The following transactions for the month of August 2010 were extracted from the books of Ali Merchants August 6 Goods bought on credit worth sh 900 invoice no.013 from shah traders 8 Credit purchases amounting to sh 840 invoice no.002 from Kamau Traders 15 Credit purchases worth sh 1,000 invoice no.615 from Mutiso wholesalers. 21 Purchased goods on credit amounting to sh 2,500 invoice no.712 from Kapkoi traders. 28 Bought goods on credit from Serem Traders worth sh 550 invoice no.216. Required: a) Record the above transactions in a purchases journal. (8 marks) b) Explain the aspects in which accounts of business are affected by the operation of: i) The consistency concept (4 marks)

1. a) Differentiate between cash transactions and credit transaction. (4 marks)
b) Explain three uses of ledger accounts in business. (6 marks)
c) Briefly describe functions of accounting information to a Business Enterptise. (10 marks)
2. a) Explain five errors that may cause a trial balance not to balance. (10 marks)
b) Describe briefly the purpose for the following ledger accounts.
i. sales ledger (2 marks)
ii. Purchases ledger (2 marks)
iii. Cash book (2 marks)
iv. Nominal Ledger (2 marks)
v. Private ledger (2 marks)
3. a) Define the term contra entry. (2 marks)
b) Explain three reasons why cash and bank accounts are ussually kept in a separate ledger from other accounts. (3 mark)
c) Kamau started business in 1st January 2011 with sh 150,000 in bank and cash in hand sh 40,000. His transactions for the month of January were as follows:
Jan 1 Bought stock worth sh 50,000 by cheque
2 Purchased office equipment by cheque sh 30,000
4 Withdrew sh 25,000 from bank and kept it in the office to be used in making minor payments when necessary.
7 Purchased stationery sh 600 in cash
12 Sold goods worth sh 8,000 to Ondiek on credit
18 Bought stock woth sh 32,000 on credit from Tuju
25 Received a cheque of sh 4,500 from Ondiek
27 Purchased stationery sh 200 in cash
30 Received cash sh 2,000 from Ondiek
i) Record the above transactions in the relevant ledger accounts and balance them off as st 31st January 2011. (10 marks)
ii) Extract a trial balance as at that date. (5 marks)

4. a) Define a petty cash book. (2 marks)
b) Explain four uses of subsidiary books. (8 marks)
c) A petty cashier of Chuku Traders operates her petty cash book on imprest system with a weekly float of sh 6,000. The following details relate to the week ended on 7th August 2010.
August 1 Cash in hand sh 1,300
1 Received reimbursement cheque from main cashier
2 Bought sugar sh 200 and paid wages sh 900
3 Bought office stationery sh 250 and paid for bus fare sh 400
3 Paid for typewriter repair of sh 800 and bought tea leaves of sh 100.
4 Bought typewriter ribborns sh 350, Milk sh 90 and paid bus fare sh 150.
5 Bought coffee sh 260, bread sh 450 and stamps sh 300
6 Paid wages sh 700, stamps sh 150 and bought stencil sh 600.
Prepare Chuku’s petty cash book duly balanced as on 7th August 2010 using the following columns staff tea, wages, stationery, travelling, postage and miscellaneous. (10 marks)
5. a) Explain four uses of a trial balance to a business enterprise. (8 marks)
b) On 1st March 2010 Balala had cash in hand sh 7,800 and bank overdraft of sh 23,400. During the month, the following transactions took place
March 3 Cash sales sh 6,500 paid direct into the bank
4 Bought goods for sh 15,000 and paid by cheque
6 Cash sales sh 50,000
9 Received a cheque for sh 18,000 from Amolo in full settlement of his debts
13 Paid insurance premium sh 16,000 in cash
14 Paid Kamotho by cheque sh 9,700 in full settlement of his account less 3% cash discount
17 Cash sales sh 150,000 paid direct into the bank
21 Withdrew sh 30,000 from bank for office use.
23 Received a cheque of sh 23,750 from Rotich in full settlement of his account less5% cash discount
25 Paid wages of sh 20,000 in cash
26 Cheque received from Amolo was dishonored
30 Banked all cash except sh 3,000

Prepare a three column cash book duly balanced. (12 marks)

6. The following trial balance was taken from the books of XYZ on 30th December 2010

XYZ trial balance
As at 30th December 2010
Sh ‘000’ sh ‘000’
Capital 13,000
Drawings 2,700
Debtors and creditors 2,535 2,250
Stock 1.1.2010 3,961
Purchase and sales 14,500 22,400
Returns 539 462
Wages and salaries 3,165
Carriage Inwards 470
Discounts 354 330
Advertising 313
Bad debts 110
General expenses 510
Rates 275
Cash in hand 80
Cash at bank 330
Motor vehicle 1,100
Premises 7,500
38,442 38,442

Additional information
i) Wages due sh 54,000
ii) Rates paid in advance sh 65,000
iii) Motor vehicles to be depreciated by 20%
iv) Stock 31.12.2010 value at sh 4,126,000

Required, prepare:
a) Trading, profit and loss account for the year ending 31st december 2010. (10 marks)
b) Balance sheet as at 31st December. (10 marks)




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