SECTION A: (20 marks)

1. Suppliers of goods on credit are recorded in

a) Cash book

b) Sales journal

c) Purchases journal

d) General journal.

2. If one part of the journal entry represents an expense, the other part of the entry will represents

a) Debit and asset account.

b) Credit and asset account.

c) Debit and liability account.

d) Credit and liability account.

3. When goods are withdrawn for personal use, the accounting entries are

a) Debit drawings account, credit purchases account.

b) Debit drawings account, credit cash account.

c) Debit purchases account, credit capital account.

d) Debit drawings account, credit sales account.

4. Given purchases shs240, 000, carriage inwards shs20, 000, returns of purchases shs150,000, wages shs35,000 and closing stock shs100,000. Calculate the cost of sales.

a) Shs235,000

b) Shs180,000

c) Shs210,000

d) Shs140,000

5. Which one of the following is an example of revenue to a business?

a) Discount allowed.

b) Commission payable.

c) Rent payable.

d) Rent receivable.

6. Bad debts recovered will

a) Reduce the debtor's account.

b) Increase sales.

c) Increase cash.

d) Reduce the net profit.

7. Who owes money money to the business? A

a) Debtor.

b) Creditor.

c) Liability.

d) Supplier.

8. A credit balance brought down in the subscriptions account will represent

a) Subscriptions in arrears.

b) Subscriptions re-paid.

c) Subscriptions written off.

d) Subscriptions in advance.

9. Calculate capital when given assets of shs100, 000,000 and liabilities of shs50,000,000.

a) Shs100,000,000

b) Shs50,000,000

c) Shs150,000,000

d) Shs300,000,000

10. Cost of goods sold can be determined by:

a) Sales-purchases.

b) Opening stock+ carriage inwards-closing stock.

c) Purchases + sales returns - closing stock.

d) Carriage inwards + purchases + closing stock - opening stock.

11. The arithmetic accuracy of the books of accounts is checked by use of

a) Trial balance

b) Balance sheet

c) Trading account

d) Income statement.

12. The petty cashier was given periodic imprest of shs500, 000. He spent shs455, 000 on petty cash items in a given month.

How much should be re-imbursed?

a) Shs500,000

b) Shs955,000

c) Shs455,000

d) Shs45,000

13. The difference between current assets and current liabilities is known as

a) Capital employed.

b) Net profit

c) Fixed capital

d) Working capital

14. Kato purchased office furniture for the business from his personal funds shs250,000. What effect would this transaction have on capital?

a) Has no effect on capital.

b) Increase capital by shs250,000

c) Increases capital by shs500,000

d) Decrease capital by shs250,000

15. Ramadan purchased goods worth shs1,000,000 on credit under the following terms; 5% trade discount and 2% cash discount. How much did he pay?

a) Shs1,000,000

b) Shs950,000

c) Shs930,000

d) Shs931,000

16. Which one of the following errors will cause a disagreement in the trial balance?

a) Complete reversal of entries.

b) Omission of an entry.

c) Errors of omission.

d) Error of original entry.

17. The concept that requires accounting figures to be shown at their historical amount purchased in the books of accounts is called a

a) Business concept.

b) Realization concept.

c) Cost concept.

d) Going concern.

18. The document issued by a bank to inform its customers of their financial state of affairs is referred to as

a) Bank statement.

b) Cash book.

c) Cheque book.

d) Bank reconciliation statement.

19. Goods of shs23, 000 purchased from C.Muwonge were credited to C.Muwozi. Find the net profit after correcting the error given that the net profit was shs57, 000.

a) Shs23,000

b) Shs34,000

c) Shs57,000

d) Shs80,000

20. Which of the following statements about the partnership salary is not correct?

a) In the absence of a partnership deed, no partner is entitled to salary.

b) It is debited to the partners' current account.

c) It is credited to the current account.

d) It is debited in the appropriation account.

SECTION B: (80 marks)

21. a) Give two purpose of preparing control accounts.

b)The following debtors control account was prepared by an inexperienced book-keeper.

Debtors' Control Account

Balance b/d

Cash (receipts)

Bank (receipts)

Returns inwards

Balance b/d








Cash (refund to a debtor)

Credit sales

Discount allowed

Provision for bad debts

Balance c/d








On further examination of the books, the following information was discovered:

i) Discount allowed total included shs4, 000 allowed on cash sales.

ii) Bad debts of shs5, 000 were written off and not recorded.

iii) A debtor's cheque for shs50, 000 which was dishonored was not recorded in the control account.

iv) The balances brought down in the debtors control a/c was shs659, 000.

Re-draft the debtors control account with errors corrected.

22. The following were assets and liabilities of Mr. Kizito Brown on 1st May, 2004.


Cash at bank 185,000

Building (for store) 115,000

Mukama (creditor) 80,000

Stock of goods 35,000

The following transactions took place.

May 2 rented office premises and paid by cheque shs6,000.

3 bought stock of goods on credit from Mukama shs10, 000.

4 purchased office furniture by cheque shs5, 000.

5 paid mukama by cheque.

6 purchased motor van on credit from Uganda Motors shs46, 000.


a) Ledger accounts to record the above transactions.

b) Balance sheet as at 6th May, 2004.

23. Amotor vehicle was purchased for shs4, 000,000 on 1st Jan, 2001. Depreciation was to be provided at the rate of 25% per annum on diminishing balance method. Show the entries as they would appear in the books of accounts up to December, 2003.

a) Motor vehicle account.

b) Provision for depreciation on motor vehicle account.

c) Profit and loss account (extract).

d) Balance sheet (extract).

24. Muziki, Tabu and nam are partners sharing profits and losses in the ratio 4:3:2 respectively.

The partnership Trial Balance for the year ended 31.12.2003 is as follows:

Dr. Cr.

Shs shs

Capital accounts: muziki 1,040,000

Tabu 780,000

Nam 520,000

Current accounts: muziki 156,000

Tabu 117,000

Namu 52,000

Stock 1st Jan, 2003 390,000

Purchases 2,243,800

Sales 5,298,800

Returns 73,000 85,500

Fixtures and fittings 248,200

Plant and machinery 2,800,000

Trade debtors 424,800

Trade creditors 634,000

Salaries and wages 1,892,800

Rent and rates 228,500

General expenses 173,200

Cash in hand 24,300

Bank overdraft 478,500

Salary to Nam 60,000

Carriage inwards 57,200

8,888,800 8,888,800

The following further information is available:

i) Wages amounting to shs12, 600 was outstanding.

ii) Rates for shs9, 700 had been paid in advance.

iii) Closing stock on 31.12.2003 was valued at shs585, 500.

iv) Plant & machinery and fixtures & fittings to be depreciated by 10%.

v) Nam receives a salary of shs12, 000 payable in two installments of shs60,000 each, in June and December.


a) Trading, profit & loss a/c for the year ended 31.12.2003.

b) A partnership appropriation account for the period.

25. a) What are the essential features of a receipts and payments account of a club?

b) The Bursar of luro primary school submits the following receipts & payments account to you for the ended 31st December, 2003.





Balance b/d 20,000

School fees 14,000,000

Sale of school badges 100,000

Donations for buildings 500,000



Staff salaries 85,000

Grass cutter's wages 3,500

Electricity & water 15,000

Books for library 50,000

Stationery 25,000

Extension of building 450,000

Printing badges 3,400

Repairs of furniture 5,000

Annual prizes 20,000

Balance c/d 13,963,100


Additional information:

- School fees of shs14, 000,000 includes shs400, 000 representing arrears for 2002; school fees amounting to shs250, 000 is still outstanding.

- Amount of shs400 is owing to the printers of school badges.

- Staff salaries of shs85, 000 includes shs15, 000 in advance for 2004.

- Furniture and equipment should be depreciated by 5% and 10% respectively by straight line method.

- On 1st Jan.2003 the school had the following fixed assets at cost.


Building 5,000,000

Furniture 2,000,000

Library books 1,400,000

Equipment 500,000


i) Income and expenditure a/c for the year ended 31st December, 2003.

ii) The Balance sheet as at that date.

26. A trail balance extracted from the books of M.Balayo had the following totals:

Debit side total shs9, 384,000

Credit side total shs9, 323,000

Balayo opened a suspense account and placed the difference in the trial balance.

He later discovered the following errors:

i) A credit for shs23, 000 received from Biashara retailers wholesalers had not been recorded anywhere in the books.

ii) A credit note for shs14, 000 issued to busiki retailers had been entered correctly in appropriate subsidiary book but had not been posted to the personal account.

iii) A cheque for shs74, 000 received from Nkore was entered as shs47,000 in the cash book and posted to the ledger accordingly.

iv) Discounts allowed shs23, 500 were credited to discounts received account in the ledger.

v) Rent received shs22, 000 has been credited to premises account.

vi) Sales day book was under-cast by shs94, 000.


a) Journal entries to rectify the above errors.

b) Suspense account duly balanced.