SS2 TYPE A

1. Which of the following errors can affect the agreement of the trial balance?
a) Omission of a purchase transaction
b) Recording an expense as a revenue
c) Recording a transaction twice
d) Recording a transaction at its correct amount

2. If an asset is undercast by $500, how will it affect the trial balance agreement?
a) It will not affect the trial balance agreement
b) It will cause the trial balance to disagree by $500
c) It will cause the trial balance to disagree by $1000
d) It will cause the trial balance to disagree, but by an uncertain amount

3. Which type of error would not affect the agreement of the trial balance?
a) Recording a transaction at the wrong amount
b) Omission of a purchase transaction
c) Recording a purchase as a sale
d) Recording a transaction twice

4. If a liability is overstated, how does it affect the trial balance agreement?

a) It will cause the trial balance to disagree by the amount of overstatement
b) It will cause the trial balance to disagree by the amount of understatement
c) It will not affect the trial balance agreement
d) It will cause the trial balance to disagree, but by an uncertain amount

5. Another name for incomplete records is (a) balance sheet (b) double entry (c) single entry (d)
trial balance

6. A statement of affair is equivalent to a/an (a) appropriation account (b) balance sheet (c) profit
and loss account (d) trading account

7. Capital is determined under single entry system by preparing (a) a statement of affairs (b) an
expenses control account (c) an income statement (d) a receipt and payment account

8. Which of the following is not used in solving problems of incomplete records? (a) control
account (b) statement of affairs (c) cash book (d) trial balance

9. A system where records maintained are inadequate to facilitate the preparation of a trading,
profit and loss account is referred to as (a) single entry (b) double entry (c) control account (d)
company dissolution

10. Discount allowed would appear in the (a) debit side of sales control account and credit side of
purchases control account (b) debit side of sales ledger control account only (c) debit side of
purchases ledger control account only (d) credit side of the sales ledger control account (e)
credit side of the purchases ledger control account

11. What is the purpose of a suspense account in accounting?

 a) To record transactions of unknown value
b) To correct errors that cannot be identified immediately
c) To adjust the balance of cash accounts
d) To record revenue and expenses temporarily

12. When would a transaction be temporarily recorded in the suspense account?

a) When it cannot be classified into any other account
b) When its correct account cannot be determined immediately
c) When it involves a large amount of money
d) When it is related to the owner's personal expenses

13. What happens to the balance in the suspense account once the error is rectified?
a) It remains in the suspense account permanently
b) It is transferred to the owner's equity account
c) It is transferred to the correct account affected by the error
d) It is transferred to the income statement

14. Which of the following is not a source of income to clubs or society? (a) bar takings (b) tax
receivable (c) membership subscription (d) donations from the public

15. An income and expenditure account is prepared based on the principle as (a) balance sheet (b)
incomplete records (c) profit and loss account (d) trading account

16. The annual summary of cash records of a club or society is called (a) cash book (b) profit and loss
account (c) receipt and payments (d) statement of affairs

17. Which of the following is an example of non-profit making organization? (a) civil society
organization (b) cooperative societies (c) joint venture (d) partnership

18. A not-for-profit making organization's accumulated fund is obtained by preparing the (a)
receipts and payments account (b) statements of affairs (c) book reconciliation statement (d)
income and expenditure account

19. Which of the following is found ina receipt and payment account? (a) accruals (b) prepayments
(c) depreciation of fixed assets (d) purchases of fixed assets

20. What type of error occurs when a transaction is recorded at an amount different from its actual
value?
a) Error of principle
b) Error of omission
c) Error of commission
d) Error of original entry

21. If a purchase of equipment is incorrectly recorded as a purchase of inventory, what type of error
is it?
a) Error of principle
b) Error of omission
c) Error of commission
 d) Error of original entry
22. Partners whose liabilities are restricted to their financial contributions to the partnership in the
event of winding up are (a) ordinary partners (b) limited partners (c) dormant patners (d)
sleeping partners

23. Which of the following documents set out the internal regulations of a partnership? (a) law (b)
deed (c) regulations (d) code

24. Where partnership deed does not exist, profits and losses are shared (a) based on capital (b) on
equal basis (c) based on interest (d) based on drawings

25. Goodwill is recognized in partnership accounts when (a) the business makes a huge profit (b) the
business has good customers (c) a partner is dormant (d) a new partner is admitted

26. In which of the following accounts is interest on partner's capital found? (a) profit and loss (b)
trading (c) income surplus (d) profit and loss appropriation

27. Termination of the activities of a partnership is called (a) appropriation (b) dissolution (c)
liquidation (d) realization (e) rejection

28. What is the primary purpose of a manufacturing account?

a) To calculate the net profit or loss
b) To determine the cost of goods manufactured
c) To record all manufacturing expenses
d) To summarize all revenue and expenses

29. In a manufacturing account, which of the following is considered a manufacturing expense?

a) Sales commission
b) Administrative salaries
c) Raw materials consumed
d) Advertising expenses

30. What does the manufacturing account primarily show?

a) Revenue earned from sales
b) Expenses incurred in the production process
c) Cash flows from manufacturing activities
d) Investments made in manufacturing equipment

31. How is the cost of goods manufactured calculated in a manufacturing account?

a) Beginning inventory + Purchases - Ending inventory
b) Direct materials + Direct labor + Manufacturing overhead
c) Sales revenue - Cost of goods sold
d) Gross profit - Operating expenses
32. What is meant by "direct materials" in a manufacturing account?
a) Raw materials used in the production process
b) Indirect costs associated with manufacturing
c) Finished goods awaiting sale
 d) Labor costs incurred in the production process
33. In a manufacturing account, what does "work in progress" refer to?
a) Goods that are partially completed but not yet finished
b) Finished goods ready for sale
c) Raw materials awaiting use in production
d) Goods returned by customers

34. What is the significance of "manufacturing overhead" in a manufacturing account?

a) It represents the direct costs of production
b) It includes all indirect manufacturing costs
c) It refers to the cost of direct materials
d) It represents the cost of labor in the production process

35. Carriage outwards is accounting term for amount spent on (a) goods purchased (b) goods sold
(c) excess stock (d) goods returned to stock

36. Which of the following is not a liability? (a) accrued wages (b) creditors (c) prepayments (d)
insurance due but unpaid

37. Calculate the total manufacturing cost: Direct materials = $15,000, Direct labor = $8,000,
Manufacturing overhead = $10,000.
a) $25,000
b) $33,000
c) $20,000
d) $18,000

38. Calculate the cost of goods manufactured: Beginning work in progress = $4,000, Direct materials
used = $12,000, Direct labor = $6,000, Manufacturing overhead = $8,000, Ending work in
progress = $3,000.
a) $27,000
b) $25,000
c) $23,000
d) $20,000

39. Why is it essential for manufacturing businesses to prepare a manufacturing account?

a) To comply with legal regulations
b) To assess the profitability of individual products
c) To minimize production costs
d) To attract investors

40. Explain the significance of accurately calculating the cost of goods manufactured.
a) It helps in determining the selling price of products
 b) It ensures compliance with tax laws
c) It minimizes production delays
d) It maximizes shareholder wealth

SECTION B: THEORY
Answer TWO questions
1 a) Explain the following terms;
(i) Members' Subscription (ii) Accumulated fund (iii) Bar Stock (iv) Bar profit
b) List five (5) sources of income for a not-for-profit making organization

2 Explain the following:

(i) Partners’ current accounts (ii) Partnership appropriation accounts
(iii) Limited partner (iv) General partners

3 a) What is single entry accounting system?

b) State two characteristics of single entry accounting system
c) State three disadvantages of single entry accounting system

Attempt this: Compulsory

4. Jomo, Ackun and Noye are in partnership under these terms;

- profit and losses are to be shared among them in ratio 4:3:2 respectively.
- interest on capital is allowed at the rate of 5% per annum
- Ackun is entitled to an annual salary of #1,600,000
The following were the balances in their accounts:
Capital Account Current Account Drawings Interest on drawings
# # # #
Jomo 12,000,000 240,000(cr) 500,000 25,000
Ackun 8,000,000 160,000(cr) 600,000 30,000
Noye 6,000,000 140,000(cr) 700,000 35,000

Additional Information:
(a) By mutual agreement, Noye on 1st July, 2005 increased his capital by #2,000,000 while Jomo reduced
his capital by #2,000,000
(b) The net profit for the year ended 31st December, 2005 was #6,269,960

You are required the prepare: (i) profit and loss appropriation account
(ii) partners' capital account columnar form
(iii) partners' current account in columnar form