Financial Accounting 2018 November Knec Past Paper

1. (a) Explain each of the following terms as used in accounting;
(i) accruals concept;
(ii) going concern concept;
(iii) dual aspect concept;
(iv) monetary unit concept (8 marks)
(b) On 31 December 2017, the trial balance of Watimo Traders did not balance. The difference of Ksh. 39,090 was placed on the credit side of the suspense account. On the comparison, the following errors were revealed,
(I) A cash sale of Ksh, 35,328 was recorded as ksh, 35,238 in the sales account.
(II) The purchases account had been overcast by Ksh, 24,000.
(III) A discount received of Ksh. 41,000 had been wrongly debited on the discount received account.
(IV) A credit sale of Ksli. 121J200 had been recorded as Ksh. 112,200 in die debtors account.
1V) A bill of Ksh. 17,000 paid for electricity was not recorded in the electricity account
(VI) Discounts allowed account had been understated by Ksh, 11,000.
(VII) The bank account was understated by Ksh. 20,000.
(VIII) A payment of Ksh 5,000 to a supplier had been credited to the supplier’s account. Prepare:
(i) journal entries to correct the errors above.
(ii) a suspense account, (12 marks)

2. (a) Explain four features of the straight line method of depreciation. (8 marks) The following is the receipts and payment account for 1
31 December 2017.

or the year ended 31 December 2017, prepare:
(i) subscriptions account;
(it) bar trading account;
(iii) income and expenditure account. The following balances were extracted from the books of account of Ycvcn Traders as at I April 2018.

(b) On 5 March 2018, the petty cashiers of Janalo Enterprises was given a cash float of Ksh. 15,000. The cash is reimbursed at the end of each week. Tire petty cashier made the following payments during the week.
March 5 Bought stumps for Ksh 1,400
5 Bought mobile phone airtime for Ksh. 2,100
6 Bought sugar for Ksh. 250
6 Paid a credit for an amount of Ksh. 4,000
7 Paid Ksh. 120 for a registered mail
7 Bought tea leaves for Ksh. 60
8 Bought printing papers for Ksh. 820
Prepare a petty cash book using the following analysis columns;
Postage
– • Telephone
Beverage
Stationery
Ledger account.
4. (a) Explain the use of each of the follow ing documents:
(i) credit note;
(ii) invoice;
(iii) quotation;
(iv) delivery note.
(bi On 3 I March 2018, the cash book (bunk column) of Akisha Ventures had a debit balance of Ksh 335*100 while the bank statement had a credit balance of Ksh. 122,450 on the same date.
Upon comparison, the following discrepancies were revealed;
(I) A cheque of Ksh 140^00 received from a debtor had been dishonoured by ihc bank.
[ID A dividend received of Ksh. 2.400 had beet reflected in the bank statement only
(111) A standing order payment of Ksh. 15.000 had been made by the bank.
(TV) Cheques issued to suppliers amounting to Ksh. 21*000 had not been presented to
the bank for payment.
(V) A commission of Ksh. 550 had been charged by the bank for services rendered.
(VI) Cheques received from Timothy and lane of Ksh. 70,300 and Ksh, 10,000 respectively, had not yet been credited by the bunk.
■ Prepare;
(i) an updated cash book’
(ii) a bank reconciliation statement. (12 marks)
lExplain die information needs of each of the following users of financial statements;
(i) shareholders;
(ii) management;
(iii) employees;
(iv) lenders

(b) On I April 2018, Viuinax I milled had a cash balance of Ksh. 100,000 and a hank overdraft of Ksk 25,000. the following transaclioni took place during the inunlh of April 2018.
April 2 Sold goods for Ksh, 270.000 in cash
4 Paid Ksh, 4JOOO for electricity in cash.
6 Took Ksh. 200,000 from the cash till and deposited into the business bank account.
5 Settled Amina’s account of Ksh. 42,500. less 2% cash discount by cheque.
12 Received a cheque of Ksh. 5,(100 for dividends.
18 Received Ksh. 54,000 in cash from Mary after allowing a cash discount of 10%.
28 Received a cheque of Ksh. 70,000 Trom Babu.
* 29 Raid Ksh. 41JOOO by cheque to I .imah after deducting a cash discount of Ksh. 837.
30 Paid Ksh. 25JOOO (or rent in cash.
30 Received Ksh. 16.000 fn>m Juma in cash.
Prepare a three column cash book for the month of April 201R. 112 marks.)
6. (a) The following us pencil urc relates to F’ikasa L .united fur the month of February 2018

Additional information;
(i) The inventory as at 31 December 2017 was Ksh. 653,400.
(ii) A provision for doubtful debts of 5% is to he created,
(iii) Depreciation on furniture is 20% per annum on cost.
Prepare:
(I) an income statement fur the year ended 31 December 2017.
(II) a statement of financial position as at 31 December 2017.

lb) The following transactions relate to Miromax Enterprises for the month of
February 2018, (8 marks)
February
2 The proprietor started a business with Ksh. 400,00(1 in the business bank account.
8 Bought goods for Ksh. 145,000 from Pato Traders on credit.
10 Sold goods for Ksh. 170JD00 to Halrina on credit.
16 Paid Ksh. 18000 for electricity by cheque.
18 Sold goods for Ksh. 37,000 in cash.
20 Received a cheque of Ksh 98j000 from Halima,
24 Paid Ksh. 40,000 to Pato Traders by cheque.
28 Bought goods for Ksh. 19JXX) in cash*
(i) Prepare ledger accounts to record the transactions above.
(ii) Balance oil the accounts.

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