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 KASNEB
CPA (PART 1 SEC 1)
FINANCIAL ACCOUNTING
FOR MORE FREE PAST PAPERS VISIT www.someakenya.com

Friday 22 may 2015

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your
workings

Question one

The following trial balance was extracted from the books of Mawazo Ltd. as at 31 December 2014:
Sh. Sh.

inventories (1 January 2014)

Raw materials 238,385
Work-in-progress 403,315
Finished goods 758,415
Freehold land and buildings at cost (land Sh. 525,000) 875,000
Plant and machinery at cost 910,000 m
Motor vehicle at cost 371,000 a .co
ny
Fixtures and fittings at cost 277,935
a ke
Accumulated depreciation (1 January 2014): me
Plant and machinery w .so
434,000
Motor vehicles ww213,500
Fixtures and fittings 82,350
Bad debts written off 34,265
Allowance for doubtful debts 48,335
Rates and insurance 64,505
Factory wages 758,590
Factory power 157,920
Electricity and water 113,920
Maintenance of plant and machinery 76,790
office salaries 630,000
Return inwards and return outwards 9,415 22,190
Discount received 17,255
15% debentures 700,000
Purchases and
sales 6,421,660 8,572,375
General expenses 204,415
Bank charges 20,415
Advertising 60,060
Cash and bank balances 234,990
Trade receivables and trade payables 924,315 407,645
 Revenues reserve (1 January 2014) 730,835
General reserve 840,000

Share premium 350,000

Share capital - issued and fully paid:

1,400,000
140,000 ordinary shares of Sh.10 each
112,000
Interim dividend paid

161.135
Motor vehicle expenses 13, 818,485 13,818,485

Additional information

1. Electricity and water, insurance and general expenses are to be apportioned as follows;
 Factory 80%
 Office 20%
2. The allowance for doubtful debts is to be maintained at 10% of trade receivables as at 31 December
2014.
3. The Directors propose to pay final dividend. This shall increase the dividend for the year to Sh. 2 per
share.
4. Corporation tax is to be provided at 30% of net profit.
5. Prepaid expenses as at 31 December 2014 were as follows: m
 R ate s S h. 5 ,2 50 a .co
ny
 Insurance Sh. 1,680
a ke
6. Accrued electricity and water amounted to Sh. 5,390 as at 31 December 2014. me
7. The value of inventories as at 31 December 2014 were as follows:
w.so
Sh. ww
raw materials 974,785
Work-in- progress 577,150
finised goods 861,945
8. Depreciation is to be provided as follows;

Assets Rate per annum

buildings 4% on cost
plant and machinery 15% on written down value
motor veh ices 25% on written down value
fixtures and fittings 10% on written down value
Required

a) Manufacturing account for the year ended 31 December 2014. (10marks)

b) Income statement for the year ended 31 December 2014. (10 marks)
(Total 20 marks)

Question two

Samuel and Mary are trading as partners sharing profits and losses in the ratio of 2:1 respectively.
On 1 May 2015, Ann was admitted as a partner. The statement of financial position as at 30 April 2015 was a
follows:
Non-currents assets Sh. Sh.
Freehold premises 9,000,000
Plant and equipment 3,700,000
Fixures and fittings 1,700,000
14,400,000
Current assets
Inventory 6,200,000
Trade receivables 4,300,000
Cash balance 69,800 10,569,800
24,969,800
Financed by
Capital account: Samuel 8,000,000
Mary 4,000,000 12,000,000
Current account: Samuel 3,154,800
Mary 915,000 4,069,800
Non-current liabilty
Term loan 600
m
.co
Current liabities
a
Trade payables 2,700,000
ny
Bank overdraft 5,600,000 8,300,000 a ke
24,969,800 me
w.so
The admission of Ann was subject to the following;
ww
1. Samuel, Mary and Ann to share profits and losses in the ratio 2:1:1 respectively.
2. Ann is to contribute cash in order to bring her capital and current accounts to the same level as the
initial partners from the old firm who has lower investment in the business. In addition, the partner in
the old firm with the higher investment will draw out cash so that his/her capital and current accounts
equal those of new partners
3. On admission of Ann, goodwill was to be valued at Sh. 600,000 but not to be maintained in the books
of new firm.
4. An allowance for doubtful debts is to be made for Sh. 300,000
5. On admission of Ann, the assets were to be revalued as follows;

Assets Sh.
Freehold premises 11,000,000
Plant and equipment 3,400,000
Inventory 5,400,000

Required

a)
i. Revaluation account (4 marks)
 ii. Partners' capital accounts (4 marks)
iii. Partners' current accounts (4 marks)
iv. B a n k a c c o u n t ( 2 m a r k s ) b) Statement of financial position
(8 marks)
as at 1 May 2015 after the admission of Ann.
(Total 20 marks)

Question three
a) Using illustrations, explain four types of errors that might not be disclosed by the trial balance.
(8 marks)
b) The following information was extracted from the financial records of Jane Wangi for the year ended
30 April 2015;

Sh.
sales ledger balances (1 May 2014) 62,540
Cash received from debtors 212,390
Discount allowed 3,470
Return inwards 4,820
cash sales 58,330
Bad debts written off 1,960
Credit sales for the year 249,490
Debit balance transferred to purchase ledger accounts 3,410

m
During the same financial year, Jane Wangi's sales ledger balances amounted to Sh. 80,080 which did not
a .co
agree with the closing balance in the sales ledger control. ny
a ke
After checking all the entries, the following errors were discovered;
me
1. A debtor balance of Sh.930 had been omitted from the list of debtors w.so
2. Return inwards journal had been undercast by Sh. 870 ww
3. Peter Maina had returned goods worth Sh. 540 but the amount had been recorded as Sh. 450 in his
account
4. Discount allowed of Sh. 270 had been posted to the wrong side of debtors account
5. A debtor had been charged with an interest of Sh. 80 but which had been overlooked by the
accountant
6. Sales day book had been overcast by Sh. 1,360
7. Bad debts amounting to Sh. 190 had been entered in the control account but had not been posted to
customer's account
8. Discount allowed of Sh. 350 had been entered in the cash book but was yet to be entered in the
customer's account
9. Return inwards amounting to Sh. 440 from Robert Rotich had not been recorded in the books
10. Macred Juma was both a customer and a supplier. He had a balance of Sh. 270 in the purchases
ledger and 190 in the sales ledger. The contra entry was made in Macred Juma's account but no entry
had been made in the control account.
11. A sales invoice of Sh. 1,490 had not been entered in the books
12. A credit sale of Sh. 1,860 to James Onsango had been entered on the credit side of his account
Required

i. Sales ledger control account from the original list of balances

(4marks)
ii. Adjustment sales ledger control account
(4marks)
iii. Debtors reconciliation statement for the year ended 30 April 2015 (4 marks)

(Total 20 marks)
Question four

Explain the use of the following source document:

i. Sales and purchase invoice (2 marks)

ii. Debit note (2 marks)
iii. Credit note (2 marks)

Patrick Joe retired from employment on 31 December 2013 and decided to venture into business. He bought
an existing business on 1 April 2014, acquiring the inventory at a valuation of Sh. 1,142,000, furniture and
fixtures at Sh. 1,500,000 and goodwill for the remaining balance.

He used his existing bank account and did not maintain a full set of accounting records, the only record
available being till book recording cash payments from the till. Surplus cash was banked periodically during the
year.
m
a .co
A summary of Patrick Joe's bank account for the year ended 31 March 2015 was as follows:
ny
a ke
me
Bank account w.so
Sh. "000" ww Sh."000"
Balance brought forward 3,646 Purchase of business 3,192
Pension 975 Rent, 15 months to 30 June 2015 500
Bankings from shop 16,427 Rates, 9 months to December 2014 84
Electricty 92
Hire of equipment 80
Purchases 14,700
Personal cheques 1,122
Balance carried forward 1.272

21.048 21.048
Additional information:

1. A summary of the till book for the year ended 31 March 2015 showed the following;

Sh."000"
Purchases 1,606
Staff wages 742
 Sundry expenses 156
Drawing 520
2. Other balance as at 31 March 2015 were given as follows

Sh.
"000"
Inventory 1,542
Receivables 74
Cash in hand 54
Payables 470
Rate payable 120

3. Furniture and fixtures are to depreciated at 10% per annum on cost

Required;

i. Income statement for the year ended 31 March 2015. (7 marks)

ii. Statement of financial position as at 31 March 2015 (7 marks)

m
a .co
ny
Question five
a ke
me
.so
a) "A statement of cash flows is considered to be of such importance to users of financial statements
w
ww
that International Accounting Standard (IAS) 7 requires an entity to include such a statement as an
integral part of the financial statements".
Required:
Justify the above statement (4 marks)
b) Explain three roles of the International Accounting Standards Board (IASB) as provide by the
International Financial Reporting Standards (IFRSs) foundation constitution (6 marks)
c) The approved estimates and actual expenditure details relating to the Ministry of Agriculture and
Fishing as at 30 June 2014 were as follows:

Approved Approved
estimates expenditure
Sh."million" Sh."million"

Capital expenditures
Purchase of motor vehicles 220 230
purchase of office equipment 180 160
Networking the offices with fiber optic 60 40

Recurrent expenditure

Electricity, water and telephone 70 68

 Travelling expenses 92 89
Passages and leave 84 62
House allowance 54 61
490 495
Personal emoluments

internal income

Sale of hybrid grains/seeds 30 32

Artificial insemination fees 150 145
Grain drying services 20 25

Required:

Appropriation account for the year ended 30 June 2014 showing the net surplus to be surrendered to the
exchequer (if any). (10 marks)

(Total 20 marks)

m
a .co
ny
a ke
me
w.so
ww
 KASNEB
FINANCIAL ACCOUNTING
FOR MORE FREE PAST PAPERS VISIT www.someakenya.com

May 2014

QUESTION ONE

Carol and Mary are in a partnership sharing profits equally. They make handbags under the brand name
"CARY".

The partnership trial balance as at 31 December 2013 was as follows:

Sh.
"000" Sh."000"
Capital Carol 24,000
Mary 24,000
Drawings Carol 5,000
Mary 4,800
Land 15,200
Factory building at cost 20,400
m
.co
Accumulated depreciation on factory building 15,370
a
Delivery van at cost 8,100
ny
Accumulated depreciation on delivery van a
1,912 ke
me
.so
Inventory (1 January 2013):
w
ww
Raw materials 2,300
Work in progress 2,210
Finished goods (10,250 handbags at sh 2,000 each) 20,500
Sales 63,000
Return inwards 112
Purchase of raw materials 14,590
Tax 3,960
Factory wages 7,630
office salaries 2,500
General expenses: Factory 7,730
Office 9,470
Plant at cost 17,220
Accumulated depreciation on plant 5,870
Provision for unrealized profit (1 January 2013) 2,050
Allowance for doubtful debts 770
Trade receivables and payables 10,680 2,640

Bank overdraft 4.670

148.442 148.442
Additional information

1. During the year ended 31,December 2013, 16,727 handbags were transferred to the warehouse at a
price of Sh. 2400 each
2. As at 31 December 2013, inventory was valued as follows:
 Raw material - Sh. 1,900,000
 Work in progress - Sh. 2,880,000
 Finished goods - Sh. 17, 428,800
3. All handbags sold at Sh. 3200 each
4. The allowance for doubtful debt is to be maintained at 5% of the trade receivables
5. Accrued general expenses as at 31 December 2013 were as follows;
 Factory - Sh. 1, 748, 000
 Office - Sh. 764, 000
6. As at 31 December 2013, rent and rates were prepaid as follows:
 Factory - Sh. 104, 000
 Office - Sh. 80, 000
7. Depreciation is to be provided on cost as follows;
Assets Rate per annum
Factory building 2%
Plant 10%
m
Delivery vans 20% a .co
e ny
e ak
8. om
Carol is entitled to 25% of the manufacturing profit based on the transfer price to the warehouse,
. s
wile Mary is entitled to 10% of the trading gross profit w
9. No interest is credited or charged on capital account or drawings. ww
Required:

a) Manufacturing account for the year ended 31 December 2013. (6 marks)

b) Income statement for the year ended 31 December 2013 (8 marks)
c) Statement of financial position as at 31 December 2013 (6 marks)

(Total: 20 marks)

QUESTION TWO

The following balances were extracted from the books of Upendo Ltd, for the year ended 31 December 2013;

Sh. "000"
Ordinary Shares 120,000
8% Preference Shares 40,000
Inventory (31 December 2013) 83,852
Trade Receivables 27,200
Bank Balance 7,796
10% Debentures 16,000
General Reserves 28,000
Gross Profit for the year 81,508
Bad Debts 340
Salaries and Wages 28,200
Insurance and Rates 1,410
Telephone Expenses 620
Electricity Expenses 1,216
Debenture Interests 800
Directors Fees 2,500
General Expenses 3,108
Motor vehicles at cost 29,100
Accumulated depreciation on motor vehicles 22,300
Office Equipments at cost 44,640
Accumulated Depreciation on Office Equipments 17,200
Land 100,000
Buildings at cost 32,200
Trade Payables 13,722
Revenue Reserves (1st January 2013) 24,252
Additional information

1. Accrued electricity expenses as at 31 December 2013 amounted to Sh. 548,000

m
2. The amount of insurance includes a premium of Sh. 300,000 paid in September 2013 to cover the
a .co
company for six months from 1 October 2013 to 31 March 2014. ny
3. Depreciation is provided for as follows: a ke
me


Office equipment - 15 % per annum on cost
Motor vehicles - 20% per annum on cost w.so
4. Provisions are to be made for: ww
 Directors fees - Sh. 5,000,000
 Audit fees- Sh. 1, 200,000
 Outstanding debenture interest
5. The directors have recommended the following:
 Sh. 12,000,000 be transferred to general reserves
 Dividends on preference shares be paid
 Payment of 10% dividend on ordinary shares

Note: Ignore depreciation on buildings

Required:

(12 marks)
a) Income statement for the year ended 31 December 2013.
(8 marks)
b) Statement of financial position as at 31 December 2013
(Total: 20 marks)

QUESTION THREE

a) The property plant and equipment balances of Matatizo Ltd. comprised the following as at 1 January
2013:
 Depreciation Net book value
Cost
Sh. Sh. "000" Sh."000"
"000"
Freehold land 300,000 30,000
Buildings 38,520 38,520
Plant and machinery 70,200 37,812 32,388
Motor vehicles 37,800 23,040 14,760

The company uses straight line method of depreciation on assets as follows:

 10% per annum for plant and machinery

 20% per annum for motor vehicles

Additional information

1. It is the company's policy to make a depreciation charge proportionate to the period of usage of the
assets
2. An item of machinery bought on 1 July 2009 for sh. 10,080,000 was sold on 1 April 2013 at Sh.
6,000,000
3. From the year ended 31 December 2013, the management of the company decided to charge
depreciation on buildings at a rate of 2.5% per annum. The buildings were completed on 1 July 2009.
4. On 1 January 2013, a vehicle purchased on 1 May 2010 for sh. 12,600,000 was traded in at a value m
of Sh. 7,320,000 in part exchange for a new vehicle costing Sh. 18,000,000
a .co
5. Included in machinery is an old machine which originally cost Sh. 13,500,000 and which was already ny
a ke
me
fully depreciated and not expected to yield any material amount on either use or resale.
6.
.so
On 30 June 2013, a machine costing Sh 13,500,000 was purchased from a vendor who had used it
w
for three years. The vendor had bought the machine costing Sh. 10,500,000 was purchased on 1
august 2013. ww
Required:

A schedule showing the movement of property, plant and equipment for the year ended 31 December 2013
(12 marks)

b) The following were approved estimates and actual expenditures for the ministry of Health for the
financial year ended 30 June 2013:

Item Details Actual

Approved
estimates expenditure
Sh.
Sh. "000" "000"
300 Transport 76,500 73,100
301 Travel and subsistence 88,400 86,700
500 Personal emoluments 102,000 96,900
700 Electricity expenses 81,600 76,500
240 Staff development 15,980 17,510
900 Purchase of equipment 166,600 166,600
 400 Other allowances 116,960 113,390
1000 Appropriations-in-aid 133,960 125,800

Drawings from the exchequer during the financial year ended 30 June 2013 amounted to Sh. 127,500,000

Required:

i. General account of vote (3 marks)

ii. Exchequer account (2 marks)
iii. Paymaster general account (3 marks)

(Total: 20 marks)

QUESTION FOUR

a) Summarise three limitation of ration analysis (6 marks)

b) The following financial statements were extracted from the books of Majengo Ltd. for the years ended
31 December 2012 and 2013:

Income statements for the years ended 31 December:

2012 2013
Sh."000" Sh "000"
m
.co
Sales (all on credit) 200,000 200,000
a
Cost of sales 120.000 100.000 ny
a ke
me
Gross profit 80,000 100,000
Expenses -60,000 -60,000
w.so
Net profit 20,000 40,000
ww
Dividends -20,000 -20,000
Retailed profit 20,000
Balance brought forward 25.000 25.000
Balance carried forward 25,000 45,000

Statements of financial position as at 31 December:

2012 2,013
Sh."000" Sh."000"
Non current assets
Land 63,000 44,000
Plant and machinery at cost 6,000 8,500
Buildings at cost 79,000 60,000
Investments at cost 80.000 53.000
228,000 165,500
Current assets
Inventory 65,000 55,000
 Trade receivables 50,000 40,000
115,000 95,000
Current liabilities
Trade payables 60,000 40,000
Proposed dividend 20,000 20,000
Bank balance 4,000 2,500
-84,000 -62,500
Net current assets 31,000 32,500
Net assets 259,000 198,000
Financed by:
Ordinary share capital 50,000 40,000
Share premium 14,000 13,000
Revaluation reserve 20,000
Revenue reserve 25,000 45,000
10% debentures 150,000 100,000
259,000 198,000
Additional information

1. Ordinary shares with nominal value of Sh. 10,000,000 were repurchased at a premium during the
year. All necessary approvals were obtained for this transaction.
m
2. Part of debentures were redeemed at par during the year.
a .co
3. Ignore taxation.
ny
a ke
Required:
me
w.so
ww
The following rations were for Majengo Ltd for years ended 31 December 2012 and 2013;

i. Gross profit margin (2 marks)

ii. Net profit (2 marks)
iii. Trade receivables turnover (2marks)
iv. Acid test ratio (2 marks)
v. Dividend cover (2 marks)
vi. Gearing ration (2 marks)
vii. Return on capital employed (ROCE) (2 marks)

(Total: 20 marks)

QUESTION FIVE

a) Discuss five principles of the code of ethics that govern the profession conduct of accountants
(10 marks)
b) Highlight six types of errors that could be reflected in a trial balance (6 marks)
c) Outline two advantages of an income and expenditure account to a receipts and payments account
(4 marks)

(Total: 20 marks)
 KASNEB
FINANCIAL ACCOUNTING
FOR MORE FREE PAST PAPERS VISIT www.someakenya.com

31 MAY 2013.

QUESTION ONE

Mboyamak Ltd. manufactures farm implements. The following list of balances was extracted from the books of
account of the company as at 31 December 2012:

Sh
Inventory as at 1 January
2012:
Raw materials 1,270,000
Work in progress 1,555,000
Finished goods 1,163,000
Purchase of raw materials 4,576,750
Carriage of raw materials 98,000
Direct labour 4,210,400
Office salaries 1,670,950
m
Rent 260,000 a .co
ny
Electricity (office) 221,000
a ke
Depreciation expenses: Machinery 510,000
me
Equipment (office) 115,000
w.so
Sales 15,931,100 ww
Electricity (factory) 406,000

Additional information:

1. Inventory as at 31 December 2012 was given as follows:

Sh
raw materials 1,445,000
Work in progress 1,230,000
Finished goods 1,442,000

2. Rent is to be apportioned between factory and office in the ratio 3:1

3. Finished goods are transferred from factory to sales at a mark up of 20 %
4. The values of opening and closing inventory are given at the transfer price.

Required:

i. Manufacturing account for the year ended 31 December 2012

ii. Income statement for the year ended 31 December 2012 (12 marks)
(8 marks)

(Total: 20 marks)
 QUESTION TWO

a) Discuss five users of accounting information clearly indicating their information needs (10 marks)
b) You have just been employed by Best way Ltd. as a trainee accountant. Your first exercise is to check
the transactions in the company's cash book, check entries in the bank statement, update the cash
book and make any amendments as necessary after which you will prepare a bank reconciliation
statement at the end of the month.

The company's cash book and bank statement for the month of March 2013 are provided below:

Dr CASH BOOK (Bank column only) Cr

Date Details Amount Date Details Amount
Sh.
2013 Sh. "000" 2013 "000"
1-Mar Balance brought down 4,865 2-Mar Salama Insuarance 187.5
1-Mar Devco. & Co. Ltd. 622.5 2-Mar Hellen- cheque number 4100 515
5-Mar J. Karanja 470 4-Mar Orchards Ltd. - cheque number 4101 787.5
8-Mar P. Otieno 375 8-Mar Buki Garage- cheque number 4102 527.5
10-Mar Huge Ltd 1,100 9-Mar Value sure finance 300
18-Mar Tiny Ltd 162.5 13-Mar Joseph Baraka- cheque number 4103 55
27-Mar R. Nafula 1,300 20-Mar Good samaritan Ltd- cheque number 4104 342.5 m
30-Mar David and Partners 205 27-Mar Kenya power Ltd- cheque number 4105
a .co
675
ny
31-Mar Balance carried down a ke 5,710
me
9.100
w.so 9.100

ww
Balance brought
1-Apr forward 5,710

Best way Ltd.

Bank statement

Date: 31
March
2013
Date
Debit Credit Balance
2013 Sh.
1-Mar Details "000" Sh."000" Sh."000"
4,865 CR
2-Mar Balance Cheques
622.5 5,487.5CR
4-Mar
Salama insurance 187.5 5,300CR
5-Mar
Cheque number 4101 787.5 4,512.5CR
6-Mar J.
Karanja 470 4982.5CR
 P.
9-Mar Otieno 375 5,357.5CR
9-Mar Cheque number 4102 527.5 4,830CR
12-Mar Cheques 1,100 5,930 CR
12-Mar Value sure Finance 300 5,630 CR
5,792.5
20-Mar Cheques 162.5 CR
28-Mar Kenya power 675 5,117.5CR
30-Mar Skyline Ltd 230 5,347.5CR
31-Mar Bank charges 137.5 5.210CR
31-Mar Bottom line co. Ltd 2,500 2,710 CR

Required:

A bank reconciliation statement as at 31 March 2013 (10 marks)

(Total: 20 marks)

QUESTION THREE

Kanini, Lucy and Ndwiga are in a partnership sharing profits and losses in the ratio 3:2:1 respectively. Ndwiga
decided to retire on 31 December 2012 and Gitonga was admitted as a partner on that date. The following is
m
the partnership trial balance as at 31 December 2012.
a .co
ny
Sh Sh a ke
me
premise 1,800,000
w.so
ww
plant 740,000
vehicles 300,000
equipment 40,000
inventory as a 31 December 2012 1,247,580
accounts receivables 699,600
cash 15,200
accounts payable 380720
bank overdraft 84,000
Loan- Ndigwa 560,000
Capital- Kanini 1,700,000
Lucy 1,300,000
Ndwiga 700,000
current accounts- Kanini 74,280
Lucy 50,180
Ndwiga 93,560
4,892,560 4,892,560
Additional information

1. Revaluation: premises Sh. 2,400,000; Plant Sh. 700,000 and inventory Sh. 1,083,580
2. Allowance for doubtful debts amounting to Sh. 60,000 is to be provided
 3. Goodwill amounting to Sh. 840,000 is to be provided in the books on the day Ndwiga retires. The
partners in the new partnership do not wish to maintain goodwill
4. Kanini and Lucy are to share profits in the same ratio as before. Gitonga will have same share profits
as Lucy.
5. Ndwiga is to take his car at book value of Sh. 78,000 in part payment, and the balance of all he is
owed by the firm in cash except Sh. 400,000 which he is will to leave as a loan account
6. The partners in the new firm are to start on equal footing so far as capital and current account are
concerned. Gitonga is to contribute cash to bring his capital and current accounts to the same amount
as the original partner from the old firm who has the lower investment in the business.
7. The original partner in the old firm who has the higher investment will withdraw cash so that his capital
and current account balances equal those of his new partners.

Required:

a) Partner's capital account (6 marks)

b) Partner's current account (6 marks)
c) Statement of financial position for the partnership of Kanini, Lucy and Gitonga as at 31 December
2012 (8 marks)

(Total: 20 marks)

QUESTION FOUR

a) The following extracts are from the financial statements of SOY Ltd, as at 31 March: m
a .co
2013 ny
Sh.
2012
a ke
me
.so
"000" Sh."000"
Non- current assets w
Freehold land and building 50,400 36,000 ww
Plant and machinery 17,580 19,050
Investment at cost 10,800 11,250
Goodwill 8,400 8,700
87,180 75,000
Current assets
Inventory 30,150 26,100
Trade receivables 18,420 23,400
Short term investments 5,130 2,520
Cash in hand 600 1.290
54.300 53.310
141,480 128,310
Total assets
Equity and liabilities
Ordinary share capital 54,000 45,000
Share premium 4,500 2,250
Revaluation reserves 13,500
Revenue reserve 18,450 15,750
90.450 63.000
 Non- current liabilities
14% loan stock 22.500 27.000
Current liabilities
Trade payables 17,550 15,750
Bank overdraft 7,170 19,620
Proposed dividend 1,350 1,140
Taxation 2.460 1.800
28.530 38.310
Total equity and liabilities 141.480 128.310

Additional information:

1. The income statement extract for the year ended 31 March 2013 is as follows;

Sh."000" Sh."000"
Profit before tax 7,200
Less corporation tax 2.700
Profit afer tax 4,500
Dividends: Interim paid 450
Proposed 1.350 1.800 m
Retained earnings 2.700 a .co
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2. During the year, plant with a net book value of Sh. 2,250,000 was sold for Sh. 4,410,000. The plant
had originally cost Sh. 9,000,000 w
3. Part of the investment was sold during the year at a profit of Sh. 480,000 ww
4. Depreciation on plant and machinery amounting to Sh. 3,450,000 was charged to the income
statement during the year
5. During the year impairment of good will was estimated to be Sh. 1,260,000
6. The revaluation reserve relates to freehold land and building

Required:

Statement of cash flow in accordance with international accounting standard (IAS) 7 "statement of cash flow"
(14 marks)

b) Discuss three categories of financial ratios (6 marks)

(Total: 20 marks)

QUESTION FIVE

The following were the estimates and actual expenditure or Barani ministry of Youth and Sports for the
financial year ended 30 June 2012:

Item Details Estimates Actual

Sh."000" Sh."000"
201 Basic salaries 96,000 92,400
 201 21,420
Other personal allowance 18,900
400 Utilities, supplies and salaries 56,300 47,800
450 Printing and stationery 12,400 12,100
250 Travelling expenses 42,500 44,700
280 Training expenses 9,200 7,300
305 Maintanance and repairs of equipment 2,500 1,880
500 Grants to youth clubs 8,900 8,900
Gross expenditure 246,700 236,500
600 Appropriation-in-aid 15,000 12,500
Net expenditure 231,700 224,000

Drawings from the exchequer during the financial year ended 30 June 2012 amounted to Sh. 226,000,000.

Required:

a) General account of vote (3 marks)

b) Exchequer account (3 marks)
c) Paymaster general (PMG) account (3 marks)
d) Appropriation account for the year ended 30 June 2012 (8 marks)
e) Statement of assets and liabilities as at 30 June 2012 (3 marks)
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(Total: 20 marks) a .co
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