TUESDAY: 5 December 2023. Afternoon Paper. Time Allowed: 3 hours.
Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Any assumptions made must be clearly and concisely stated. Do NOT write anything on this paper.
RATES OF TAX (Including wife’s employment, self-employment and professional income rates of tax).
Year of income 2022.
QUESTION ONE
1. Explain the following terms as used in companies accounts:
Authorised share capital. (2 marks)
Issued share capital. (2 marks)
2. Highlight FOUR roles of accounting regulatory bodies in your country. (4 marks)
3. Summarise any SIX books of original entry maintained by a business entity. (6 marks)
4. Explain THREE features of a not for profit making organisation. (6 marks)
(Total: 20 marks)
QUESTION TWO
Allan and Bill have been trading as partners in a wholesale business for many years sharing profits and losses in the ratio 2:1 respectively.
The latest trial balance as at 31 October 2023 extracted from the accounting records of the partnership revealed the following:
Due to irreconcilable differences between the partners, they resolved to dissolve their partnership business with effect from 1 November 2023 under the following terms:
1. Bill took over one of the motor vehicles at a valuation of Sh.480,000 and the rest of motor vehicles realised Sh.1,035,000 in cash.
2. Other assets were realised at their fair values as follows:
3. The credit suppliers accepted Sh.9,300,000 in full settlement of the amounts due to them.
4. Dissolution expenses which amounted to Sh.4,200,000 were immediately settled in cash.
Required:
Prepare the following ledger accounts to close the books of the partnership, upon dissolution:
Realisation account. (6 marks)
Cash at bank account. (6 marks)
Partners current accounts. (4 marks)
Partners capital accounts. (4 marks)
(Total: 20 marks)
QUESTION THREE
1. Highlight two differences between “capital reserves” and “revenue reserves”. (4 marks)
2. Explain the following accounting principles:
Materiality principle. (2 marks)
Matching principle. (2 marks)
Historical cost concept. (2 marks)
3. The following information relates to the books of Mawenzi Ltd.:
2. The company’s policy on allowance for doubtful debt is based on the age of the debt outstanding as follows:
0.5% for less than 30 days, 1% for 31 – 60 days, 2% for 61 – 90 days and 3% above 91 days.
3. Customers are allowed a cash discount of 2% for debts settlement within 1 month. Half of them paid within 1 month.
4. Net profit for the company before adjustments for provisions for doubtful debts and discounts was
Sh.2,415,000.
Required:
Allowance for doubtful debt as at 31 December 2022. (4 marks)
Debtors balance to be shown in the statement of financial position as at 31 December 2022. (2 marks)
Statement of adjusted net profit for the period ending 31 December 2022. (4 marks)
(Total: 20 marks)
QUESTION FOUR
1. Summarise FOUR roles of the revenue authority or similar body in your country. (4 marks)
2. Differentiate between “progressive taxes” and “proportional taxes”. (4 marks)
3. Outline TWO investment allowances that could be claimed by a manufacturing company in your country. (2 marks)
4. Jobesh Mwanzia has been in Marine business for the last 5 years. He incurred the following capital expenditure during the year 2022:
1. Purchased the following ships:
• Nyali A 4,500 tonnes for Sh.200 million.
• Tudor 4C 3,000 tonnes for Sh.150 million.
• Bombolulu X7 4,990 tonnes for Sh.250 million.
• Kongowea 37Y 4,120 tonnes for Sh.318 million.
2. Purchased vehicle (Prado) for Director for Sh.4 million.
3. Purchased furniture for Sh.100,000.
4. Purchased lorry for Sh.5,000,000.
5. Constructed staff canteen at Sh.4.5 million and was put into use from 1 July 2022.
6. Constructed a godown on 1 June 2022 at Sh.10 million and put into use on 1 October 2022.
7. Purchased other machines and equipment for repair of the ship for Sh.200,000.
Required:
Determine investment allowance claimable by Jobesh Mwanzia for the year ended 31 December 2022. (10 marks)
(Total: 20 marks)
QUESTION FIVE
1. Explain the following roles of taxation in achieving budgetary objectives as per the fiscal policies in your country:
Fair redistribution of income. (2 marks)
Optimum allocation of resources. (2 marks)
Protection policy. (2 marks)
Social welfare. (2 marks)
2. Discuss how the following factors could influence taxable capacity:
Tax structure. (2 marks)
Tax rates. (2 marks)
Tax elasticity. (2 marks)
Government expenditures. (2 marks)
3. Summarise four offences under the customs and excise taxes in your country. (4 marks)
(Total: 20 marks)
