This is a whole set of exam questions that you may take as your homework and provide answers to. They are pretty good for accounting students.

1. QUESTION ONE
Muthusi is a businessman operating a retail business in a small town. Due to the size of his business, he is not
able to employ a qualified accountant on a permanent basis. Click here to get homework answers and answers
to your accounting questions at http://allhomeworktutors.com/
The following information was extracted from the books of the business as at 31 October 2002:
Shs.
Freehold property (cost) 600,000
Motor vehicles (NBV) 750,000
Furniture and fixtures (NBV) 240,000
Stock 390,000
Trade debtors 500,000
Bank overdraft 60,000
Trade creditors 380,000
Accruals 15,000
10% loan 600,000
Provision for doubtful debts 25,000
The following transactions took place during the financial year ended 31 October 2003:
1. Sales and purchases on credit amounted to Sh.2,080,000 and Sh.1,900,000 respectively.
2. The following transactions were carried out through the bank account:
Shs.
Sales – Cash 720,000
Purchases – Cash 240,000
Payments to trade creditors 1,940,000
Purchase of furniture 200,000
Salaries and wages 160,000
Lighting 65,000
General expenses 35,000
Interest on loan 30,000
Drawings 60,000
Repayment of loan on 30 April 2003 100,000
Collections from trade debtors 1,890,000
Proceeds from sale of motor vehicle 120,000
3. The business depreciates motor vehicles at 20% per annum on a reducing balance basis. A full year’s
depreciation is provided on a motor vehicle acquired in the course of the year and no depreciation is
provided on a motor vehicle disposed of in the course of the year.
The motor vehicle sold in the year had been purchased at Sh.250,000 and an accumulated
depreciation of Sh.122,000 had been provided on it at the time of disposal.
4. Furniture is depreciated at 10% per annum on cost and in proportion to the period used in the year. The
additional furniture was purchased on 1 May 20903 while the cost of furniture held on 31 October 2002
was Sh.400,000
5. Loan interest paid was for one-half year up to 30 April 2003
6. The business received discounts of Sh.40,000 and allowed discounts of Sh.70,000 during the year.
7. Bad debts of Sh.20,000 were written off. Provision for doubtful debts is to be maintained at 5% of the
debtor’s balance at the end of the year.
8. Accruals are in respect of lighting and on 31 October 2003, the amount accrued was Sh.19,000

2. 9. Muthusi’s business obtains a normal gross profit rate of 25% on selling price.
Required:
(a) Trading and profit and loss account for the year ended 31 October 2003 (12 marks)
(b) Balance sheet as at 31 October 2003. (8 marks)
(Total: 20 marks)
QUESTION TWO
The following are the summarized financial statements of Deweto limited:
Trading and profit and loss account for the year ended 31 October.
2002 2003
Sh.’000 Sh.’000
Sales 93,500 11,350
Cost of sales (55,120) (72,970)
Gross profit 38,380 38,380
Expenses (26,230) (23,960)
Net profit before interest and tax 12,150 14,420
Loan interest _(450) __(375)
Net profit before tax 11,700 14,045
Taxation (3,510) (5,413.5)
Net profit after tax 8,190 8,631.5
Dividend (6,00) (6,000)
Retained profit 2,190 2,631.5
Balance sheet as at 31 October
2002 2003
Sh.’000 Sh.’000 Sh.’000 Sh.’000
Fixed assets:
Freehold premises 10,500 10,500
Plant and equipment 7,200 9,500
Motor vehicles _5,350 23,050 _7,300 27,300
Current assets:
Stock 12,500 11,800
Debtors 9,850 8,900
Bank balance and cash in hand _5,950 28,300 5,864.5 26,564.5
Current liabilities:
Creditors 8,350 7,830
Taxation 3,510 5,413.5
Dividend 3,000 (14,860) 3,000 (16,243.5)
36,490 37,621
Ordinary share capital 30,000 30,000
Reserves _3,490 _5,121
33,490 35,121
15% loan _3,000 _2,500
36,490 37,621
Note:
1. 80% of the sales are no credit
2. The stock as at 31 October 2001 was valued at Sh.13,000,000

3. Required:
(a) Calculate two ratios for each classification identified below for the financial years ended 31 October 2002
and 2003:
(i) Profitability ratios (4 marks)
(ii) Liquidity ratios (4 marks)
(iii) Gearing ratios (4 marks)
(iv) Activity ratios (4 marks)
(b) Comment on Deweto Ltd’s profitability and liquidity positions. (4 marks)
(Total: 20 marks)
QUESTION THREE
The following version of the receipts and payments account has been provided by the treasurer of Maendeleo
Social club for the year ended 31 October 2003:
Receipts Payments
Shs.’ 000 Shs.’ 000
Opening Balance 500
Accountancy Fees 200
Bar Purchases 24,000
Bar sales 55,000
Dances: Expenses 900
Ticket Sales 1,600
Foods: Purchases 4,500
Sales 8,000
Insurance 500
Electricity 1,500
Members Subscriptions 35,000
Office Expenses 22,000
Purchase of Furniture 4,000
Rates 2,000
Salaries and Wages: Bar Staff 10,000
Other Staff 14,000
Telephone 3,000
Travelling Expenses 13,000
Balance c/f _______ 500
100,100, 100,100
Additional Information: Shs. 000 Shs. 000
1. Fixed Assets: At November 2002
Club Premises at Cost 18,000
Furniture and Fittings at Cost 35,000
Less Provision for depreciation 14,000 21,000
39,000
2. Accruals and Sundry Creditors At Nov 2002 At 31 Oct 2003
Shs. 000 Shs. 000

4. Accountancy Fees 200 250
Bar Purchases 1,500 2,000
Electricity 400 300
Members Subscriptions (Paid in Advance) 1,000 800
Telephone 600 700
3. Sundry Prepayments and Receivables
Insurance 300 200
Members Subscriptions (In Arrears) 6,000 7,000
4. Maendeleo Social Club had a Bank Account, which had a balance of Shs. 2,500,000 on 1 Nov 2002.
This Bank account was not used during the year to 31 Oct 2003and the only entry made in this
account was for the interest of shs. 200,000 which was credited yo the bank on 31 Oct 2003.
5. Depreciation on Furniture and fittings is at the rate of 10% per annum on cost. A full years
depreciation is provided for any furniture bought during the year.
6. Bar stock was valued at shs. 7,000,000 0n 1 Nov 2002 and at Shs. 1,500,000 on 31 Oct 2003.
7. No Apportionment of costs is made between bar activities and other club activities.
Required:
i. Income and Expenditure Account for the year 31 Oct 2003. (12 Marks)
ii. Balance Sheet (8 Marks)
(Total 20 Marks)
QUESTION FOUR
Meza Ltd has an authorized share capital of Sh.20,000,000 divided into 1,500,000 ordinary shares of Sh.10
each and 250,000 8% preference shares of Sh.20 each.
An extract of the balance sheet as at 30 June 2003 was as follows:
Sh.’000 Sh.’000
Fixed assets 7,040 Equity
Current assets 500,000 ordinary shares of
Stock 2,300 Sh.10 par value 5,000
Debtors 980 250,000 8 % preference shares
Bank balance _530 of Sh.20 par value 5,000
3,810 Share premium 300
Creditors _(550) 3,260 _____
10,300 10,300
On 1 July 2003, the company offered 500,000 ordinary shares for sale to the public at Sh.15 each payable as
follows:
 On application Sh.7 including the premium
 On allotment Sh.5
 On first and final call, Sh.3
Applications were received on 15 July 2003 and allotment made on 31 July 2003. The allotment money was
received on 15 August 2003.
The first and final call was made on 15 September 2003 and the money received on 30 September 2003.
The company received applications for 650,000 shares. Applications for 25,000 shares were rejected and the
application money was refunded. The shares were then allocated to the remaining applicants on a pro rata

5. basis, the excess of the application money being carried forward in part satisfaction of the amounts due on
allotment.
An allotee of 3,000 shares failed to pay both the allotment and first and final call money and the shares were
forfeited on 13 October 2003.
The forfeited shares were then re-issued at Sh.12 each on 21 October 2003. Say do my homework here and
this will be provided with answers at http://allhomeworktutors.com/do-my-homework
Required:
(a) Ledger accounts to record the above transactions (14 marks)
(b) Balance sheet as at 21 October 2003 (6 marks)
(Total: 20 marks)
QUESTION FIVE
(a) Briefly explain the meaning of each of the following accounting concepts, giving in each case, an
example of the application of each:
(i) Materiality (4 marks)
(ii) Substance over form (4 marks)
(iii) Money measurement (4 marks)
(b) Briefly explain whether revenue may be recognized in the following circumstances in respect of sales
made by a business entity:
(i) Goods have acquired by the business entity which it confidently expects to resell
very quickly (2 marks)
(ii) A customer places a firm order for goods (2 marks)
(iii) Goods are delivered to the customer’s premises (2 marks)
(iv) The customer’s cheque in payment for the goods has been cleared by the bank.
(2 marks)
(Total: 20 marks)