SECTION A: (20 marks)

1. Which of the following is a liability?

a) Rent income due

b) Rent expense prepaid

c) Prepaid rent income

d) Rent expense paid in cash

2. When an overdraft is acquired, what happens to the financial position of the business?

a) Assets are increased; liabilities decreased

b) Assets are decreased; liabilities increased

c) Assets are increased; liabilities increased

d) Assets are not affected; liabilities increased.

3. Customers accounts are found in:

a) Sales ledger

b) General ledger

c) Purchase ledger

d) Nominal ledger

4. When each withdraw from bank for office use, the entries are

a) Debit cash column; credit bank column

b) Debit bank column; credit cash column

c) Debit cash column; credit cash column

d) Debit bank column; credit bank column.

5. The word used to describe the transfer of nominal entries to the ledger is..............................

a) Balancing

b) Posting

c) Normalizing

d) Narrating

6. Which one of the following documents would be sent to a customer when the supplier discovers that some of the goods taken had been omitted during the calculation of amounts due

a) Credit note

b) An invoice

c) Debit note

d) Standing order

7. A cheque issued by a firm and entered in a cash book but not yet passed through the banking system would be called...........................

a) An uncredited cheque

b) A dishonored cheque

c) A refer to drawer cheque

d) An undebited cheque

8. Gross loss is

a) When cost sales exceeds net sales

b) When cost of sales is less than sales

c) When sales exceed purchases.

d) When net is equal to cost of sales.

9. Which of the following errors will the trial balance not disclosed?

a) Errors of transaction

b) Miscat in entries

c) Reversal of entries

d) Miscalculation of balances

10. Given that creditors were shs25,000 and shs42,000 on 1st January 1991 and 31st December 1991 respectively and if payments made to creditors amounted shs32,000during the year. What was the total amount of invoices received from the creditors?

a) 74,000

b) 42,000

c) 49,000

d) 67,000

11. Which of the following information is not required when preparing a sales ledger control account?

a) Total credit notes issued to customers

b) Cash sales

c) Total invoices issued to customers

d) Payments from customers

12. A debit balance in electricity account at the end of trading period represents

a) Amount of electricity paid in advances

b) Outstanding amount of electricity

c) Amount of electricity in arrears

d) Overused amount of electricity.

13. A machine whose cost value is shs100, 000 with an expected life time of four years is to be depreciated using straight-line method. If after two years it will have registered an accumulated depreciation of shs48, 720. What will be its scrap value at the end of four years?

a) Shs94,000

b) Shs2,560

c) Shs24,000

d) Shs51,280

14. In an income and expenditure account of a club, one of the items which will appear on the credit side of the account is......................

a) Member's subscriptions

b) Purchases of club equipment

c) Donations

d) Entrance fees from discos

15. Which of the following information is true in the absence of a partnership deed?

a) Interest is charged on partners' drawings

b) Profits and losses are shared in proportion to the partners' capital contributions.

c) Interest is allowed on partners' capital

d) No interest is charged on partners' drawings

16. Which one of the following may not be a good reason for returning goods by a customer?

a) Faulty design

b) Obsolence

c) Damage in transit

d) Demand is low

17. Which one of the following will be included in the trading Accounts of a shopkeeper?

a) Carriage inward

b) Electricity bill

c) Accountants fee

d) Carriage outward

18. When a debtor to a firm is declared bankrupt, this requires the firm to

a) Debit debtors' account and credit bad debts account

b) Credit debtors' account and debit the bad debts account

c) Debit bad debts recovered accounts and credit debtors' account

d) Credit bad debts recovered account and debit debtors' account.

19. Musa had the following information on the dates shown below:

1st January 1992 31st December 1992

Assets: shs50, 000 shs75, 000

Creditors: shs25, 000 shs15, 000

Determine the profit musa made during the year

a) Shs25,000

b) Shs35,000

c) Shs60,000

d) Shs50,000

20. Money spent on items for items for business use is referred to as:

a) Revenue expenditure

b) Retained expenditure

c) Differed expenditure

d) Capital expenditure

SECTION B: (80 marks)

21. a) Give two reasons to explain why it is necessary for a poultry farmer to keep proper books of accounts.

b) The following information was obtained from Bwireko poultry farm as at 31st December 1992:


Sales (eggs) 1,600,000

Purchases (poultry feeds) 860,000

Advertising 46,000

Farm equipment 200,000

Electricity charges 24,000

Value of laying birds 135,000

Land 300,000

Buildings 300,000

Capital 700,000

Stationery 2,800

Drawings 124,000

Cash at bank 187,500

Carriage on sales 84,000

Wages and salaries 172,000

Farm debtors 128,000

Farm creditors 83,300

Loan from Uganda development bank 200,000

Interest on loan 20,000

Stock (unused feeds) as at 31/1/92 125,000

Additional information

1) Depreciation per annum is to be allowed on all the farm's fixed assets.

2) Laying birds are kept for more than one year.

3) Income tax of shs200, 000 is due but not yet paid.

You are required to prepare:

i. Bwireko poultry farm's trading profit and loss account for the period ended 31/12/1992.

ii. A balance sheet as at 31/12/1992.

22. a) List any five causes of differences between customer's cash book balance and bank statement balance.

b) The following is the cash book (Bank column) of Mr. Mpopa for June 1991.



June 2 Ezutu 500,000

5 Ocholi 1,500,000

8 Mikisa 2,000,000

20 Baluka 3,000,000

30 Balance c/d 1,500,000



June 1 Balance b/d 2,000,000

3 Muhashi 800,000

7 Onyango 2,200,000

25 Adutia 3,500,000


July 1 Balance b/d 1,500,000








June 1

June 4

June 6

June 8

June 10

June 18

June 30

Balance b/f





Ledger fee

Standing order


















The cheque issued to Muhashi was shs.1, 800 ,000 and not shs800,000.


i. the amended cash book

ii. Bank reconciliation statement.

23. a) Mention any five uses of a journal other than correcting errors.

b) Prepare journal entries necessary to correct the following errors in the books of Maina a trader in jinja.

i. A carpet bought on credit at shs490, 000 for office uses had been entered in the purchases day book and posted to the purchases account.

ii. Maina had withdrawn cash amounting to shs50, 000 for personal use but no entry had been made in the books.

iii. Goods worth shs52, 000 had been sold to Misanvu on credit but entered in the sales day book as shs25, 000 and posted to the accounts.

iv. A cheque worth shs90, 000 received from Muboga, one of the credit customers had been posted in Muboga's account as shs9, 000.

v. A cash payment of shs6, 500 for petrol had been debited to the delivery van account.

24. a)Give any three advantages of control accounts.

b)The following details are from books of Alube Motor Dealers:

balances on 1st January 1991.


Debtors 1,200,000

Creditors 800,000

Stock 1,000,000

Transactions during the year:

Cash receipts from debtors 4,800,000

Cash payments to creditors 2,500,000

Credit sales 5,000,000

Credit purchases 3,000,000

Returns outwards 100,000

Returns inwards 200,000

Debts written off 400,000

Cheques dishonored (Debtors) 1,800,000

Discount allowed 100,000

Discount received 50,000

Package charges (Debtors) 50,000

Required to:

Select the appropriate items from the above list and use them to prepare a

i. sales ledger control account

ii. Purchases ledger control account.

25. Bagagga Progressive Farmers bought a vehicle at shs28, 000, 000 on 1st January 1991. It was estimated that the vehicle would last five years leaving a scrap value of shs3, 000, 000.

You are required to show the following accounts for a period of three years:

i. Motor vehicle account

ii. Provision for depreciation on vehicle account

iii. Depreciation account

26. a) List any three differences between a receipt and payments account and an income and expenditure account.

b) Given below is the receipts and payments account for the West Nile Club for the year ended 3st December, 1992:

DR Receipts and Payments Account CR


Jan 1 Balance b/d 800,000


1992 1,000,000

1993 200,000

Donations 1,200.000

Club Disco

Collections 900,000

Sales of refreshments 1,100,000



Club Disco expenses 100,000

Rent (premises) 300,000

Ground hire 200,000

Equipment 500,000

Purchase of

Refreshments 700,000

Balance c/d 3,400,000


Additional information:

i. stock of refreshments as at 1/1/1992 shs200,000

ii. stock of refreshments as at 31/12/1992 shs300,000

iii. prepaid rent is shs100,000

iv. ground hire dues shs50,000

Required to prepare the:

i. Bar trading account.

ii. Income and expenditure account for the year ended 31st December, 1992.