Accounting and Control July 2016 Past Paper – KNEC Diploma

Accounting and Control July 2016 Past Examination Question Paper – KNEC

This Past Paper examination was examined by the Kenya National Examination Council (KNEC) and it applies to the following course

  • Diploma in Human Resource Management – Module III

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3 hours


  • This paper consists of SEVEN questions.
  • Answer any FIVE questions in the answer booklet provided.
  • All the questions carry equal marks.
  • Candidates should answer the questions in English.
  • This paper consists of 9 printed pages.
  • Candidates should check the question paper to ascertain that all the pages are printed as indicated and that no questions are missing.

Explain five benefits that may accrue to the users of financial statements of an organization.                     (10 marks)

(b) The trial balance of Fahari Traders as at 30 June 2015 did not balance and the difference was posted to a suspense account. On investigation, the following errors were revealed:

  • Sales account was overcast by Ksh9,000.
  • Payment of Ksh4,000 for motor vehicle repairs had been entered in the motor vehicle account.
  • Rent account was under cast by Ksh5,500.
  • Cash received from a debtor for 7,000 was entered in the cash book only.
  • Purchases of Ksh6,900 had been entered in the books as Ksh9,600.
  • Included in the purchases were goods valued at Ksh4,800 which were for the proprietor’s personal use.


  • Journal entries to correct errors above.
  • A suspense account duly balanced. (10 marks)


(a) The following ledge account balances relate to Mambo Enterprises as at 1 June 2015.
Motor vehicles               640,000
Ndombi -a debtor            12,800
Lezit – a creditor                5,400
Bank                               18,900
During the month of June 2015, the following transactions took place.
Bought stock Ksh98,000 from Mbele traders on credit.
Cash sales amounted to Ksh 15,000.
Bought furniture for Ksh5,500 by cheque.
Received Kshl2,000 cash from Ndombi in full settlement of his account. Bought a motor vehicle Ksh280,000 from Kazungu on credit.
Paid Lezit Ksh5,000 cash in full settlement of his account.
Paid Ksh3,800 cash for repairs to the business premises.
Took goods Ksh2,000 from the business for personal use.
Paid Ksh4,200 cash for rent.
Prepare ledger accounts to record the transactions above.
(b) Meeta Ltd produces and sell product TX. In the forthcoming year, the company plans to manufacture and sell 30,000 units at Ksh45 each. The following are the cost estimates for the year.
Direct material        450,000
Direct labour           300,000
Variable overheads 180,000
Fixed overheads     240,000
Calculate the:

  • Contribution per unit.
  • Net profit when sales volume is increased by 5%.
  • Additional sales (units) required to maintain the current profit level when unit selling price is reduced by Ksh5.

(8 marks)

  1. (a) The details below relate to Beta transporters Ltd.
  • On 1, June 2014 bought a motor vehicle KBT-X12 for Kshl .2 million.

Depreciation is to be charged at the rate of 25% per annum on the reducing balance method.

  • On 5, April 2015 bought a motor vehicle KBR-X10 for Kshl.8 million.

Depreciation to be at a rate of 20% on cost, pro-rata basis.
Prepare a provision for depreciation account for the year ended 31 December 2014 and 2015.                                               (8 marks)
(b) The following are the summarised financial statements of Kazuri Ltd.

Statement of Financial position as at 31 December 2014

Assets Ksh Capital and Liabilities Ksh
Plant and machinery 1,500,000 71,000 ordinary shares of Ksh20 142,000
(net) each
Motor vehicle (net) 880,000 10% preference shares 540,000
Stock 420,000 12% debentures 700,000
Debtor 420,000 Profit and loss account 400,000
Other current assets 250,000 Trader creditors 160,000
Other current liabilities 250.000
3.470.000 3.470.000
Income statement for the year ended 31 December 2014
Sales 3,400,000
Cost of sales umm
Gross profit 2,000,000
Add: Other income
Discount received -200,000
Less: Operating expenses
Depreciation charge 132,000
Administration expenses 286,000
Selling expenses 292,000
Interest charge 250.000 260J3QQ
Net Profit                                                                           1,240.000

Additional information:
On 1, January, 2014:

  • The value of stock was Ksfe480,000.
  • The balance of income statement was Ksh76,200.
  • Dividends proposed during the year were:
  • On ordinary shares         – Ksh35,000.
  • On preference shares     – Ksh27,000

(I)       Calculate each of the following ratios:

  • Acid test ratio.
  • Stock turnover ratio.
  • Debtors collection period.
  • Interest coverage ratio (take 1 year = 365 days).

(ft) The industry average for debtors collection period is 35 days while the net profit percentage is 28%.

  • Comment on the company’s performance.
  • Advise the management on two actions to take in each case.

(12 marks)

Purchases Ksh
Returns inwards 270,000
Returns outwards 4,200
Carriage inwards 7,600
Sales 825,000
Carnage outwards 13,800
Discounts received 5,400
Trade receivables 84,000
Provision for doubtful debts 4,600
Postage and printing 21,900
Administrative expenses 73,300
Inventory7 (1 July 2014) 92,800

Additional information:

  • Inventory on 30 June 2015 was Ksh60,400.
  • Provision for doubtful debts to be adjusted to 5% of trade receivables.
  • As at 30 June 2015;
  • Rent and rates paid in advance was Ksh5,500.
  • Administrative expenses owing were Ksh6,500.

Prepare an income statement for the year ended 30 June 2015.

The following details relate to Kesho Traders for the months of March, April, May and June 2015.

Sales Purchases Operating costs
(Ksh) (Ksh) (Ksh)
March 800,000 320,000 175,000
April 920,000 330,000 182,000
May 900,000 300,000 187,000
June 940,000 310,000 178,000

Additional information:

  1. Cash from sales are received as follows:
  • 80% in the month of sale.
  • 20% in the month following the sale.
  1. Purchases are paid for as follows:
  • 70% in the month of purchase.
  • 15% one month after the date of purchase.
  • 15% two months after the date of purchase.
  1. Cash balance on 30th March 2015 was Ksh290,000.
  2. Overheads are paid in the month they are incurred.

Prepare a cash budget for month of March, April, May and June 2015.      (11 marks)
On 1 June 2015, Nori Traders had Kshl 17,500 in the business account. Transactions for the month of June were as follows:
2 Withdrew Ksh3 5,000 from the bank for business use.
5 Bought trade inventories Ksh20,500 by cheque.
7 Took Ksh2,500 from the office till for personal use.
12 Received Ksh23,000 in cash from Ngatho in full settlement of his account of Ksh25,000.
14 Cash sales amounted to Ksh7,800.
19 Paid Kaithe’s account Ksh27,000 after having received a 10% cash discount.
26 Paid rent Ksh6,000 by cheque.
28 Paid wages Ksh7,500 in cash.
30 Banked all the cash except Kshl 5,000.
Prepare a three column cash book.                                                    (10 marks)
Explain five advantages of cost accounting in an organization.             (10 marks)

  1. (a) Explain five weaknesses of the piece rate method of labour remuneration.

(10 marks)
(b) Faida Traders operates a petty cash book on the imprest system with a monthly
cash float of Ksh65,000. The reimbursement is made on the first day of every month.
On 1 June 2015, the petty cashier had a balance of Ksh28,800. The following transactions were made during the month.
Paid Ksh 18,000 for cleaning services.
Paid Ksh 1,450 for postage.
Paid Allan, a creditor Ksh6,800.
Bought printing papers Ksh900.
Bought beverages for Kshl,200 and snacks Ksh500. Paid Ksh 1,960 for taxi services.
Bought office equipment for Ksh3,600.
Bought files and folders for Ksh4,200.
Paid for milk supply Ksh6,000.
Bought brooms for Ksh920.
Paid Ksh3,750 for bus fare.
Bought air time Kshl,450.
Prepare a petty cash book with the following analysis columns:

  • Staff refreshments.
  • Communication and stationery.
  • (10          marks)
7.         (a)

1 June Purchases ledger balance                                1300,000 cr.
Sales ledger balance                *              650,000 dr.
Totals for the Month:
Credit sales
Cash payments for trade creditors Cash received from trade debtors Credit purchases Cheque paid for suppliers Discounts allowed Returns outwards Returns inwards Discounts received Interest charged on overdue trade debtors accounts
Penalty charged on suppliers overdue accounts        18,000
Prepare a:

  • Sales ledger control account.
  • Purchases ledger control account. (8 marks)

The following is cash book obtained from the books of Lindi Traders and the bank statement for the month of May 2016.
Cash Book (Bank column)_____________
(ii) Bank statement received by Lindi Traders for the month of May 2016.

Details Dr Cr Balance
Ksh Ksh Ksh
Balance 710,000 cr
Miti Traders 400,000 1,110,000
Gacha Traders 812,500 297,500 cr
Kigotho Traders 500,000 797,500 c
Naku Traders 458,500 339,000 cr
Alu V 270,000 69,000 cr
Rashid 225,400 294,400 cr
Ali Traders 130,000 424,400 cr
Bank charges 15,000 409,400 cr
Dividends 34,500 443,900 cr
Masa 155,000 288,900 cr
Singh Traders 85,500 203,500 cr
Mako Traders 376,900 580,300 cr
  • An updated cash book.
  • A bank reconciliation statement as at 31 May 2016.


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