Accounting and Control November 2010 Past Paper – KNEC Diploma

Accounting and Control November 2010 Past Examination Question Paper – KNEC

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

  • Diploma in Human Resource Management – Module III

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ACCOUNTING AND CONTROL November 2010 Time: 3 hours

3 hours

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

  1. (a) Jatu started business on 1 August 2010 with sh350,000 which he deposited in a

business bank account,
The following transactions took place during the month:
August 1     Pad rent Ksh.60,000 by cheque.

  • Bought furniture for Ksh.45,000 and paid by cheque.
  • Bought goods on credit from Shaka, Ksh.120,500 and Patience Ksh.72,400.

7       Cash sales Ksh.5,800.
15 Brought in his personal motor vehicle worth Ksh.400,000 to be used in the business.
20 Donated Ksh.3,000 cash to Hawi Children’s Home.
23 Sold goods on credit to Aisha, Ksh.80,000 and Musa Ksh.52,700.
28     Paid Shaka the amount due to him by cheque.
31     Received a cheque of Ksh.40,000 from Musa in part payment.
Prepare ledger accounts to record the above transactions.            (12 marks)
(b) The following information relates to three workers employed by Bora Ltd. for the week ended 4 September, 2010.

Sema Tena Rema
Hours worked 46 52 42
Basic hourly rate (Ksh) 30 50 40
Number of units produced 100 80 96
Time allowed per unit (hrs) 0.4 0.75 03

The workers are paid on time basis. Bonus is paid at 75% of the time saved on the job. The company’s normal working hours are 42 per week. Overtime is paid at a rate of a time and a half.

  • Basic pay.
  • Overtime pay.
  • Bonus pay.
  • Gross pay. ”                                                              (8           marks)”
  1. (a) Explain the purpose of cost accounting in an organization.                (8 marks)

(b) The following balances were extracted from the books of Kingsta Traders as at 31 December, 2009.
Purchases                                              482,(XX)
Salaries                                                   160,000
Cash in hand                                             35,900
Cash at bank                                             85,000
Carriage outwards                                       4,000
Insurance                                                  10,800
General expenses                                      15,000
Sales                                                       780,800
Buildings                                                  800,000
Debtors                                                   250,800
Creditors                                                  197300
Drawings                                                   58,100
Capital                                                  1,000,000
Stock 1 January, 2009                               76,500
On 31 December, 2009:

  • Stock was valued at Ksh.l 10,600.
  • General expenses owing were Ksh .7,200.
  • Insurance prepaid was Ksh.2,400.


  • Trading, profit and loss account for the year ended 31 December, 2009.
  • Balance sheet as at 31 December, 2009.
  1. (a) Explain four measures that may be taken to control idle time in a factory.

.                                                 (8 marks)
(b) The following are the summarised financial statements of Haba Enterprises for the year ended 31 December, 2009.

Trading and Profit andLoss Account for the year ended 31 December, 2009


Sales                                                             8,400
Less cost of sales                                           4,620
Gross profit                                                3 ,780
Less expenses                                                3,024
Net profit                                                           756

Balance Sheet as at 31 December 2009

Ksh.000 Ksh.000
Non current assets:
Buildings 4,500
Furniture 1J041
Current assets:
Stock 317
Debtors 1,170
Bank 98
Current liabilities:
Creditors 728
Accrued electricity 42
770 815


Capital 5,600
Net profit 756


  • Gross profit margin.
  • Net profit margin.
  • Return on capital employed.
  • Current ratio.
  • Quick ratio.

II Advise the management on measures to take to improve profitability. (12 marks)

  1. (a) Explain four reasons why budgeting is important to an organization. (8 marks)

(b) Sifa Ltd. Manufactures one product. The current production is 220,000 units per

annum, which is 80% of the factory capacity. The product is sold at Ksh.55 per unit. The cost of production at the 80% capacity is as follows:

Direct materials 3300,000
Direct Labour 1,760,000
Variable production overheads 1320,000
Fixed overheads 2330,000

The company has received an order from Habo Ltd. to supply the product at Ksh31 per unit. The management is considering whether to accept or reject die order:

  • Prepare:
  • A profit and loss statement at 80% production capacity.
  • A profit and loss statement if the order is accepted.
  • Advise the management on whether to accept or reject the order. (12 marks)
  1. (a) The following balances were extracted from the books of Mali Ltd. as at:
1 January 2009 31 December 2009
Ksh. Ksh.
Electricity accrued 12,400 17200
Insurance prepaid 4,000 13500
Rent prepaid 15,000 6,000
Rates accrued 2,000 1200
Commission receivable accrued 9,700 14,600

The following information was obtained from the cash book of the company for the year ended 31 December 2009
Electricity                       ___                48,000
Insurance                                          36,500
Rent and rates                                   25,400
Commission received                         10,000

Prepare each of the following accounts showing the amount transferred to the profit and loss account:

  • Electricity account.
  • Insurance account.
  • Rent and rates account.
  • Commission receivable account. (9 marks)

(b) On 31 July 2010, the bank statement of Telek Enterprises showed a credit balance of Ksh.78,000 while the cash book had a debit balance of Ksh.70,400. Upon comparing the bank statement with the cash book, the following discrepancies were revealed:

  • Cheques banked amounting to Ksh 297,900 had not been credited by the bank.
  • Bank charges of Ksh.600 shown on the bank statement had not been entered in the cash book.
  • A standing order of Ksh.28200 was shown on the bank statement only.
  • A customer had deposited Ksh.120,700 directly into the business bank account.
  • Cheques issued to creditors amounting to Ksh238500 had not been presented for payment.
  • Dividends of Ksh.9,500 had been paid directly into the bank account.
  • A cheque of Ksh34,400 from a customer was dishonoured.


  • Updated cash book.
  • Bank reconciliation statement. (11 marks)
  1. (a) Explain each of the following accounting concepts:
(0 Prudence.
(H) Going concern.
(iii) Consistency.
(iv) Business entity. (8 marks)

(b)     The petty cashier of Excel Traders was given a cash float of Ksh20j000 by the cashier on 1 June 2010.

1 Paid bus fare Ksh.200
3 Paid wages for cleaner 2300
5 Bought envelopes 400
12 Paid internet charges 1,800
15 Paid taxi charges 550
17 Bought printing paper 600
22 Bought cellphone airtime cards 1300
24 Bought staple pins 150
27 Paid telephone bill 1,900
29 Bought detergent 280
30 Paid for car hire 8,000
  • Using the format provided* prepare a petty cash book with analysis columns of stationery, communication, travelling and cleaning.
  • Show the amount to be reimbursed to the petty cashier on 1 July, 2010.

(12 marks)
On 31 December 2009, the trial balance of Panda Traders did not agree and the difference of Ksh .1,620 was transferred to the credit side of the suspense account.

The following errors were later discovered:

  • The sales day book had been undercast by Ksh.4,800.
  • A cash purchase of Ksh.l5;000 was completely omitted from the books.
  • An amount of Ksh5,460 received from a debtor was entered in his account as Ksh .5,640.
  • Discounts allowed of Ksh.l ,500 was entered in the discounts received account.
  • A purchase of furniture Ksh.12,000 was recorded in the purchases account. Prepare:
  • Journal entries to correct the above errors.
  • The suspense account duly balanced. (12 marks)

Kamisa Wholesalers had the following balances extracted for the sales ledger:
Debtors balances:  1 May 2010           524300 Dr.
1 May 2010 31 May 2010
The following information was obtained:
Credit sales
Bad debts written off
Discounts allowed
Returns inwards
Cheques received from debtors
Cash received from debtors
Interest charged on debtors’ overdue accounts
Transfers from debtors to creditors ledger
Dishonoured cheques from debtors
Amount refunded to debtors
Prepare a sales ledger control account for the month of May 2010.


Receipt Date Detail Amount ft
Sh. Sh.
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