SECTION A: (20 marks)

1. Net capital employed is derived from

a) FA + CA - CL

b) C + LTL + CL

c) FA + CA

d) LT - C + CL

2. In total debtors control account, the bad debts written off appear in

a) Both debit and credit sides.

b) Debit side.

c) Balance brought forward side.

d) Credit side.

3. Which one of the following is an income to a partnership firm?

a) Interest on capital.

b) Interest on drawings.

c) Interest on loan given by the partners.

d) Drawings.

4. The difference between the two sides of an income and expenditure account represents

a) Loss

b) Profit

c) Either surplus or a deficit

d) Neither a surplus nor a deficit.

5. Given the following information

Total debtors shs6, 840

Provision for bad debts shs600

Provision for discount allowed is 10% of debtors.

Calculate net debtors.

a) Shs6,240

b) Shs6,216

c) Shs5,616

d) Shs624

6. An instruction to the bank to pay regularly a fixed sum of money to a specified firm is known as

a) Credit transfer

b) Standing order

c) Statement of account

d) Bank statement

7. Given opening stock of shs2, 400, purchases shs36, 400, carriage inwards shs2, 400 and returns outwards shs2, 400. Calculate the net purchases.

a) Shs58,000

b) Shs36,400

c) Shs32,000

d) Shs34,000

8. What are the entries required to create provisions for depreciation?

a) Debit profit and loss a/c, credit provisions for depreciation a/c.

b) Debit depreciation a/c, credit profit and loss a/c.

c) Debit provisions for depreciation a/c; credit depreciation a/c.

d) Debit provisions for depreciation a/c, credit profit and loss a/c.

9. For a profit making organization to find its cash position, it will prepare

a) Income and expenditure account.

b) Receipts and payments account.

c) Profit and loss account.

d) Balance sheet.

10. A bank statement showed a debit balance of shs3, 000. A cheque of shs4, 000 was deposited and cleared by the bank. The bank statement will now show a

a) Credit balance of shs1000

b) Debit balance of shs7,000

c) Credit balance of shs7,000

d) Debit balance of shs1, 000.

11. Which one of the following should be entered in journal proper?

a) Cash refund for goods returned.

b) Cash payments for wages.

c) Bad debts written off.

d) Credit sales of goods.

12. When a trader acquires a fixed asset on credit.

a) Both the assets and liabilities are decreased.

b) The assets will increase and liabilities will decrease.

c) The assets will decrease and liabilities will increase.

d) Both the assets and liabilities are increased.

13. Which account(s) is/ are affected by the goods withdrawn by the owner for personal use?

a) Profit and loss accounts only.

b) Capital account and purchases account.

c) Purchases account and trading account.

d) Sales account only.

14. If a sole trader brought into his business as capital shs.120,000, makes a profit of shs20,000 and borrowed shs15,000. What will be his capital invested?

a) Shs.125,000

b) Shs.140,000

c) Shs.120,000

d) Shs.135,000

15. A credit balance in a partner's current account indicates that the partner is

a) Owed some money

b) A debtor

c) Insolvent.

d) Having no money with the firm.

16. Which one of the following can be included as capital expenditure by a manufacturer?

a) Purchase of raw materials.

b) Sales of furnished goods.

c) Repairs of the machines.

d) Delivery cost machines.

17. Which one of the following is an asset to a club?

a) Outstanding water bill.

b) Prepaid rent.

c) Subscriptions in advance.

d) Bank overdraft.

18. The following appear in the debtors control account except

a) Discount allowed.

b) Bad debts.

c) Discount received.

d) Returns inwards.

19. A contra item in accounting is where

a) Double entry is completed within the same book.

b) Cash is banked before it is paid out.

c) The proprietor has paid his capital in cash.

d) Sales have been paid by cash.

20. Which one of the following items appears in the receipts and payments account?

a) Subscription in arrears.

b) Outstanding rent payable.

c) Donations in kind.

d) Subscriptions in advance.

SECTION B: (80 marks)

21. a) What is a ledger book?

b) Mukasa started business as a green grocer under the firm name KONY PACO ENTERPRISES LTD. With the following assets:


Wheel barrow 30,000

Cash at bank 20,000

Cash in hand 75,000

During the month of January 1996, he transacted business as follows:


Jan 1 bought vegetables from Acam Growers Ltd 15,000

Jan 2 withdrew cash from bank for business use 5,000

Jan 5 sold assorted vegetables for cash 40,000

Jan 6 deposited cash into the bank 70,000

Jan 10 sold vegetables to lira hotel ltd 80,000

Jan 16 settled Acan Grower's ltd's account by cheque

less 5% cash discount

Jan 20 cash sales banked immediately 100,000

Jan 25 lira hotel ltd. Settled their account by cheque at a cash discount of 2%

Jan 26 the wheelbarrow broke down, he decided to sell it for cash 20,000

Jan 30 bought a new bicycle for the business from Nimaro enterprises ltd. For shs85, 000 paying shs40,000 in cash the balance remaining as a debt to be settled later.

Prepare a three column cash book and ledger accounts all balanced.

22. a) In the absence of a partnership agreement, the partnership act is said to be applicable. State any four provisions of this act relevant to the preparation of accounting records.

RINGTHO AND ONGETHO are in partnership and their partnership agreement provides as follows:

i. Each partner to contribute shs250, 000 as capital per month for a period of one year.

ii. Ongetho is to get a partnership salary of 30,000 per month.

iii. Interest on drawings is to be charged at 10% per annum.

iv. Any loan by the partner to the firm is to receive 71/2% interest per annum.

v. Profits are to be shared equally.

This agreement was put into effect on 1 January 1999. At the end of the year the position was as follows:

i. Both partners had completed their payments for capital.

ii. Ringtho had taken goods totaling to shs.120, 000, while Ongetho took cash to the tune of shs.80, 000 for personal use.

iii. The partnership had generated a net profit of shs.1, 500,000 during the year.

iv. Ringtho contributed additional shs.350, 000 to the partnership.


a) Partnership appropriation account for the year ended 31st December 1999.

b) Partnership's current accounts.

23. The following trial balance was extracted from the books of YZ Ltd, a sole trader, as at 31-12-1999.


Dr. Cr.

Capital 183,360

Purchases/sales 465,000 609,000

Repairs 9,500

Motor vehicles 18,950

Car expenses 3,480

Buildings 100,000

Bank 5,400

Furniture 14,600

Wages and salaries 86,100

Discount allowed 10,610

Drawings 24,000

Provisions for doubtful debts 1,400

Debtors/ creditors 52,130 40,000

Stock 1-1-99 63,000

Discount received 18,660

852,770 852,770

Additional information:

i. Stock on 31-12-99 was shs98,000

ii. Provision for bad and doubtful debts should be adjusted to shs.1,000

iii. The proprietor withdrew goods worth shs2,000 from the business for personal use, no entries were made.

iv. Depreciate motor vehicles by shs3,900 and furniture by 10%.

Required to:

Prepare trading, profit and loss accounts and a balance sheet as at that date.

24. a) Mention any four types of errors shown by the disagreement of the trial balance totals.

b) Miss Muzzabbi prepared her trial balance on 1st April 1996 but it did not balance. On investigation, the following errors were discovered:

i. Goods worth shs52, 000 sold to Wadwa on credit were entered in the sales day book as shs25, 000 and posted to the accounts as such.

ii. Payment by Toolit, a debtor of shs20, 000 by direct bank transfer had not been entered in the debtor's account.

iii. Shs.15, 000 received from Watmon had been debited to his account.

iv. Cash drawings by Miss Muzzabbi of shs.10, 000 had been recorded in the cash book only.

v. Sales had been overstated by shs25, 000.

Required to:

i. Open and balance the suspense account to determine the original difference in books.

ii. Prepare journal entries to correct the above errors.

25. The following trail balance was extracted from the books of black power FC on 31-12-99

Dr. Cr.

Shs shs

Bar profits 109,038

Club premises 1,006,400

Salaries 161,500

Furniture 178,840

Electricity 64,940

General expenses 20,570

Donations 12,240

Accumulated fund 1-1-96 1,428,544

Postages 15,232

Bank 69,360

Creditors 35,360

Subscriptions received 220,660

Sports equipment 289,000

1,805,842 1,805,842

Additional information:

i. Provide for depreciation on sports equipment at 20% and 25% on furniture.

ii. Subscriptions received include that of year 2000 amounting to shs.34, 680.

iii. Shs.80, 308 for purchase of a generator on credit was not recorded in the books.

Required to:

Prepare an income and expenditure account and a balance sheet as at 31-12-99.

26. a) Mention any five advantages of recording petty cash on the imprest system.

b) The bursar of the Almond College maintains his books on the imprest system. He is given a weekly cash float of shs.600, 000 and the amount spent is re-imbursed by drawing a cheque on UCB a/c No. 3851.

During the week beginning 8th march, the following transactions look place:


March 8 balance b/d 20,000

Re-imbursement ?

March 9 paid for petrol and oil 40,000

Paid for office stationery 10,000

Paid a supplier for amount due 60,000

Paid for staff lunch and tea 10,000

March 10 paid office messenger bus fare delivery

Letters and parcels 14,000

Paid for postage stamps and telegrams 20,000

March 11 paid for news papers and magazines 15,000

Paid for office stationery 40,000

Paid for staff lunch and tea 10,000

March 12 paid hotel bill and accommodation for

Headmistress 80,000

Paid for the cost of repairing school van 20, 000

March 13 paid office cleaner's wages 25,000

Paid a supplier for amount due 60,000

Paid for office stationery 15,000

March 14 paid for van petrol and oil 50,000

Paid hotel bill and accommodation for

Headmistress 80,000

Paid for staff lunch and tea 10,000

Paid office cleaner's wages 20,000

Required to:

Write the Almond College Petty Cash Book using the analysis columns for travelling and motor expenses: stationery and office expenses, cleaning: postage and telegrams; miscellaneous and sundry expenses and ledger accounts duly balanced.