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Correction of errors and preparing financial statements with incomplete records

Unit: Financial accounting

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Practice CPA Financial accounting Correction of errors and preparing financial statements with incomplete records questions with detailed answers and explanations.

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December 2025

 1 Questions
Question 2b
​​ ​​Allan Abedi, a sole trader, does not maintain a complete set of accounting records. A summary of all his business transactions, concerning receipts and payments for the year ended 30 September 2025 is given below:

 Allan Abedi 
Receipts and payments for the year ended 30 September 2025: 
Sh.“000”
Sh.“000”
Balance brought forward 
9,600
Wages and salaries 
177,600
Receipt from trade receivables 
836,400
Trade payables 
584,400


Insurance
18,000


Lighting and heating
7,200


Printing and stationery 
2,400


Mobile phone expenses
1,200


General expenses
2,400


Office equipment 
12,000


Drawings
18,000


Balance carried forward 
22,800

846,000 

846,000

Additional information:
1.
 The following balances were available for the year ended 30 September:
2025 
Sh.“000”
2024
Sh.“000”
Motor vehicles (Book value) 
25,200
33,600
Office equipment (Book value) 
71,400
72,000
Trade receivables 
74,400
67,200
Trade payables
36,000
32,400
Inventories
73,200
75,600
Lighting and heating owing 
  3,000
  2,400
Prepaid insurance 
  2,400
  1,200
2.
Allowance for credit loss is provided at the rate of 5% on outstanding trade receivables. 

Required: 
(i) Statement of profit or loss for the year ended 30 September 2025. 

(ii) Statement of financial position as at 30 September 2025. 


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August 2025

 2 Questions
Question 1c
​ ​ ​ ​​Mark Olal is a sole trader and carries on business under the name “Mark and Company”. The balance on his cash book at 30 June 2025 did not agree with the balance as per the bank statement which shows a credit balance of Sh.183,750. An examination of the cash book and bank statement disclosed the following: 

  1. A deposit of Sh.24,600 made on 28 June 2025 and recorded in the cash book had been credited by the bank on 2 July 2025. 
  2. Bank charges of Sh.850 have not been entered in the cash book. 
  3. A debit of Sh.2,100 appeared on the bank statement for an unpaid cheque which had been returned marked “out of date”. The cheque was re-dated by his customer and paid into the bank again on 4 July 2025. The earlier transaction had been recorded in the cash book. 
  4. A standing order for payment of an annual subscription amounting to Sh.500 has not been entered in the cashbook. 
  5. On 26 June 2025, Mark Olal had given the cashier a cheque for Sh.5,000 to pay into his personal account at the bank. The cashier deposited it into the business account by mistake. 
  6. On 27 June 2025, a customer had made an online transfer of Sh.24,950 in payment against goods supplied. The advice was received and recorded in the cash book on 4 July 2025. 
  7. On 30 March 2025, Mark Olal entered into a hire purchase agreement and issued a standing order to the bank to pay a sum of Sh.1,300 on day 10 of each month, commencing April 2025. No entries have been made in the cash book for these payments. 
  8. A cheque for Sh.18,200 received from Amos Muli had been entered twice in the cash book. 
  9. Cheques issued amounting to Sh.233,600 was not presented to the bank for payment until after 30 June 2025. 
  10. Dividend received by the bank amounting to Sh.6,000 has not been recorded in the cash book. 
  11. A cheque of Sh.121,500 received from Bob Zuri was deposited in the bank and entered in the cash book as Sh.125,100. 

Required: 
(i) The adjusted cash book.

(ii) Bank reconciliation statement as at 30 June 2025.


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Question 5a
​ ​​Explain the following types of errors: 

(i) Compensating errors.

(ii) Error of complete reversal of entry.


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April 2024

 1 Questions
Question 1c
Explain the following types of accounting errors: 
 
(i) Complete reversal of entry.
 
(ii) Transposition error.
 
(iii) Error of commission. 


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December 2023

 1 Questions
Question 3
​​ The following is the statement of financial position of Bidii traders as at 30 September 2023. 

The statement of financial position was prepared by an inexperienced accounts clerk and included a suspense account balance under current assets.

Sh.“000”
Sh.“000”
Sh.“000”
Sh.“000”
Capital and liabilities: 
Assets: 
Capital

694,000
Non-current assets: 
Net profit 

126,000
Plant and equipment 
634,000


820,000
Less: Depreciation 
(72,000)
562,000
Drawings

(160,000)
Furniture and fittings 
70,000


660,000
Less: Depreciation 
(14,000)
56,000
Current liabilities: 
618,000
Accounts payable 
50,000
Current assets: 
Bank balance 
1,520
51,520
Inventory
28,000
Accounts receivable
57,000
Suspense account 
8,520
93,520
Total capital and liabilities 
711,520
Total assets 
711,520

Investigations revealed the following additional information: 
  1. The purchases day book had been undercast by Sh.2,800,000. 
  2. An item of equipment costing Sh.2,600,000 had been debited to repairs account. Depreciation on equipment is charged at the rate of 15% per annum on cost. 
  3. A debit balance of Sh.2,400,000 for a debtor had been omitted from total accounts receivable.
  4. An entry of Sh.2,100,000 for return outwards was made in error in the sales day book instead of the purchases returns day book.
  5. A cheque of Sh.2,250,000 paid to a creditor was correctly posted in the cash book but credited in error to the creditor’s account. 
  6. Goods valued at Sh.220,000 were withdrawn for personal use, but no entry had been made in the books of Bidii Traders.
  7. A bad debt of Sh.1,250,000 was yet to be written off from the accounts receivable account. 
  8. A discount received of Sh.590,000 had been correctly entered in the cash book, but had been posted to the wrong side of discounts received account. 

 Required: 
 (a) Journal entries (including narrations), necessary to correct the above errors.
 (b) Suspense account fully balanced.
 (c) A statement of adjusted profit for the year ended 30 September 2023.
 (d) A corrected statement of financial position as at 30 September 2023. 


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August 2023

 2 Questions
Question 5c
​ ​ ​​The following statement of financial position as at 30 June 2023 was prepared by an inexperienced bookkeeper:

Utamaduni Ltd.
Statement of financial position as at 30 June 2023 
Cost

Sh.“000”
Accumulated
Depreciation
Sh.“000”
Net book value

Sh.“000”
Assets: 
Non-current assets 
363,400
103,500
259,900
Current assets: 
Inventory
316,250
Accounts receivable (Less allowance for doubtful debts)
278,070
Bank balance 
25,875
620,195
Total assets 
880,095
Capital and liabilities: 
Authorised issued and fully paid
Share capital 3,220,000 shares of Sh.100 each

322,000
Share premium 
23,000
Profit for the year 
132,250

477,250
Current liabilities: 
Accounts payable 
402,845
Total capital and liabilities 
880,095

Additional information:
1.
A new machine purchased for Sh.2,300,000 had been recorded in the repairs account.
2.
An inventory sheet had been misplaced causing the closing inventory to be undercast by Sh.2,300,000.
3.
An invoice from a supplier of Sh.1,460,500 had been omitted from the books.
4.
Bank reconciliation had not been done and the following items on the bank statement had not been entered in the books:
  • Bank charges Sh. 1,150,000
  • Standing order for rent payment Sh. 805,000
5.
An additional allowance of Sh.575,000 is required in respect of doubtful debts.
6.
No provision has been made for electricity expense of Sh.402,500 and audit fees of Sh.1,035,000.
7.
The company has signed an agreement to buy a new plant costing Sh.8,050,000 to be delivered and installed in six months’ time.
8.
Depreciation on non-current assets is provided at 10% per annum on straight line basis. A full year’s depreciation is charged in the year of purchase.

Required:
(i)
Journal entries to correct the above errors. (Narrations not required).  
(ii)
Corrected statement of profit or loss for the year ended 30 June 2023.


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Question 2a
​ ​​​​The bank statement of Maji Marefu Enterprises as at 30 June 2023 showed an overdraft of Sh.2,324,000 while the bank balance as per the cash book showed a credit balance of Sh.1,108,000. 

The following extract from the cash book of Maji Marefu Enterprises for the month of June 2023 was provided:

  Cash book (extract)
  Sh.“000”
  Sh.“000”
Receipts during the month 
2,938
Balance (1 June 2023) 
1,522
Balance (30 June 2023) 
1,108
Payments during the month 
2,524
4,046
4,046

Upon investigation, the following matters were discovered: 

 1. A cheque received for Sh.160,000 had been returned unpaid. No adjustment had been made in the cash book. 
 2. During the month of June 2023, dividends amounting to Sh.124,000 were credited directly into the bank account, but no entries had been made in the cash book. 
 3. A cheque drawn for Sh.12,000 had been incorrectly entered in the cash book as Sh.132,000. 
 4. The balance brought forward as per the above cash book was overstated by Sh.100,000. 
 5. Bank charges amounting to Sh.272,000 appeared in the bank statement only. 
 6. Cheques drawn amounting to Sh.554,000 had not been presented to the bank for payment. 
 7. Cheques received totalling Sh.1,524,000 had been entered in the cash book and deposited in the bank, but were not credited until 5 July 2023.
 8. A cheque for Sh.54,000 had been entered as a receipt in the cash book instead of a payment. 
 9. A cheque for Sh.50,000 had erroneously been debited by the bank into Maji Marefu’s account. 

Required: 
(i) The adjusted cash book balance as at 30 June 2023. 

(ii) Bank reconciliation statement as at 30 June 2023. 


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April 2023

 2 Questions
Question 1a
​​Using appropriate examples, explain THREE errors that do not affect the trial balance.


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Question 1b
​ ​ ​​​​The following errors were discovered in the books of Eric Barasa for the year ended 31 December 2022: 
 
  1. A debit balance of Sh.1,080,000 with respect to Pius Munene was omitted from the list of accounts receivable. 
  2. An entry of Sh.270,000 concerning returns outward was made in error in the sales book instead of the purchases returns book. 
  3. The purchases day book had been undercast by Sh.2,160,000. 
  4. Purchase of new equipment costing Sh.16,200,000 had been recorded in the repairs account (Depreciation on equipment is provided at the rate of 12½% on cost per annum). 
  5. A cheque for Sh.135,000 paid to Peter Karanja (a creditor) was correctly entered in the cash book but credited to his account. 
  6. Bad debts of Sh.675,000 should have been written off, but this was not done. 
  7. Goods valued at Sh.5,400,000 were taken by Eric Barasa for his personal use and no entry had been made in the books. 
  8. Sh.2,430,000 discounts received had been correctly entered in the cash book but had been posted to the wrong side of the discounts received account. 
 
Required: 
(i) Journal entries to correct the above errors (include appropriate narrations). 
 
(ii) Suspense account fully balanced indicating the amount by which the trial balance had failed to balance.


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December 2022

 1 Questions
Question 1b
​ ​​Ujenzi Enterprises is a small retail firm. The trial balance of the firm failed to agree on 30 June 2022. The difference was transferred to a suspense account and financial statements prepared. On detailed review of the books, the following errors were revealed: 

 1. The purchases daybook had been undercast by Sh.1,200,000. 
 2. Purchases on credit from Demario Ltd. for Sh.600,000 had been posted to their account as Sh.6,000,000. 
 3. A purchase of a machine worth Sh.8,400,000 had been posted to repairs of machinery account.
 4. A customer returned goods worth Sh.1,200,000. This transaction had been entered in the sales returns daybook and posted to the debit of the customer’s account. 
 5. Sh.7,200,000 owed by Jeru Ltd., a customer, had been omitted when drawing up a schedule of debtors from the ledger.
 6. A cash discount of Sh.240,000 had been correctly entered in the cashbook, but has not been posted to the customer’s account.

Required: 
 (i) Journal entries to correct the above errors. (Narrations not required). 

(ii) Suspense account duly balanced (including the opening balance). 


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April 2022

 1 Questions
Question 5c
Required:
(i) An updated cashbook as at 30 September 2021.
(ii) Bank reconciliation statement as at 30 September 2021.


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Pilot December 2021

 1 Questions
Question 5a
​ ​​A bookkeeper extracted a trial balance on 31 December 2020 that failed to agree by Sh.330,000, a shortage on the credit side of the trial balance. A suspense account was opened for the difference. 

In January 202, the following errors made in 2020 were found: 
  • Sales daybook had been undercast by Sh.100,000. 
  • Sales of Sh.250,000 to J Church had been debited in error to J Chane account. 
  • Rent account had been undercast by Sh.70,000. 
  • Discounts received account had been undercast by Sh.300,000. 
  • The sale of a motor vehicle at book value had been credited in error to Sales account for Sh.360,000. 

Required: 
(i) Show the journal entries necessary to correct the errors. 

(ii) Draw up the suspense account after the errors described have been corrected. 

(iii) If the net profit had previously been calculated at Sh.7,900,000 for the year ended 31 December 2020, show the calculations of the corrected net profit.


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December 2021

 1 Questions
Question 5a
​ ​​ Highlight four types of errors that might not affect the trial balanceHighlight four types of errors that might not affect the trial balance


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August 2021

 1 Questions
Question 1a
​​ Explain the following types of accounting errors:

(i) Compensating errors.

(ii) Complete reversal of entry.

(iii) Error of commission.


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May 2021

 2 Questions
Question 2a
Required:
(i) Journal entries to correct the above errors. (Narrations not required).

(ii) Suspense account duly balanced.


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Question 1b
Required:
(i) Updated cash book as at 30 October 2020.

(ii) Bank reconciliation statement as at 30 October 2020.


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November 2020

 4 Questions
Question 1a
Outline four reasons for incomplete accounting records in an organisation.


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Question 1b(i)
​​ Journal entries to correct the errors. (Narrations required).


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Question 1b(ii)
Statement of adjusted profit for the period ended 30 April 2020. 


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Question 1b(iii)
Adjusted statement of financial position as at 30 April 2020.


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November 2019

 4 Questions
Question 5c
​ ​ ​​ Sales ledger control account for the year ended 30 September 2019


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Question 1d
 Explain three types of errors that may cause the trial balance not to balance.


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Question 2a
​ ​ ​​ Income statement for the year ended 30 September 2019.


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Question 2b
Statement of financial position as at 30 September 2019. 


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May 2019

 1 Questions
Question 1a
(i) 'Error of commission" and "error of principle" .
(ii) "Compensating error" and "error of complete reversal of entries" .


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November 2018

 1 Questions
Question 5b
(i) Adjusted cash book as at 31 December 2017.

(ii) Bank reconciliation statement as at 31 December 2017. 

(iii) Statement of corrected net profit for the year ended 31 December 2017. 

(iv) Explain how the bank balance will be reported in UTE's final accounts.


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May 2018

 2 Questions
Question 5c
(i) Journal entries to correct the above errors (narrations not required).(6 marks)
(ii) Suspense account dilly balanced (2 marks)
(iii) Statement of adjusted surplus (or deficit) Iòr the year ended 31 December 2017.


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Question 2b
​​ (i). Revised sales ledger control account the year ended 31 March 2018 
(ii). Revised statement showing the correct total of the schedule of receivables for the year ended 31 March 2018.


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November 2017

 2 Questions
Question 4a
 Income statement for the year ended 30 September 2017.


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Question 4b
Statement of financial position as at 30 September 2017.


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May 2017

 1 Questions
Question 1
(a) Journal entries to correct the above errors. (Narrations not lequired).

(b) Suspense account duly balanced.

(c) Adjusted income statement for the year ended 31 March 2017

(d) Corrected statement 01 financial position as at 31 March 2017.


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May 2016

 3 Questions
Question 5d
Describe three errors that do not affect the trial balance.


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Question 3b
​ ​​ Statement of financial position as at 31 March 2016.


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Question 3a
Income statement for the year ended 31 March 2016.


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November 2015

 1 Questions
Question 2b
​ ​​ (1) Journal entries with narrations to correct the errors.
(ii) Suspense account showing the original difference.


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Pilot September 2015

 1 Questions
Question 3b
Enumerate four errors that are not detected by a trial balance.


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