 31st December 2010 were as follows: Units Amounts per

Unit in Kshs

• Sales 1,820 8,540

• Transferred to warehouse 1,520 6,300

• Valuation of stock (31st December 2010) ? 6,300 ii)The value of stocks of raw materials and work in progress as at 31st December 2010 was Kshs 445,200 and Kshs 707,700.

iii) Accrued expenses as at 31st December 2010 were as follows:

• Factory expenses Kshs 292,600

• Factory wages Kshs 39,200

• Warehouse expenses Kshs 151,200

iv) The provision for bad and doubtful debts is to be maintained at 10% of the debtors. v)Ignore depreciation on building Required:

a) Trading and profit and loss and appropriation accounts for the year ended 31st December,

2010. (12 marks)

b) Balance Sheet as at that date. (8 marks)