KASNEB Public Finance and Taxation - Question 1b

Outline four functions of a County Treasury as provided in the Public Finance Management Act. ... [Click to view full question and step-by-step solution]

KASNEB Public Finance and Taxation - Question 3a

Explain three activities that constitute tax evasion in your country. ... [Click to view full question and step-by-step solution]

KASNEB Public Finance and Taxation - Question 4c

Lulu Ltd. commenced manufacturing operations on 1 May 2020 after having incurred the following capital expenditure: Sh.Factory building (note 1)20,600,00... [Click to view full question and step-by-step solution]

CPA Public Finance and Taxation – August 2021 Past Paper & Answers

Unit: Public Finance and Taxation

13 Questions

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Questions

Download CPA Public Finance and Taxation August 2021 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

Access the full paper online, download the PDF, or study offline. Each question includes step-by-step solutions to help you understand key concepts in Public Finance and Taxation.

Relationship between National and County Governments on budget and economic matters

Public funds established by the Constitution are usually managed by the National and County governments.

Required:

(i) Identify three types of funds managed by the national government.

(ii) Identify two types of funds managed by the county government.

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Introduction to Public Financial Management

Outline four functions of a County Treasury as provided in the Public Finance Management Act.

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Procurement in public entities

Citing seven reasons, justify why an accounting officer of a procuring entity might, at any time, prior to notification of tender award, terminate or cancel procurement or asset disposal proceedings without entering into contract as provided under the Public Procurement and Asset Disposal Act.

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Introduction to Public Financial Management

Explain the following attributes that must be considered when preparing a national budget:

(i) Periodicity.

(ii) Predictability.

(iii) Comprehensiveness.

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Oversight Function in Public Finance Management

Identify four types of reports that the Controller of Budget is required to prepare in relation to Public Finance Management.

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Administration of Value Added Tax (VAT)

S and M Associates is a firm of Surveyors registered for value added tax (VAT) purposes.

In the month of March 2021 the firm made the following transactions:

Revenues:	Sh.	Sh.
Revenue from VAT registered customers.		1,790,750
Revenue from consultancy services in Rwanda		2,686,125
Revenue from Ministry of Lands contract		1,486,250
Revenue from customers not registered for VAT		2,586,800
		8,549,925
Expenditure:
Legal services	435,000
Salaries and wages	1,740,000
Medical services	556,800
Motor vehicle fuel	125,280
Purchase of design materials	870,000
Motor vehicle insurance	69,600
Stationery	29,000
Audit fees	501,120
Office rent	228,375
Advertising	194,300	(4,749,475)
		3,800,450

Additional information:

VAT withheld by withholding VAT agents was Sh.120,000 during the month.
Motor vehicle insurance relates to the motor vehicle's annual premiums for comprehensive insurance.
Transactions are inclusive of VAT at the rate of 16% where applicable.

Required:

Prepare a VAT account for the month of March 2021 showing the VAT payable or refundable.

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Introduction to Taxation

Explain three activities that constitute tax evasion in your country.

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Taxation of Income

Maxwel Bewa was employed as an accountant by Okoa Micro-finance Ltd. on a three-year contract commencing on 1 April 2020. He has provided the following information relating to his employment income for the year ended 31 December 2020.

Basic salary of Sh.175,000 per month (PAYE Sh.48,000 per month)
He enjoyed free medical treatment under a senior employees medical scheme operated by the company, which was assessed at Sh.250,000 during the year.
He received goods worth Sh.140,000 from the company for personal use.
He was provided with a company car which had cost Sh.1,750,000. The car had a cc rating of 2,000 and it was under a maintenance plan where the company paid all operating costs of Sh.220,000 during the year.
He was provided with a furnished house in Alpha Estate where rent for similar houses was Sh.45,000 per month. The house had been furnished at a cost of Sh.850,000.
He was sponsored for a seminar on Accountancy by the employer at Sh.180,000, 10% of this cost was for private entertainment.
He contributes 5% of his basic pay to a registered pension scheme while the employer contributes an equal amount for him.
He employed a night watchman on 1 August 2020 at a monthly salary of Sh.25,000. The employer pays half of the monthly salary.
The employer paid Sh.320,000 as school fees for his children studying abroad on commencement of his employment contract. This amount was recovered from Bewa's income during the year.
He was nominated for an award of the employee of the year on 31 December 2020. This award carried a cash gift of Sh.250,000 and a bonus of Sh.180,000.
Life insurance premium paid for him by the employer for the period 1 April 2020 to 31 December 2020 was Sh.80,000.
As part of the terms of his employment, he was paid a holiday allowance of Sh.120,000 for his holiday to a foreign destination and back home.

Required:

(i) Total taxable income of Maxwel Bewa for the year ended 31 December 2020.

(ii) Tax liability (if any) from the income computed in (b) (i) above.

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Taxation of Income

The Finance Act, 2020 introduced a tax known as minimum tax which shall be payable regardless of whether a taxpayer will have taxable profits or not.

With reference to the above statement, identify four types of income that are not subject to minimum tax.

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Customs Taxes and Excise Taxes

Explain two ways in which the Revenue Authority in your country might prevent loss of tax revenue from imports.

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Investment Allowances/deductions

Lulu Ltd. commenced manufacturing operations on 1 May 2020 after having incurred the following capital expenditure:

	Sh.
Factory building (note 1)	20,600,000
Processing machinery	4,800,000
Factory parking bay	1,640,000
Sewerage system	560,000
Industrial effluent treatment plant	2,400,000

Additional information:

1	Factory building included the following:	Sh.
	Cost of land	4,400,000
	Godown	800,000
	Showroom	520,000
	Offices	600,000
	Retail shoр	400,000

2	On 1 July 2020, the following capital expenditures were incurred: Sh. Photocopier 60,000 Computers 150,000 Motorbike 96,000 Saloon car 3,400,000 Forklift 720,000 Furniture 240,000 Pick-up 920,000 Scanners 56,000 Tractor 1,700,000 Carpets 36,000

3	The company imported a portable weighting machine on 1 September 2020 at a cost of Sh.480,000 inclusive of duty of Sh.20,000. The duty was waived by the government.

Required:

Investment allowances due to the company for the year ended 31 December 2020.

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Introduction to Taxation

Discuss four ways in which taxation could be applied to achieve fiscal policy objectives of a developing economy.

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Taxation of Income

Mazao Ranch Ltd. practices mixed farming and milk processing.

The following is the company's statement of profit or loss for the year ended 31 December 2020:

Revenue:	Sh.	Sh.
Sale of milk		2,400,000
Sale of livestock		1,800,000
Sale of manure		540,000
Proceeds from sale of an old tractor		820,000
Discount received		180,000
		5,740,000
Expenses:
General expenses	430,000
Construction of water tank	240,000
Vaccines for livestock	640,000
Loan repayment	350,000
Depreciation	180,000
Electricity and water	135,000
Conveyance fees	156,000
Construction of chicken sheds	480,000
Animal feeds	200,000
Salaries and wages	1,240,000
Bad debts provision	150,000
Repairs and maintenance	762,000
Professional fees	620,000	(5,583,000)
Net profit		157,000

Additional information:

1	Farm works acquired on 1 July 2020 comprised the following:

		Sh.
	Granary	420,000
	Labour quarters	1,200,000
	Cowshed	160,000
2	General expenses include:	Sh.
	Subscriptions to Farmers Association	96,000
	Acquisition of a 50 year lease	180,000
	Staff Christmas party	25,000
	Parking fines	129,000
3	Repairs and maintenance comprise:	Sh.
	Provision for fencing expenditure	145,000
	Repairs to machinery	240,000
	Other repairs	377,000

4	Professional fees include Sh.500,000 paid with regard to pursuing a dispute with the Revenue Authority's VAT department.
5	Assume the corporate tax rate during the year was 25%.

Required:

(i) Adjusted taxable profit or loss of Mazao Ranch Ltd. for the year ended 31 December 2020.

(ii) Tax payable (if any) on the profit or loss in (b) (i) above.

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CPA Public Finance and Taxation – August 2021 Past Paper & Answers

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CPA Public Finance and Taxation – August 2021 Past Paper & Answers

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