1. The following information has been extracted from the books of Chuma Limited as at 31 December 2021:

Income statement for the year ended 31 December

Statement of financial position as at 31 December:

Additional information
i. The taxation balances shown above are in agreement with the revenue department.
ii. During the year ended 31 December 2021, non-current assets originally costing USD 38.5 million were sold for USD 7 million. The accumulated depreciation on these assets as at the date of disposal was USD 26.6 million.

Required
Statement of cash flows for the year ended 31 December 2021 using the indirect method per the requirements of IAS 5 (Statement of Cash Flows).

The trial balance of Mercury Ltd as at 30 June 2021 failed to balance. The difference of USD 104,700 was on the credit side of the trial balance. A suspense account was opened with that difference. After a thorough scrutiny of the books of accounts, the following errors were discovered:
i. The sales journal was understated by USD 52,800.
ii. The purchases return journal was undercast by USD 35,200.
iii. Bank charges of USD 26,400 entered in the cash book had not been posted to the ledger.
iv. Discount received column in the cash book was undercast by USD 44,000.
v. Purchase of goods for private use valued at USD 22,000 by the proprietor (Mercury) was included in the purchase account.
vi. Purchase of a motor vehicle on 1 October 2019 for USD 3,520,000 was recorded in the motor vehicle expenses account. Depreciation on the motor vehicle should be at the rate of 25% per annum on cost.
vii. Closing inventory on 30 September 2019 was understated by USD 88,000.
viii. A sale of goods on credit from Supta at USD 4,312 was correctly entered in the sales journal books but posted to his account as USD 3,412.
ix. Purchase of goods on credit from Mercury at USD 3,476 was entered in the respective records as USD 4,376.

2. Required
a. Journal entries to correct the above errors.
b. Suspense account duly balanced.
c. Statement of corrected net profit, if profit before correction of the errors was USD 4,843,608.

3. TRUE or FALSE: A real account starts the next fiscal year with a zero balance, whereas a nominal account starts with the ending balance from the prior period.

4. The following is the receipts and payments account of JJ Youth Club for the year ended 30 April 2019:

Additional information
i. The secretarial honoraria paid excludes USD 27,000 for travelling allowance.
ii. Interest earned on the deposit with Savai & Loans Ltd for the year to 30/04/2020 amounted to USD 52,500.
iii. The barman was also to receive a bonus of 7.5% of the net income for the bar after charging such bonus.
iv. The pavilion and equipment are to be depreciated at the rate of 14% per annum.
v. From the register of members, unpaid subscriptions as at 30 April 2019 amounted to USD 153,000, while subscriptions received during the year included USD 76,500 in respect of the previous year and USD 51,000 in respect of the year starting 01/05/2020.

vi. The assets and liabilities of the club as at 1 May 2019 were as follows:

vii. The following balances of assets and liabilities of the club were relevant as at 30/04/2020:

Required
a. Income and expenditure account for the year ended 30/04/2020.
b. Statement of financial position as at 30/04/2020.

5. The following trial balance was extracted from the books of Mabuyu Limited as of 31 December 2019:

Additional Information

i. Inventory as at 31 December 2019 was valued at USD 714,560,000.
ii. Rent and rates paid in advance as at 31/12/2019 amounted to USD 13.2 million.
iii. Motor vehicle running expenses due but unpaid as at 31/12/2019 were USD 18.48 million.
iv. Depreciation is charged as follows:
• Plant and equipment -12.5% per annum on cost.
• Motor vehicles -25% per annum on cost.
• Buildings to be depreciated but USD 35.2 million.
v. The directors have proposed a dividend of USD 4 per share for the year ended 31 December 2019.
vi. The provision for doubtful debts is to be adjusted is to be adjusted to USD 15.84 million.
vii. Share capital is divided into 132,000 ordinary shares of USD10, all of which were issued and fully paid.
viii. Ignore taxation.

Required
a. Income statement for the year ended 31 December 2019.
b. Statement of financial position as at 31 December 2019.

Ayana, Zuberi, and Chaniya have been in partnership sharing profits and losses in the ratio 2:1:2, respectively, after charging interest on capital at the rate of 8 % per annum. The financial year end of the partnership is 31/03/2021
6. Additional information
i. For the retirement of Chaniya, the land was revalued at USD 32.5 million. Goodwill of the partnership was valued at USD 5.2 million, but was to be written off immediately.
ii. On 30/09/2020, Chaniya retired from the partnership. Ayana and Zuberi agreed to continue with the partnership and to share profits and losses in the ratio of 2:3 after charging interest of 8 % per annum on capital.
iii. Chaniya agreed to leave the amount due to her in respect of his capital as a loan earning interest of 9 % per annum. The amount due to her in respect of the current account was settled in full at the end of the financial year.
iv. The relevant adjustment relating to the above transactions had not been made when the following trial balance was extracted on 31/03/2021:

Assume that the net profit accrued evenly throughout the year.

Required
a. Income statement in columnar form for the two periods ended 30/09/2020 and 31/03/2021
b. Partners’ capital accounts.
c. Partners’ current accounts.
d. Statement of financial position as at 31/03/2021

7. TRUE or FALSE: In partnerships, the current account is usually fixed, while the capital account is the current total of appropriations and the share of residual profit/loss, less drawings.

8. Jogoo runs a wholesale business selling children’s clothing. His Trial balance for the year ended 30 September 2020 was as follows:

Additional information
i. Allowance for doubtful debts is to be increased by 8.5 %.
ii. Electricity and telephone bills prepaid as at 30 September 2020 amount to USD 420,000 and USD 1.26 million, respectively.
iii. Rent accrued as at 30 September 2020 amounts to USD 1.26 million.
iv. Depreciation is provided on motor vehicles and furniture and fixtures at 25% & 12.5% per annum on cost.
v. Inventory as at 30 September 2020 was valued at USD 16.8 million.
vi. General expenses accrued as at 30 September 2020 amounted to USD 1.68 million.
Required
a. Income statement for the year ended 30 September 2020.
b. Statement of financial position as at 30 September 2020.

9. The following balances on non-current assets were extracted from the books of Sengi Ltd as at 1 May 2019:

The following information relates to the year ended 30 April 2020:
i. An item of plant acquired on 1 November 2014 for USD 7,175,000 was disposed of during the year for USD 3.5 million.
ii. New machinery was acquired during the year. The following were the costs of acquisition:

Input VAT is recoverable from output VAT.

iii. Land and buildings were revalued by Matata Valuers on 2 May 2019 at USD 15,890,000 and USD 13,608,000, respectively.
iv. The depreciation policy of Sengi is as follows:

A full year’s depreciation is provided in the year of acquisition. No depreciation is provided in the year of disposal.
v. A delivery van, which was purchased in April 2019 for USD 6,006,000, was stolen during the year. The insurers agreed to compensate the company by paying 90% of the cost.
Required
Property, plant, and equipment movement schedule for the year ended 30 April 2020

10. Nyuki traders commenced trading on 1 January 2018.During the two years ended 31 December 2018 and 31 December 2019, the following debts were written off to the bad debts account on the stated dates:

On 31.12.2018, total debtors amounted to USD 32 million. It was decided to make an allowance for doubtful debts of 5% of the debtors. On 31.12.2019, the debtors' balance stood at USD 35 million. Allowance for bad debts was maintained at 7.5% of debtors. The accountant of Nyuki Traders did not provide for the bad debts, nor did he recognize the bad debts expense in the two years.

Required
a. Debtors' account at each year's end
b. Bad debts account
c. Allowance for bad debts account

11. Under the faithful representation concept, the financial statement produced must accurately reflect the condition of a business. List three(3) attributes of faithful representation

12. The following transactions relate to Duma traders for June 2019:

Required
Three-column cash books to record the above transactions

13. The basis of accounting describes how financial activities are recognized and reported. Describe the two(2) main accounting bases.

Kipepeo Mosi balances her cash book at the end of every month and compares it with her bank statement for reconciliation. On 31 October 2020, the balances did not agree. The cash book bank column showed an overdraft of USD 3,740.000. The debit balance on the bank statement as at 31 October 2020 was USD 7,654,000.
After inspecting her books, Kipepeo discovered the following issues:
i. Cheques totaling USD1,960,000 had been entered in the cash book, but the cheques had not been presented to the bank as at 31 October 2020
ii. Payment for goods worth USD 75,600 from debtors through electronic funds transfer (EFT) had not been entered in the cash book.
iii. A standing order for a credit purchase of a motor vehicle of USD 178,000 was processed through the bank on 15 October 2020, but had not been entered in the cash book.
iv. Bank charges of USD 30,000 were included in the bank statement but had not been recorded in the cash book.
v. A cheque payment to a supplier for USD 500,800 was incorrectly entered in the cash book as a receipt.
vi. A cheque for USD 40,000 received from a debtor and deposited with the bank was returned stamped ‘’account closed’’.
vii. Cheques received and entered in the cash book but not yet credited in the bank amounted to USD 4.7 million.

14. Required
a. Updated cash book as at 31 October 2020.
b. Bank reconciliation statement as at 31 October 2020.

15. A ________ in accounting is an amount set aside to cover a probable future expense, or reduction in the value of an asset.

16. Transactions for which there is uncertainty about where they should be recorded are temporary recorded in a:

17. In a three-column cash book, the discount column on the debit side of the cash book will record (a)_______,and that on the credit side (b)__________.

18. TRUE or FALSE: Internally generated goodwill is recognized as an intangible asset.

19. The following balances were extracted from the records of Nyumbu, a sole trader, as at 31 December:

Additional information.
i. Total discount allowed and discount received amounted to USD 1,056,000 and USD 990,000, respectively. Bad debts written off during the year amounted to USD 240,000
ii. Total sales amounted to USD 396 million, while purchases amounted to USD 278.2 million. There were no cash sales or cash purchases.
iii. On 30 September 2021, Nyumbu repaid part of the loan by cheque of USD 6.6 million.
iv. Nyumbu makes a uniform gross profit to cost of sales of 2/3 every year.
v. The following expenses were paid by cheque during the year:

vi. Nyumbu did not maintain a record of cash withdrawn from the bank for personal use, so the deficit in the bank is due to personal withdrawals.
.
Required
a. Income statement for the year ended 31 December 2021.
b. Statement of financial position as at 31 December 2021.

20. Shomoro operates a bookshop in Narok. The following trial balance was extracted from the books of Shomoro at the close of business on 31 March 2021:

Additional information
i. Salaries of USD 900,000 are to be accrued as at 31 March 2021.
ii. Depreciation is to be provided as follows, based on cost:

iii. Inventory as at 31 March 2021 was valued at USD 46,440,000.
Required
a. Income statement for the year ended 31 March 2021.
Statement of financial position as at 31 March 2021.

Akina, Barika, and Chacha are in a partnership sharing profits in the ratio 2:1:2, respectively, with Barika entitled to an 8 % commission on sales. On April 1, 2017, Dalila was admitted into the partnership under the following arrangements:
i. For the purpose of admission of Dalila to the partnership, goodwill was valued at USD 4,004,000 and was to be written off immediately.
ii. Dalila was to introduce capital of USD 2,310,000.
iii. The partners were entitled to the following:

21.

iv. New profit and loss sharing ratios are 3:1:2:2 for Akina, Barika, Chacha, and Dalila, respectively, as at 30 September 2017.
The trial balance given below was extracted from the books of the partnership as at 30 September 2017:

Additional information
i. Non-current assets are due to be depreciated at the rate of 25% on cost per annum.
ii. The expenses and revenues accrued evenly throughout the year.
iii. Inventory as at 30 September 2017 was valued at USD 5,236,000.

Required
a. Partners’ income statement and appropriation account for the year ended 30 September 2017.
b. Partners’ capital account.
c. Statement of financial position as at 30 September 2017.

22. Mkungu Ltd had the following trial balance as at 30/09/2021:

Additional information
i. Establishment of expenses prepaid as at 30/09/2021 amounts to USD 340,000.
ii. Administration expenses accrued as at 30/09/20121amount to USD 595,000.
iii. The company paid the interest on loan stock for the year ended 30/09/2021 and on 5/10/20121
iv. The trade receivables included USD 1.7 million from a debtor who has now been declared bankrupt.
v. Depreciation is provided annually on the cost of non-current assets held at the end of the year as follows:

vi. The company’s directors propose that:
• The preference share dividend is paid.
• A dividend of 14% on ordinary shares will be paid
• USD 21,250,000 will be transferred to general reserves
vii. The provision of doubtful debts is to be adjusted to 4% of trade receivables at 30/09/2021.
viii. Gross profit is at a rate of 20% of sales.

Required
a. Income statement for the year ended 30/09/2021.
b. Statement of financial position as at 30/09/2021.

23. TRUE or FALSE: In endowment funds, the principal is never spent, but the interest generated can be spent as per the donor’s specifications.

24. Define incomplete records and highlight five(5) reasons for incomplete records.

25. Fenotrix Enterprise had the following transactions in its first year of business:

Required: Calculate the closing Cash balance.

26. On January 1, Silo Primary school purchased 5,000 desks at USD 200 per desk. On February 1, Silo purchased 7,000 desks at USD 400 per desk. On march 31, Silo sold 6,400 desks. What amount will go to the balance sheet as inventory, if Silo uses the FIFO method of valuation?

27. Violet has the following balance sheet accounts and balances:

Required: What is the balance of retained earnings?

28. Somex Limited valued and transferred its inventory of finished goods at a market value of USD 5,000. Given that the markup is 20%, calculate the element of manufacturing unrealized profit included in the valuation.

29. The following balances of assets and liabilities were extracted from the books of Leo Sports Club as at 31 March:

The summary of receipts and payments for the year ended 31 March 2022 was as follows:

Additional information
i. The club maintains a uniform gross profit margin of 20% on bar sales.
ii. The bar glasses are considered revenue expenditure.
iii. The barman is entitled to an annual bonus of 15% of the net profit after charging the bonus.
iv. The petty cash was used for the purchase of stationery only.
v. Subscriptions received during the year included USD 1.2 Million, being arrears of the previous year. It is the policy of the club to write off arrears of more than one year.

Required
a. Bar income statement for the year ended 31 March 2022.
b. Subscriptions account.
c. Income and expenditure account for the year ended 31 March 2022.
d. Statement of financial position as at 31 March 2022.

30. TRUE or FALSE: Errors of commission usually lead to oversight, whereas errors of principle are caused by a lack of knowledge of accounting principles.

31. The supplies account of Ngovu Limited had a US$ 860 debit balance at the end of the accounting period before adjustment for supplies used. There was an inventory of US$ 240 worth of unused supplies on hand. Which of the following is the required adjusting entry?

32. Lex Ltd declared a net income of US$ 45,000 last year, a depreciation expense of US$ 9.000, an interest amortization expense of US$ 4,500, an interest income of US$ 4,500, and a gain on the sale of Fixed assets of US$ 2,250. The actual cash flow from business operations for Lex Ltd is:

33. The approved estimates and actual expenditure for Kime’s Ministry of Tourism for the financial year ended 30 June 2023 were as follows:

The ministry made five (5) equal withdrawals for the Exchequer of USD 220 million each.

Required
a. Paymaster general account.
b. The exchequer accounts.
c. General account of vote.
d. Statement of assets and liabilities as at 30 June 2023.

34. The approval estimates and actual expenditure of the Makobe’s Ministry of Agriculture for the year ended 30 June 2024 were as follows:

Drawings from the Exchequer during the financial year amounted to USD 400 million.

Required
a. Exchequer account.
b. General account of vote (GAV).
c. Appropriation account for the year ended 30 June 2024.
d. Statement of assets and liabilities as at 30 June 2024.