SECTON A: (20 marks)

1. What source document is used for compiling a returns inwards journal?

a) Carbon copy of the invoice.

b) Carbon copy of the credit note.

c) Original copy of the credit note.

d) Original copy of the debit note.

2. A purchase of goods by a businessman worth shs7, 250 was entered in the purchase account as shs7,520. To correct such an error, one should

a) Debit purchase account, shs270.

b) Credit sales account, shs270.

c) Debit sales account, shs270.

d) Credit purchase account, shs270.

3. Which one of the following best describes the accounting process?

a) Recording, classifying, summarizing, interpreting.

b) Recording, summarizing, classifying, interpreting.

c) Classifying, recording, summarizing, interpreting.

d) Summarizing, interpreting, recording, classifying.

4. Juma's double column cash book revealed a credit balance in the bank column, this means that he had

a) Debit balance carried forward.

b) Outstanding debtors.

c) Overdrawn his account.

d) A credit balance in the bank.

5. Given sales shs28, 500, opening stock shs4,690, closing stock shs7,240, carriage inwards shs570, purchases shs21,360. Calculate the cost of goods offered for sale.

a) Shs19,380

b) Shs9,120

c) Shs21,360

d) Shs26,620

6. The closing balance of profit and loss account is transferred to

a) Trial balance

b) Capital account

c) Balance sheet

d) Bank statement.

7. One of the characteristics of receipts and payments accounts is that it

a) Includes only incomes relating to that period.

b) Includes only expenses relating to that period.

c) Includes all expenses paid during the period.

d) Does not include things of capital nature.

8. Returns outwards by a firm decrease its

a) Liabilities

b) Debtors

c) Sales

d) Capital

9. When goods are withdrawn for personal use, the accounting entries are to debit

a) Drawings account, credit purchase account.

b) Purchase account, credit capital account.

c) Drawings account. Credit cash account.

d) Drawings account, credit sales account.

10. Otim bought goods worth shs260, 000 on credit. A trade discount of 5% was allowed for the bulk purchases and 21/2% cash discount was also granted. How much did he pay within the credit terms?

a) Shs247,000

b) Shs266,500

c) Shs253,500

d) Shs240,825

11. The existing provision for bad debts on 31st December, 2002 was shs400. Provision for bad debts amounted to only shs350. To adjust this debit

a) Bad debts account shs50, credit provision for bad debts accounts shs50.

b) Profit and loss account shs50, credit provision for bad debts accounts shs50.

c) Provision for bad debts account shs50. Credit profit and loss account shs50.

d) Provision for bad debts account, credit bad debts account shs50.

12. The following appears in the income and expenditure account except

a) Depreciation

b) Income received in advance.

c) Accrued income.

d) Bad debts.

13. Which one of the following represents cash sales?

a) Incoming cash receipts.

b) Outgoing invoices.

c) Outgoing receipts.

d) Incoming invoices.

14. Extraction of a trading account is useful in that

a) Selling and distribution expenses can be calculated.

b) The total value of expenses can be ascertained.

c) Stock can be included in it.

d) A trader can calculate how much gross profit and loss account.

15. Which one of the following is correct about either capital or revenue expenditure?

a) Revenue expenditure is debited in profit and loss account.

b) Capital expenditure is debited in profit and loss account.

c) Part of fixed assets used -up are transferred to the balance sheet.

d) Capital expenditures is credited in the profit and loss account.

16. When a bad debt which was written off is received, debit cash book and credit.

a) Creditors account.

b) Debtors account.

c) Bad debts recoverable account.

d) Bad debts account.

17. The following information was given:

- John's capital shs30,000

- Peter's capital shs20,000

- Profit shs100,000

- Profit ratio john 3/5; peter 2/5

- John's current account shs15,000 Dr.

- Peter's current account shs10, 000 Cr.

How much is the balance on john's current account?

a) Shs60, 000 DR.

b) Shs70, 000 Cr.

c) Shs40,000 Dr.

d) Shs45, 000 Cr.

18. Which of the following is true when there is no partnership agreement?

a) Profits and losses are to be shared equally.

b) No interest is to be charged on partners' loans to the firm.

c) Salaries are allowed to partners.

d) Interest is to be allowed on capital.

19. Where the balance of discount is allowed account transferred to at the end of the financial year?

a) Creditor's account.

b) Profit and loss account.

c) Trading account.

d) Debtors account.

20. The particular column of a purchase journal records the

a) Invoice number.

b) Personal account of the supplier.

c) Personal account of the debtor.

d) Value of goods.

SECTION B: (60 marks)

21. From the following trial balance of K. Toya, a shopkeeper, prepare his 10 column worksheet.


Shs shs

Sales 40,000

Purchases 35,000

Sales returns 500

Purchases returns 620

Stock 1.1.2002 10,000

Provision for bad debts 80

Wages/ salaries 3,000

Rates 700

Furniture 4,000

Motor vans 3,000

Debtors/ creditors 980 700

Bad debts 20

Capital 17,900

Cash in hand 300

Drawing 1,800

59,300 59,300

Additional information:

i. Closing stock shs12,000

ii. Accrued wages shs500

iii. Rates prepared shs50

iv. The provision for bad debts to be increased to 10% of debtors

v. Rates outstanding shs22.

22. a) Give any two differences between cash discount and trade discount.

b) the following details relate to the business of Mr. Abaca for the month of February, 2002.

Feb 1 Balances b/d: shs

Cash (Dr.) 100,000

Bank (Cr.) 20,000

Debtors' accounts:

Adero 40,000

Buka 25,000

Chandy 35,000

Creditors' accounts:

Duke 10,000

Ernest 50,000

Felix 30,000

Feb 2 Abaca bought as an additional investment

And deposited into bank 40,000

3 cash sales 120,000

4 bought office equipment by cheque 20,000

5 deposited cash into the bank 110,000

7 paid all his creditors' accounts by cheques

Less 5% discount in each case.

8 bought goods and paid by cheque 30,000

10 withdrew cash from bank for office use 25,000

12 paid travelling expenses to Kampala 12,000

14 withdrew cash for personal use (Abaca) 15,000

15 received cheques for all his debtors' accounts

In each case deducting 5% discount.

18 cash sales paid direct to bank 80,000

20 paid assistant for shop cleaning 3,500


i. Prepare a three column cash book for Mr. Abaca duly balanced on 28th February, 2002.

ii. Post the discounts to the relevant ledger accounts as they would appear in the general ledger.

23. a) Distinguish between capital expenditures and revenue expenditures.

b) State in cash whether the following are capital or revenue items.

i. Annual road license fees for motor vehicle.

ii. Cost of goods purchased for resale.

iii. Installation of switchboard and telephone.

iv. Purchase of a new punch machine and stapling machine.

v. Purchase of land for the extension of factory buildings.

vi. Wages paid to workmen for off loading goods for resale from a container.

vii. Wages paid to workmen for the installation of plant in a factory.

viii. Legal charges for the purchase of land.

ix. Interest paid on loan.

x. Depreciation and maintenance of plant.

c) Why is the distinction between capital expenditure and revenue expenditure necessary?

24. a) State and explain any five differences disclosed by the disagreement between the cash book balance and bank statement for the month of January, 2002 were as follows:


Dr. Cr

Shs shs

Jan 1 balance 10,000,000 Jan1 Akampurira 001 1,500,000

8 sales 2,000,000 4 salaries 002 1,000,000

7 Namugenyi 1,000,000 6 Ocaya 003 500,000

11 sales 3,000,000 10 kamonde 004 2,000,000

16 joy 1,500,000 15 rent 005 500,000

21 sales 4,000,000 18 PAYE 006 1,250,000

27 loan 2,000,000 22 N.H.I.F. 007 1,000,000

31 berna 1,500,000 29 N.S.S.F. 008 250,000

31 insurance 009 1,000,000

Balance C/D 16,000,000

0 0


January debit credit balances

1 balance 10,000,000

3 001 1,500,000 8,500,000

4 cash 2,000,000 10,500,000

5 002 1,000,000 9,500,000

8 cash 1,000,000 10,500,000

10 003 500,000 10,000,000

12 cash 3,000,000 13,000,000

15 005 500,000 12,000,000

17 cash 1,500,000 14,000,000

20 006 1,250,000 12,750,000

22 cash 4,000,000 16,750,000

23 007 1,000,000 15,750,000

28 cash 2,000,000 17,750,000

31 charges 50,000 17,700,000

Required to prepare:

i. adjusted cash book,

ii. Bank reconciliation statement.

25. The trial balance of Dan Isabirye as at 30-06-2002 reflected a discrepancy of shs45, 500,000 where credit side exceeded the debit side. On investigation, the following errors were discovered:

i. Shs3, 500,000 paid to busoga growers to clear the previous year's balance had been debited to purchases account.

ii. Cash purchases of shs15, 000,000 from base Metals ltd had been credited to their account.

iii. Commission of shs5, 500,000 earned but not received from travelling wholesalers ltd had been credited to their account.

iv. A cheque of shs5, 500,000 received from kabanda Milly had been credited to their account and corresponding debit entry had not been made.

Required to prepare:

a) Journal entries to correct the errors.

b) A suspense account duly balanced.

26. a) State any four clauses of the partnership agreement which applies to the preparation of the partners' final accounts.

b)On 1st January, 2002, A, Band C entered into partnership contributing shs25,000,000: shs13,000,000 and shs12,000,000 respectively and agreed to share profits in the ratios of 5:3:2. B and C are entitled to a salary of shs1, 600,000 and shs1, 450,000 respectively per year. Interest on capital is to be allowed at 5% per annum. During the year, A withdrew shs4, 000,000; B shs2, 500,000 and C shs1, 500,000. Interest being A shs225, 000, B shs1, 125,000 and C shs1, 500,000. Interests being during the year before the above adjustments were shs7, 140,000.

Required to:

Show how the profits are distributed and also prepare the capital accounts of the partners if they are fluctuating.