KASNEB Public Finance and Taxation - Question 2a

Explain the meaning of 'Appropriation Act' as provided under the Public Finance Management Act. ... [Click to view full question and step-by-step solution]

KASNEB Public Finance and Taxation - Question 4a

Highlight two reasons why an importer is required to fill in an import declaration form.... [Click to view full question and step-by-step solution]

CPA Public Finance and Taxation – November 2018 Past Paper & Answers

Unit: Public Finance and Taxation

14 Questions

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Questions

Download CPA Public Finance and Taxation November 2018 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

The Public Finance Management Act requires that all payments from the consolidated fund should be authorised and comply with certain general rules.

With reference to the above statement, outline two ways of authorising payments out of the consolidated fund.

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Procurement in public entities

According to the Public Procurement and Asset Disposal (PPAD) Act, open tendering should be the preferred procurement method for procurement of goods, works and services. The procuring entity may use an alternative procurement procedure only if that procedure is allowed and satisfies the conditions under the Act for use of that method.

(i) With reference to the above statement:
Explain three circumstances under which open tendering might not be appropriate.

(ii) Suggest four methods of procurement as provided under PPAD Act other than the open tendering process.

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Oversight Function in Public Finance Management

Discuss three roles played by the senate or equivalent institution in your country in relation to public finance management.

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Introduction to Public Financial Management

Explain the meaning of "Appropriation Act" as provided under the Public Finance Management Act.

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Relationship between National and County Governments on budget and economic matters

For the past few years, most of the counties revenue generation has stagnated or even declined although the economy's gross domestic product (GDP) has grown within the same period.

Propose four causes to which this underperformance in revenue collection by the counties or similar devolved units in your country could be attributed,

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Administration of Value Added Tax (VAT)

Bandika Ltd., a company dealing in a variety of value added tax (VAT) designated goods, was registered for VAT purposes on 1 March 2018.

The following transactions were recorded for the month of March 2018:

March 10:	Opening stock 9,200 units valued at Sh.85 per unit.
March 5:	Imported 10,000 units at Sh.80 per unit being cost, insurance and freight (CIF).
March 8:	Purchased 5,000 units from the local market at Sh.60 per unit.
March 9:	Sold 6,000 units at Sh.90 per unit.
March 12:	Purchased office furniture for Sh.40,000 for use in the business.
March 15:	Paid Sh.10,000 for photocopy and printing of office documents.
March 16:	Purchased oil filters and lubricants for use in the factory for Sh.75,000.
March 16:	Paid an invoice for Sh.85,000 in respect of fuel for company vehicles, the fuel had been used in February 2018
March 18:	Supplied 30,000 units to a department in the National Treasury at a price of Sh.85 per unit.
March 20:	Sold 2,500 units at Sh.90 per unit to a company in Uganda.
March 23:	Purchased on credit 2,500 units locally at Sh.80 per unit before deducting a cash discount of 5%.
March 27:	The directors' appropriated goods valued at Sh.320,000 which were not paid for.
March 28:	Paid electricity expense of Sh.15,000 and telephone expense of Sh.6,000.

All transactions were inclusive of VAT at the rate of 16% where applicable, unless otherwise specified.

Assume the rate of import duty is 20%.

Required:

A value added tax (VAT) account for the month of March 2018 for Bandika Ltd.

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Introduction to Taxation

Fiscal policy influences both the pattern of economic activities and also the level and growth of aggregate demand, output and employment.

Required:
Summarise four ways through which taxation could be used as a tool of fiscal policy in your country.

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Taxation of Income

Beckham Atondo retired as a marketing manager from Bright Insurance Company Limited on 30 September 2017 after serving the company for 20 years and received a lumpsum pension of Sh.1,580,000.

He has provided the following information on his employment and other income for the year ended 31 December 2017:

1	Basic salary and other allowances:
		Sh.
	o Basic salary per month	160,000 (Monthly PAYE Sh.42,000)
	o Monthly responsibility allowance	42,000
	o Bonus paid in June 2017	250,000
	o Monthly risk allowance	35,000

2	During his employment, the company paid his monthly electricity, water and telephone bills averaging Sh.22,000, Sh.18,500 and Sh.16,000 respectively.
3	The company paid Sh.320,000 to cover for Atondo's family life insurance premiums during his employment period in the year ended 31 December 2017.
4	He contributed Sh.18,000 per month towards a registered Home Ownership Saving Plan (HOSP) during his employment period at Bright Insurance Company.
5	In October 2017, he invested half of his pension income in a taxi services business. His records from the taxi services business indicated a net profit of Sh.120,000. The following expenses had been charged in the books during the three month period for year ended 31 December 2017 relating to the taxi business:

		Sh.
	Repairs and maintenance	180,000
	Depreciation	60,000
	Fuels and lubricants	240,000
	Parking fines	42,000
	Driver's salaries	64,000
	General provision for bad debts	26,000
	Licences and registration	60,000
	Replacement of car engine	260,000
	Motor vehicle inspection	25,000

Required:

(i) Taxable income of Beckham Atondo for the year ended 31 December 2017.

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

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Customs Taxes and Excise Taxes

Highlight two reasons why an importer is required to fill in an import declaration form.

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Customs Taxes and Excise Taxes

Morris Kwachu applied for a licence to commence manufacturing business dealing in excisable goods, The Commissioner refused to issue him with a licence.

Advise him on four grounds under which the Commissioner might refuse to issue the applicant with a licence as provided under the Excise Duty Act

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Taxation of Income

Benard, Cosmas and Korrir are partners, operating a chain of retail shops. They share profits or losses in the ratio 2:2:1 respectively. During the year ended 31 December 2017, the partners reported a loss of Sh.2,542,000 after deducting the following:

Interest on capital:	Sh.
Benard	135,000
Cosmas	135,000
Korrir	215,000
Salaries to partners:
Benard	400,000
Cosmas	320,000
Korrir	576,000
Motor vehicle repairs	526,000
General repairs and maintenance	120,000
Office and Sundry expenses	260,000
Goodwill impairment	340,000
Loss on disposal of motor vehicle	385,000
Postage and telephone	180,000
Water and electricity	146,000
Subscription to Wananchi Golf Club	105,000
Donations	240,000
Bad debts written off	346,000
Rent, rates and licences	180,000
Accountancy services	325,000
Depreciation	845,000
Purchase of pickup	1,500,000
Transport cost	340,000
Insurance of motor vehicles	520,000

Additional information:

1	Office and sundry expenses included cost of office cabinet of Sh.90,000.
2	Transport cost included Sh.10,000 per month relating to personal use.
3	Provision for bad and doubtful debts account:

	Sh.		Sh.
Bad debts	246,000	General (brought forward)	330,000
Specific (carried forward)	192,000	Specific (brought forward)	152,000
General (carried forward)	390,000	Profit and loss account	346,000
	828,000		828,000

4	Wear and tear allowances agreed with the Commissioner amounted to Sh.1,236,000.
5	Included in general repairs and maintenance is Sh.80,000 paid for the year 2018.

Required:

(i) The adjusted partnership profit or loss for the year ended 31 December 2017.

(ii) Distribution schedule of the profit or loss calculated in (c)(i) above.

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Taxation of Income

State four conditions that must be fulfilled for donations to be allowable deduction for tax purposes.

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Administration of Income Tax and Tax Procedures

Outline circumstances upon which the Commissioner of Domestic Tax may accept a late notice of objection from a tax payer.

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Investment Allowances/deductions

Chemtech Ltd. was incorporated in March 2017 to manufacture edible oils. The company started its operations in June 2017 after constructing the following structures:

Factory building
Staff canteen
Drainage system
Stone perimeter wall
Labour quarters

Sh.
2,600,000
840,000
350,000
1,200,000
1,800,000

The following assets were acquired by the company and put in use as from I July 2017:

	Sh.
Distribution van	2,300,000
Processing machinery	1,800,000
Furniture and fittings	860,000
Mercedes Benz Saloon (for the director)	3,400,000
Generator	420,000
Pick-up	1,200,000
Heating plant	830,000
Fax machines	180,000
Conveyor belts	650,000
Computers	320,000
Packaging machines	800,000
Two lorries (each 4 tonnes)	4,000,000
Photocopier machine	120,000
Forklift	960,000
Water pump	480,000
Laptop computers	260,000

Additional information:

1. A godown and a sports pavilion were constructed at a cost of Sh.890,000 and Sh.1,200.000 respectively and usedр with effect from 1 October 2017.

2. The Director's Mercedes Benz was involved in an accident on compensated the company Sh.3,000,000 as the write off value. 11 December 2017 and the insurance company

3. The company sunk a borehole at a cost of Sh.450,000 which was utilised from 1 November 2017.

4. A loading bay and an extension to the factory building were constructed and utilised with effect from 1 September 2017. The loading bay cost Sh.450,000 while the factory extension cost Sh.225,000.

Required:

Capital allowances due to Chemtech Ltd. for the year ended 31 December 2017.

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CPA Public Finance and Taxation – November 2018 Past Paper & Answers

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CPA Public Finance and Taxation – November 2018 Past Paper & Answers

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