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CPA Financial accounting – December 2024 Past Paper & Answers

Unit: Financial accounting

12 Questions

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Questions

Download CPA Financial accounting December 2024 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
Accounting in the Public Sector
​​In the context of public sector accounting, explain the following terms: 

(i) Contingent liability. 

(ii) Social benefits.
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1b
Financial Statements of a sole trader
​​Outline FOUR reasons for incomplete accounting records in sole proprietorship business organisations.
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1c
Financial Statements of a company
​​Summarise FOUR objectives of preparing financial statements of an organisation.
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1d
Analyzing Financial Statements
​​Explain TWO categories of financial ratios.
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1e
Regulation and other principles guiding the accounting profession
​​Distinguish between “historical cost convention” and “going concern convention”.
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2
Financial Statements of a partnership
​ ​ ​​Ann, Ben and Chad have been operating a partnership business under the name ABC Traders. Their partnership agreement provides for a profit or loss sharing ratio of 5:3:2 respectively. 

On 31 December 2023, Ann retired from the partnership and left Ben and Chad to continue with the partnership, sharing profit or loss equally. 

The following balances were extracted from their books for the year ended 30 June 2024 before adjusting for Ann’s retirement:

Sh.“000”
Land at cost
2,400
Building at cost  
6,400
Equipment at cost
960
Accumulated depreciation 1 July 2023
Building
480
Equipment
220
Trade receivables  
1,368
Trade payables
1,624
Allowance for doubtful debts (1 July 2023)  
42
Cash at bank
84
Capital account (1 July 2023)
Ann
3,600
(Credit) 
Ben
3,400
(Credit) 
Chad
3,200
(Credit) 
Current account (1 July 2023)
Ann
60
(Credit) 
Ben
40
(Debit) 
Chad
40
(Credit) 
Purchases
5,820
Sales
9,880
Staff salaries and wages 
1,172
Rent and rates 
500
General administrative expenses 
284
Bad debts written off 
18

Additional information:
1.
Inventory was valued at Sh.1,620,000 and Sh.1,800,000 as at 1 July 2023 and 30 June 2024 respectively.
2.
As at 30 June 2024, rent and rates paid in advance amounted to Sh.100,000.
3.
As at 30 June 2024, general administrative expenses accruing amounted to Sh.88,000.
4.
The partners made the following drawings during the year ended 30 June 2024:
Partner
Date
Amount Sh.“000”
Ann
31 December 2023
420
Ben
30 June 2024 
740
Chad
30 June 2024 
720
5.
Depreciation is to be provided on a straight line basis as follows: 
Asset
Rate per annum 
Building
2% 
Equipment
15%
6.
Allowance for doubtful debt to be increased to Sh.48,000.
7.
Balance due to Ann was to remain in partnership carrying no interest until 1 July 2024.
8.
The value of partnership goodwill as at 31 December 2023 was agreed by the three partners at Sh.4,000,000 and was not to remain in the books of the partnership.
9.
On 31 December 2023, the partners agreed to revalue the land upwards to Sh.3,200,000.
10.
Assume profits accrued evenly throughout the year.

Required:
(a)
Statement of profit or loss and appropriation account for the year ended 30 June 2024.
(b)
Statement of financial position as at 30 June 2024. 

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3a
Regulation and other principles guiding the accounting profession
​​Highlight FOUR roles of Accounting Standards.
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3b
Financial Statements of a company
​ ​ ​​Roka Ltd. manufactures high quality shoes. The following are the financial statements of the company during the years ended 31 August 2024 and 31 August 2023:

Roka Ltd.
Statement of profit or loss for the year ended 31 August 2024:
Sh.
Sh.
Sales
14,963,130
Cost of sales 
(7,707,050) 
7,256,080 
Investment income 
29,484
7,285,564
Expenses:
Distribution cost
2,552,784
Administration cost
1,772,576
(4,325,360)
Net profit before tax and finance cost
2,960,204 
Finance cost 
(410,800)
Net profit before tax
2,549,404
Corporation tax
 (820,924) 
Net profit for the year 
1,728,480
Retained earnings brought forward
 8,658,000
Retained earnings carried forward
10,386,480
Roka Ltd
Statement of financial position as at 31 August:
2024 Sh.
2023 Sh.
Non-current assets
33,930,702
27,833,208 
Accumulated depreciation 
(7,695,142)
(6,607,874)
26,235,560
21,225,334
Current assets: 
Inventory
8,582,288
7,573,696
Trade receivables 
3,231,150 
4,504,864
Bank
309,192
278,408
12,122,630
12,356,968
Total assets 
38,358,190
33,582,302
Capital and liabilities:
Ordinary share capital
10,920,000
7,800,000
Share premium 
4,103,840
4,038,814
Revaluation reserve 
3,876,080
2,127,840
Retained earnings
10,386,480
8,658,000
29,286,400
22,624,654
Non-current liabilities: 
12% debentures 
3,501,680
4,589,000
Current liabilities:
Trade payables 
4,942,860
5,694,624
Corporation tax
627,250
674,024
5,570,110
6,368,648
Total capital and liabilities 
38,358,190
33,582,302

Additional information: 
1. The company made a profit of Sh.34,320 on the sale of a machine whose cost was Sh.466,986 and whose accumulated depreciation was Sh.102,986. 
2. The only revaluation made on non-current assets was for freehold land. 

Required: 
Statement of cash flows for the year ended 31 August 2024 in accordance with International Accounting Standard (IAS) 7 “Statement of Cash Flows”. 
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4a
Statements of a not-for-profit entity
​ ​​Explain TWO objectives of not-for-profit organisation.
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4b
Financial Statements of a sole trader
​ ​ ​ ​​The following trial balance was extracted from the books of Bella Omari, a sole trader, as at 30 September 2024:

Sh.
Sh.
Capital (1 October 2023)
4,748,430
Purchases
1,385,400
Sales
2,952,240
Returns outward 
8,400
Returns inward
24,240
Discount allowed 
27,300
Discount received
21,120
Wages and salaries 
933,000
Rates
73,500
Insurance
53,400
General expenses 
121,800
Trade receivables 
552,000
Trade payables
483,600
Bank overdraft 
120,600
Inventory (1 October 2023)
183,000
Land and buildings 
2,550,000
Plant and machinery
1,600,000
Motor vehicles
843,000
Drawings
312,300
Furniture and fittings 
245,000
Cash
60,300
Accumulated depreciation: 
Plant and machinery 
447,010
Motor vehicles
168,600
Furniture and fittings
14,240
8,964,240
8,964,240

Additional information:
1.
As at 30 September 2024, inventory was valued at Sh.222,600.
2.
As at 30 September 2024, rates paid in advanced amounted to Sh.10,500.
3.
As at 30 September 2024, outstanding electricity expenses amounted to Sh.5,370. This is included in general expenses.
4.
Trade receivables include an irrecoverable amount of Sh.8,400. 
5.
A 5% allowance for doubtful debt is to be made on the remaining trade receivables.
6.
Depreciation is provided at the following annual rates using the straight line method: 
  • Plant and machinery 25%
  • Motor vehicles 20%
  • Furniture and fittings 12½%
No depreciation is provided on the land and buildings.  
7.
Included in wages and salaries is an amount of Sh.93,000 paid to the domestic workers of Bella Omari. 
8.
As at 30 September 2024, outstanding wages and salaries amounted to Sh.37,200. 

Required: 
(a)
Statement of profit or loss for the year ended 30 September 2024. 
(b)
Statement of financial position as at 30 September 2024.
 

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5a
Analyzing Financial Statements
​​Enumerate SIX reasons for preparing a cash flow statement in a business.
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5b
Financial Statements of a manufacturing entity
​ ​ ​ ​​The following trial balance was extracted from the books of Venus Ltd., a manufacturing company as at 31 August 2024:

Sh.“000”
Sh.“000”
Ordinary share capital 
250,000
Retained earnings (1 September 2023)
182,750
Share premium 
100,000
Bank
17,100
Factory building (Land Sh.40,000,000)
175,000
Plant and machinery  
200,000
Furniture and fittings
120,000
Accumulated depreciation: 
  • Factory building 
6,000
  • Furniture and fittings
25,000
  • Plant and machinery 
20,000
Inventory (1 September 2023): 
  • Raw materials 
55,000
  • Work-in-progress 
40,000
  • Finished goods (200,000 units) 
39,000
Purchases and sales 
225,000
681,500
Trade receivables and trade payables 
133,500
101,250
Allowance for doubtful debts
17,500
Bad debts 
1,500
Carriage on raw materials 
7,500
Direct wages 
120,000
Administrative salaries 
80,000
Electricity
20,000
Maintenance and repairs 
34,000
Return outwards 
5,250
Sales and marketing expenses 
13,630
General administration expenses 
46,120
Insurance
24,000
Bank charges 
6,250
Factory equipment hire
22,500
Discount allowed 
9,150
1,389,250
1,389,250

Additional information:
1.
Depreciation is provided at the following rates:
  • Factory building - 4% on a straight line basis
  • Plant and machinery - 20% on reducing balance
  • Furniture and fittings - 12.5% on a straight line basis
Furniture and fittings are purely for office use. 
2.
Inventory as at 31 August 2024 was valued as follows:
  • Raw materials - Sh.30,000,000.
  • Work-in-progress - Sh.56,500,000
  • Finished goods - 160,000 units
Inventories are sold on first-in-first-out (FIFO) basis. 
3.
2,000,000 units were produced during the year.
4.
Allowance for doubtful debts is provided at the rate of 10% for debts between 6 months to 12 months and at the rate of 25% on debts above 12 months. The debtors aging analysis was as below:
0 – 5 months
6 – 12 months
Above 12 months
Total
Sh.38,500
Sh.45,000
Sh.50,000
Sh.33,500 
5.
Goods are transferred to the warehouse at a cost plus 20%. 
6.
Electricity, insurance and maintenance costs are to be apportioned in the ratio 3:1 between factory and administrative expenses.

Required:
(i)
Manufacturing account for the year ended 31 August 2024.
(ii)
Statement of profit or loss for the year ended 31 August 2024.
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