Question 4
- Prepare a Profit and Loss account for Vamboi Farms Limited for the year ended December 31, 2014. [11 marks]
- Suggest four ways of improving the performance of Vamboi Farms Limited. [4 marks]
The information below was obtained from the record books of Vamboi Farms Limited for the year ended December 31, 2014.
Study it carefully and answer the questions that follow.
Item Amount (Le)
Cost of inputs 500
Publicity 120
Produce in store 120
Transport expenes 620
Sales of produce 840
Wages 150
Value of crops on the field 450
Miscellaneous expenses 40
Rent 50
Observation
This question was poorly attempted by the candidates. In 4(a-b), most of the candidates could neither prepare a Profit and Loss account for Vamboi Farms Limited nor suggest ways of improving the performance of the farm.
The expected answers include:
4. (a) Profit and loss account for Vamboi Farms Limited for year ended December 31, 2014
Debit/DR |
Credit/CR |
Expenses Amount Rent 50.00 Cost of inputs 500.00 Miscellaneous expenses 40.00 Publicity 120.00 Transport expenses 620.00 |
Income Amount Produce in store 120.00 On the field 450.00
Total income 1,410.00 |
Grand Total 1,480.00 |
Grand Total 1,480.00 |
(b) Ways of improving the performance of Vamboi Farms Limited
- Use of cheaper alternative means of transport
- Acquisition of credit facility to expand production
- Use of cheaper methods of publicit- Acquisition of cheaper (good/quality) inputs/Acquisition of improved variety of
seeds
- Adoption of improved farming techniques/mechanization
- Cutting down on miscellaneous expenses
- Acquisition of better processing and storage facilities