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CPA Financial accounting – April 2026 Past Paper & Answers

Unit: Financial accounting

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Download CPA Financial accounting April 2026 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

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Other Financial accounting Past Papers

1a
Regulation and other principles guiding the accounting profession
​​Explain TWO core characteristics of useful financial information.
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1b
Financial Statements of a sole trader
​ ​ ​​The following balances were extracted from the books of Upendo Traders as at 31 December 2025:

Dr.Cr.
Sh.“000”Sh.“000”
Premises180,000
Furniture90,000
Inventory (1 January 2025)42,000
Purchases240,000
Carriage inwards8,000
Salaries and wages54,000
Lighting and heating12,000
General expenses18,000
Trade receivables60,000
Bank27,000
Drawings36,000
Capital250,000
Sales480,000
Trade payables30,000
Discounts received7,000
767,000767,000

Additional information: 
1. Inventory as at 31 December 2025 was valued at Sh.36,000,000 
2. Salaries and wages accrued amounted to Sh.6,000,000 
3. Lighting and heating prepaid amounted to Sh.2,000,000. 
4. Depreciation on furniture is provided at 10% per annum. 
5. Allowance for credit losses is to be maintained at 5% of trade receivables. 
6. Included in general expenses is Sh.3,000,000 relating to the proprietor’s personal expenses. 
7. Goods costing Sh.5,000, 000 were withdrawn by the proprietor for personal use but had not been recorded. 
8. Carriage inwards includes Sh.1,200,000 relating to carriage on furniture purchased during the year. 

Required: 
(i) Statement of profit or loss for the year ended 31 December 2025. 

(ii) Statement of financial position as at 31 December 2025.   
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2a
Regulation and other principles guiding the accounting profession
​​Outline FOUR legal sources of regulation that govern the accounting profession.
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2b
Financial Statements of a sole trader
​ ​ ​​The following balances were extracted from the books of Bahari Stores as at 31 December 2025:

DrCr
Sh. “000”Sh. “000”
Inventory (1 January 2025)15,000
Trade receivables9,600
Furniture7,200
Purchases70,000
Wages and salaries14,000
General expenses6,000
Drawings8,000
Bank34,000
Capital37,800
Sales120,000
Trade payables6,000
163,800163,800

Additional information: 
1. Inventory as at 31 December 2025 was valued at Sh.18,000,000. 
2. Trade receivables as at 1 January 2025 amounted to Sh.7,200,000 and as at 31 December 2025 amounted to Sh.9,600,000. 
3. Trade payables as at 1 January 2025 amounted to Sh.4,800,000 and as at 31 December 2025 amounted to Sh.6,000,000. 
4. Cash sales during the year amounted to Sh.24,000,000. 
5. Receipts from trade receivables during the year amounted to Sh.96,000,000. 
6. Depreciation on furniture is Sh.1,200,000 per year. 
7. Expected Credit Loss losses is to be set at 5% of trade receivables. 
8. Wages outstanding as at 31 December 2025 amounted to Sh.1,400,000. 
9. Goods costing Sh.1,200,000 were withdrawn by the proprietor for personal use during the year. 
10. Office equipment costing Sh.2,000,000 was included in purchases and is to be depreciated at 10% per annum. 

Required: 
(i) Statement of profit or loss for the year ended 31 December 2025. 

(ii) Statement of financial position as at 31 December 2025.  
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3a
Analyzing Financial Statements
​​Analyse TWO categories of financial ratios.
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3b
Financial Statements of a partnership
​ ​ ​ ​​Amina and Otieno are in partnership sharing profits and losses in the ratio of 3:2 respectively. Interest on capital is allowed at the rate of 10% per annum. 

 The following trial balance was extracted from the books of the partnership as at 31 December 2025:

DrCr
Sh. “000”Sh. “000”
Purchases32,000
Salaries and wages8,000
Rent4,000
General expenses2,800
Inventory (1 January 2025)6,000
Trade receivables7,200
Bank31,800
Office equipment5,000
Drawings - Amina4,800
Drawings - Otieno3,600
Sales60,000
Capital - Amina24,000
Capital - Otieno16,000
Trade payables5,200
105,200105,200

Additional information:
1.Inventory as at 31 December 2025 was valued at Sh.8,400,000.
2.Partners are entitled to annual salaries as follows:
Amina – Sh.3,000,000
Otieno – Sh.2,400,000
3.Interest on drawings is to be charged at 5% per annum.
4.Rent amounting to Sh.400,000 was outstanding as at 31 December 2025.
5.Expected credit losses is to be set at 5% of trade receivables.
6.Included in the general expenses is Sh.200,000 relating to partners’ private expenses shared equally between Amina and Otieno.
7.Office equipment is to be depreciated at 10% per annum.
 
Required: 
(i) Statement of profit or loss and appropriation account for the year ended 31 December 2025. 

(ii) Partners' capital accounts.

(iii) Statement of financial position as at 31 December 2025.  
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4a
The Accounting Process and Systems
​​Explain FOUR reasons for preparing control accounts.
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4b
Statements of a not-for-profit entity
​ ​ ​ ​ ​​Lakeview Sports Club prepares its accounts annually. The following receipts and payments account for the year ended 30 June 2025 has been extracted from the club’s records. 

 Lakeview Sports Club rreceipts and payments account for the year ended 30 June 2025:

Sh. “000”Sh. “000”
Balance brought forward1,200Salaries2,400
Subscriptions8,000Equipment3,600
Donations1,000Electricity600
Bar sales2,400General expenses1,800
Sale of equipment1,200Bar purchases1,500
Balance carried forward3,900
13,80013,800

Additional information: 
1. Equipment at 1 July 2024 was valued at Sh.7,200,000. 
2. During the year, equipment with a book value of Sh.900,000 was sold for Sh.1,200,000. 
3. Depreciation on equipment is provided at 10% per annum. 
4. Subscriptions in arrears were Sh.600,000 as at 1 July 2024 and Sh.800,000 as at 30 June 2025. 
5. Subscriptions received in advance were Sh.1,000,000 as at 1 July 2024 and Sh.700,000 as at 30 June 2025. 
6. Subscriptions in arrears amounting to Sh.80,000 are considered irrecoverable. 
7. Electricity owing was Sh.200,000 as at 1 July 2024 and Sh.300,000 as at 30 June 2025. 
8. General expenses owing were Sh.100,000 as at 1 July 2024 and Sh.150,000 as at 30 June 2025. 
9. General expenses prepaid as at 30 June 2025 amounted to Sh.50,000. 
10. Salaries outstanding as at 30 June 2025 amounted to Sh.200,000. 
11. Bar inventory was Sh.400,000 as at 1 July 2024 and Sh.500,000 as at 30 June 2025.

Required: 
(i) Income and Expenditure Account for the year ended 30 June 2025. 

(ii) Statement of Financial Position as at 30 June 2025.  
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5
Financial Statements of a manufacturing entity
​ ​ ​ ​​Atlas Furnishings Ltd. manufactures wooden office desks. The following trial balance was extracted from the books of the company as at 31 December 2025:

Dr.Cr.
Sh. “000”Sh. “000”
Retained profit as at 1 January 2025-1,860
Direct wages18,400-
Accounts receivable16,800-
Accounts payable-17,540
Bank2,200-
Purchase of raw materials24,600-
Net sales-108,960
Building (net book value)7,200-
Motor vehicle (net book value)5,100-
Office equipment (net book value)2,960-
Plant and machinery (net book value)18,500-
Allowance for credit loss-60
Directors’ salaries2,240-
Inventory as at 1 January 2025:--
• Raw materials3,200-
• Work-in-progress4,600-
• Finished goods9,200
-
Selling and distribution costs10,880-
Rent and rates3,120-
Office salaries5,760-
Insurance720-
Other indirect factory costs1,840-
Electricity and water2,640-
General administrative expenses2,480-
Preference dividend paid120-
Ordinary share capital-10,000
8% preference shares-4,140
142,560142,560

Additional information:
1.Inventories as at 31 December 2025 were valued as follows:
Raw materials -Sh.8,600,000
Work-in-progress -Sh.3,420,000
 
2.The company transfers finished goods to the warehouse at cost plus a mark-up of 30% on cost. During the year ended 31 December 2025:
• 3,000 desks were manufactured.
• 2,700 desks were sold.
• All opening finished goods inventory was sold during the year.
Closing finished goods inventory should be valued at production cost only.
3.The allowance for credit losses should be increased by Sh.20,000.
4.Depreciation is charged on the net book value of fixed assets at the following rates:
AssetRate (%)Apportionment
Building3Administration
Plant and machinery12Factory
Office equipment15Administration
Motor vehicle2550% factory, 50% administration
5.As at 31 December 2025:
• Outstanding insurance amounted to Sh.180,000.
• Prepaid rent amounted to Sh.220,000.
6.Rent and rates, insurance and electricity and water are to be apportioned 3/4 to factory and 1/4 to administration.
7.The preference dividend paid in the trial balance relates to an interim preference dividend for the year. The directors have proposed:
• Payment of the final preference dividend for the year; and
• Payment of an ordinary dividend of 12%.
8.Corporate tax for the year ended 31 December 2025 is estimated at Sh.10,800,000.
 
Required: 
(a) Manufacturing account for the year ended 31 December 2025. 

(b) Statement of profit or loss for the year ended 31 December 2025.  
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