December 17, 2022

TUESDAY: 6 December 2022.        Afternoon Paper.         Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper. QUESTION ONE 1. During an induction programme to the new auditors, the Audit Senior emphasised on the need for confidentiality of the auditors in execution of their duties. Required: Define the principle of confidentiality. (2 marks) Enumerate FOUR circumstances where professional accountants could be required to disclose confidential information. (4 marks) 2. Explain the following types of audit evidence: Physical examination. (2 marks) Documentary. (2 marks) Oral. (2 marks) 3. Describe FOUR limitations of audit. (8 marks) (Total: 20 marks) QUESTION TWO 1. Analyse SIX internal control systems that a company should have in place to prevent and detect errors. (6 marks) 2. Your firm has been appointed as the auditor for ABC Ltd. that deals with the manufacturing of plastic products. The Audit Manager has assigned you a task of verification of inventory in the warehouse. Required: Identify FOUR audit objectives that you would seek to achieve in verification of the inventory.(4 marks) Suggest SIX challenges you are likely to encounter in verification of the inventory. (6 marks) 3. During an audit assignment in a computerised environment, Ann Muhithe suggested the use of dummy testing instead of live data testing. Required: Summarise FOUR disadvantages of adopting dummy testing. (4 marks) (Total: 20 marks) QUESTION THREE 1. Differentiate between “current audit file” and “permanent audit file”. (2 marks) List SIX contents of a permanent audit file. (6 marks) 2. You are at your initial stages of your auditing career. The Audit Manager has presented to you a draft audit report for familiarisation. You realise the usage of the terms “True and fair view” being repeatedly mentioned under the opinion section of the audit report. Required: Explain FOUR circumstances under which the auditor would indicate that the financial statements present a true and fair view of the financial performance and position of the company. (4 marks) 3. ISA 210: Agreeing the terms of engagements provides guidance on the content of engagement letters and deals with the auditor’s responsibilities in agreeing with the terms of the audit engagement with management. Required: 1. Highlight FOUR purposes of an engagement letter. (4 marks) 2.  Enumerate FOUR matters that ought to be included in the engagement letter. (4 marks) (Total: 20 marks) QUESTION FOUR 1. State FIVE disadvantages of an audit programme. (5 marks) 2.  Name FIVE precautionary measures that could help to overcome the limitations of an audit programme. (5 marks) 3. In the context of an audit, explain FIVE differences between an error and a fraud. (10 marks) (Total: 20 marks) QUESTION FIVE 1. A system of controls does not provide absolute assurance that the control objectives of an organisation will be met. Instead, there are several inherent limitations in any system that reduce the level of assurance. Required: Explain FOUR inherent limitations of Internal Control. (8 marks) 2. Analyse SIX duties of an Auditor. (12 marks) (Total: 20 marks)

TUESDAY: 6 December 2022.    Morning Paper.      Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Do NOT write anything on this paper. QUESTION ONE 1. Outline THREE limitations of retained earnings as a source of finance. (3 marks) 2. Explain THREE non-financial goals of a firm. (6 marks) 3. Heko Ltd. has the following capital structure which is considered optimal: Sh.“000” Debt (par value Sh.1,000) 300,000 Preference shares (par value Sh.100) 180,000 Ordinary shares (par value Sh.100) 720,000 Additional information: 1. The investors of Heko Ltd. expect earnings and dividends to grow at a constant rate of 9% in the future. 2. The company has just paid ordinary shareholders dividend of Sh.4.2 per share. 3. The current market price of ordinary shares of Heko Ltd. is Sh.80 each. 4. The firm will incur a floatation cost of Sh.4 per share to issue new shares. 5. New preference shares can be sold at Sh.105 per share with a dividend of Sh.11 per share and floatation cost of Sh.10 per share. 6. The company will issue debenture under the following terms: • The coupon rate 12% per annum • Discount Sh.30 per debenture • Floatation cost Sh.20 per debenture • The par value is Sh.1,000 • Maturity period of ten years 7. The corporate tax rate is 30%. Required: 1. The cost of ordinary share capital. (2 marks) 2. The cost of preference share capital. (2 marks) 3. The cost of debenture capital. (3 marks) 4. The weighted average cost of capital (WACC) using market value weights. (4 marks) (Total: 20 marks) QUESTION TWO 1. Explain the term “venture capitalist” as used in finance. (2 marks) 2. Identify THREE differences between “factoring” and “invoice discounting”. (6 marks) 3. Erick Nandwa borrowed Sh.250,000 from Pritt Sacco at a monthly interest rate of 3%. The loan is to be amortised using the reducing balance method and be repaid in 6 equal monthly instalments, payable at the end of each month. Required: Prepare a loan amortisation schedule. (6 marks) 4. Paul Kalama is considering investing in a five-year Sh.1,000 par value bond bearing a coupon rate of 7%. Paul Kalama’s required rate of return is 8%. The bond is quoted at Sh.950 in the bond market. The bond will be redeemed at par value. Required: 1. Compute the intrinsic value of the bond. (4 marks) 2. Advise Paul Kalama on whether he should purchase the bond based on your computation in 4 (i) above. (2 marks) (Total: 20 marks) QUESTION THREE 1.  Outline FOUR functions of a finance manager. (4 marks) 2. Explain FOUR chronological steps of dividend payment process. (4 marks) 3. Makupa Limited intends to invest Sh.32,000,000 in a project which is expected to generate the following cash flows: Required: 1. Calculate the internal rate of return of the project. (8 marks) 2. Advise the management on whether to invest in the project or not based on your results in (c) (i) above. (2 marks) 3. Highlight TWO advantages of using internal rate of return (IRR) to appraise investment projects. (2 marks) (Total: 20 marks) QUESTION FOUR 1. Identify FOUR benefits that may accrue to a firm from business crowdfunding. (4 marks) 2.  Citing THREE reasons, justify why a company should endeavour to maintain a stable dividend payment policy. (6 marks) 3. The following balances were extracted from the books of Eaglite Manufacturing Company for the year 2021: Additional information: 1. Annual sales amounted to Sh.4,748 million. 2. Cost of production during the year amounted to Sh.2,320 million. 3. Raw materials purchased during the year amounted to Sh.1,526 million. 4. Annual cost of sales amounted to Sh.2,862 million. 5. All sales and purchases made during the year were on credit terms. Assume that a year has 365 days. Required: 1. Compute the working capital cycle for Eaglite Manufacturing Company. (8 marks) 2. The directors of Eaglite Manufacturing Company intend to negotiate for longer credit periods from suppliers of raw materials. Explain the effect of this action on the working capital cycle. (2 marks) (Total: 20 marks) QUESTION FIVE 1. Highlight TWO benefits and TWO limitations of Islamic finance. (4 marks) 2. Identify FOUR ways in which technological risk may affect the operations of a business negatively. (4 marks) 3. James mambo intends to purchase either security AX or security BY. The following information relates to the two securities: Required: 1. Compute the expected return of securities AX and BY. (4 marks) 2. Compute the standard deviation of each of the securities AX and BY. (6 marks) 3. Advise James Mambo on the security to purchase based on the results obtained in  (ii) above. (2 marks) (Total: 20 marks)

MONDAY: 5 December 2022.       Afternoon Paper.        Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Do NOT write anything on this paper. QUESTION ONE 1.  Outline FOUR disadvantages of using the scatter graph as a method of cost estimation. (4 marks) 2.  Remah Ltd has established the following information for the costs and revenues for the month of October 2022 at an activity level of 500 units: Additional information: 1. All direct costs are variable costs. 2. 20% of selling costs and 50% of the production overheads are fixed over all levels of activity respectively. Required: Determine cost estimation equation in the form Y = a + bx using the account analysis method. (4 marks) Calculate the total profit at an activity level of 1,000 units. (3 marks) 3. Moyalematt supermarket maintains a variety of inventory. The following information is given for stock item “Z”: 1. Consumption in kilograms per month: 2. Lead time is 5 – 8 days. 3. Annual holding cost per unit per annum is Sh.26.60. 4. The purchase price is Sh.200 and discounts are not allowed. 5. The ordering cost per order is Sh.798. 6. The annual demand is the accumulated monthly consumption. Required: 1. The optimal economic order quantity (EOQ). (3 marks) 2. Frequency of placing orders. (2 marks) 3. Reorder level. (2 marks) 4.  Maximum inventory level. (2 marks) (Total: 20 marks) QUESTION TWO 1. Outline FOUR assumptions of cost volume profit (CVP) analysis. (4 marks) 2. Highlight FOUR factors influencing wage rate determination. (4 marks) 3.  Toto enterprise manufactures dolly kits for children. It is currently considering various techniques of overhead absorption that are more efficient to apply to job costing: Required: Calculate the overhead absorption rate (OAR) on the following basis: 1. Percentage of direct material cost basis for cost centre P. (2 marks) 2. Direct labour hours basis for cost centre Q. (2 marks) 3. A particular job marked as Job number JB22 consumed the following inputs during the year: Additional information: 1. Administration overheads are absorbed at the rate of 20% on factory costs. 2. Profit mark-up is 331/3 % on cost. Required: Calculate the total cost and total sales for Job number JB22. (6 marks) Assuming the job number JB22 consists of 50 items, calculate the selling price per unit. (2 marks) (Total: 20 marks) QUESTION THREE 1. Explain FOUR functions of management accounting in decision making. (8 marks) 2. Identify FOUR sources of loss in process costing. (4 marks) 3. Oilivya Ltd. manufactures an industrial lubricant, which is formed by subjecting certain crude oil chemicals to two successive processes namely; P and Q. The output of process P is passed to process Q where it is blended with other chemicals. The process costs for period 3 were as follows: Additional information: 1. General overhead cost for the period amounted to Sh.27,200 and is absorbed into process costs on a process labour basis. 2. The normal output of process P is 80% of input, while that of process Q is 90% of input. 3. Waste matter scrapped from process P is sold for Sh.2 per kg, while that from process Q is sold for Sh.3 per kg. 4. The output for period 3 were as follows: • Process P 2,300 kg • Process Q 4,000 kg 5. There was no stock or work in progress at either the beginning or the end of the period, and it may be assumed that all available waste matter had been sold at the prices indicated. Required: Prepare the following process accounts: 1. Process P. (4 marks) 2. Process Q. (4 marks) (Total: 20 marks) QUESTION FOUR 1. Kandogo guest house operates service costing system. The following costs were incurred during a 30-week year: 1. Weekly cost incurred per guest was as follows: 2. The hotel operates for 30 weeks a year. 3. Fifteen guests are received per week. 4. Each guest is charged Sh.100,000 per week. 5. Fixed salary and supervision expenses are Sh.11,000,000 per annum. 6. Rent and rates for the property per annum is Sh.4,000,000. 7. Recreation and accommodation fixed costs are Sh.1,000,000 per annum. Required: Total cost per annum. (4 marks) Cost per guest per week. (3 marks) Hotel profit/(loss) per guest per week. (3 marks) 2. Furahia Ltd. operates in the entertainment and event organising industry and one of its activities is to promote concerts at locations through-out the county. The company is examining the viability of a concert in Raha County. Selling price, fixed costs and variable costs will comprise of the following cost structure: Required: 1. The number of tickets that must be sold to break-even. (4 marks) 2. The number of tickets to be sold to earn Sh.5,715,000 target profit. (2 marks) 3. The profit, assuming 85,000 tickets are sold. (2 marks) 4. The number of additional tickets that must be sold to cover extra cost of television advertising of Sh.13,335,000. (2 marks) (Total: 20 marks) QUESTION FIVE 1. By citing ONE example for each, define the following types of costs: Avoidable costs. (2 marks) Prime costs. (2 marks) Marginal costs. (2 marks) 2. Derap Enterprise wishes to prepare a master budget for the forthcoming period. Information regarding products, costs and sales levels is as follows: Additional information: 1. Opening inventory of material T was 14,075 kilograms and for material Z was 15,750 litres. 2. Closing inventory of finished goods will be sufficient to meet 20% of sales demand. 3. Closing inventory of materials will be sufficient to meet 25% of production requirements. 4. Material prices are Sh.15 per kilogram for material T and Sh.12 per litre for material Z. 5. Labour costs are Sh.120 per hour for the skilled workers and Sh.80 per hour for the semi-skilled workers. Required: Prepare the following functional budgets: 1. Production budgets in units only. (3 marks) 2. Material usage budget in kilograms and litres. (3 marks) 3.

MONDAY: 5 December 2022.      Morning Paper.       Time Allowed: 3 hours. Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper. QUESTION ONE 1. Define the term “giffen goods” as used in economics. (2 marks) 2.  Outline SIX assumptions of the production possibility frontier. (6 marks) 3.  Explain THREE limitations of macroeconomics theory. (6 marks) 4. State SIX effects of price fluctuations in the agricultural sector in an economy. (6 marks) (Total: 20 marks) QUESTION TWO 1. State FOUR characteristics of a monopoly market structure. (4 marks) Using a well labelled diagram, illustrate the longrun equilibrium point of a firm operating in a monopoly market structure. (6 marks) 2. Explain FIVE arguments in favour of enhancing the mobility of the factors of production. (10 marks) (Total: 20 marks) QUESTION THREE 1. Define the term “spot exchange rate”. (2 marks) Explain FOUR advantages of a managed floating exchange rate. (8 marks) 2. The following represents the demand and supply functions for a commodity in a certain market: Q – 4P = –5 Q – 13 = –5P Required: Determine the demand function and supply function. (5 marks) Determine the equilibrium price and equilibrium quantity. (5 marks) (Total: 20 marks) QUESTION FOUR 1. State FOUR characteristics of a mixed economy. (4 marks) 2. Suggest SIX determinants of labour supply in an economy. (6 marks) 3. Discuss FIVE monetary policies used by central bank to control the amount of money in circulation in an economy. (10 marks) (Total: 20 marks) QUESTION FIVE 1. Using a diagram, explain the law of decreasing return to scale. (6 marks) 2.  State EIGHT negative effects of inflation in an economy. (8 marks) 3. With reference to national income, summarise THREE limitations of the multiplier. (6 marks) (Total: 20 marks) QUESTION SIX 1. The economic transaction figures of Pwato Republic in thousands of shillings are as follows: Sector Total output Intermediate purchases Agricultural 56,000 33,000 Manufacturing 97,000 64,000 Service 72,000 46,000 Required: Compute the Gross National Product of Pwato Republic, using the value added approach of National Income. (2 marks) Calculate the Net Domestic Product at market prices and factor cost, if the indirect taxes and fixed assets depreciation is equal to 20,000 and 25,000 respectively. (4 marks) 2.  Suggest SIX policy measures that might be implemented by developing countries in order to accelerate their economic growth and development. (6 marks) 3.  State FOUR reasons why unemployment is a major policy issue in developing countries. (4 marks) 4. Explain FOUR challenges facing small scale industries in developing countries. (4 marks) (Total: 20 marks) QUESTION SEVEN 1. Using a diagram, show the indifference curves for complimentary and perfect substitute goods. (6 marks) 2. Distinguish between “own price elasticity of demand” and “cross elasticity of demand”. (6 marks) 3. Explain TWO exceptions of the law of diminishing marginal utility. (4 marks) 4. Outline FOUR factors that limit the effective implementation of fiscal policy in developing countries. (4 marks) (Total: 20 marks)

TUESDAY: 6 December 2022.          Afternoon Paper.            Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Any assumptions made must be clearly and concisely stated. Do NOT write anything on this paper. RATES OF TAX (Including wife’s employment, self-employment and professional income rates of tax). Year of income 2021. Assume that the following rates of tax applied throughout the year of income 2021: QUESTION ONE 1. Explain the following terms as used in taxation of employment income: Benefits in kind. (2 marks) Deemed interest. (2 marks) 2. Outline TWO conditions where an individual is deemed to be resident in Kenya for tax purposes. (4 marks) 3. Ezekiel Keboi is an employee of Sabuk Ltd. The following information relate to his income for the year ended 31 December 2021: 1. His basic salary was Sh.515,000 per month (PAYE Sh.154,600 per month). 2. He was provided with a company house with electricity, water and telephone. 3. During the year, the employer paid Sh.60,000 for his life insurance policy. 4. He was provided with a 2000cc saloon car which had an initial cost of Sh.2,600,000. 5. During the year, the company settled his bills as follows: Sh. Electricity 28,000 Water 12,000 Telephone 32,000 6. During the year, he was reimbursed Sh.180,000 spent on medical bills. The company has a medical cover for all staff. 7. His employer contributes 3% of his basic salary to a pension scheme while he contributes an equal amount. 8. He spent Sh.20,000 in December 2021 for entertaining the company’s customers which was fully reimbursed by the company. 9. He received Sh.350,000 as annual bonus which is usually payable to all employees in December each year. 10. He received an overtime allowance of Sh.40,000 in the month of December 2021. Required: Compute the total taxable income for Ezekiel Keboi for the year ended 31 December 2021. (10 marks) Determine the tax payable (if any) from the income computed in (c) (i) above. (2 marks) (Total: 20 marks) QUESTION TWO 1. Explain the following terms as used in taxation: Bond security. (2 marks) Stamp duty. (2 marks) 2. Identify FOUR documents required by the customs authority when clearing imported goods in Kenya. (4 marks) 3. Haziki Enterprises is registered for value added tax (VAT) purposes dealing in electrical appliances and accounts for VAT on monthly basis. The following information relates to the month of August 2022: All transactions are inclusive of value added tax (VAT) at the standard rate of 16% or any other applicable rate. Required: Determine the VAT payable or refundable to Haziki Enterprises for the month of August 2022. (12 marks) (Total: 20 marks) QUESTION THREE 1. Outline FOUR instances when the Commissioner might cancel a personal identification number (PIN) as provided under the Tax Procedures Act, 2015. (4 marks) 2. Identify SIX items that the Commissioner should specify in writing and notify the taxpayer when he has made an amended assessment. (6 marks) 3. Sportsline Manufacturing Ltd. commenced operations on 2 January 2021 as a manufacturer of sports shoes. The company acquired and constructed the following assets before commencing operations: Additional information: 1. The cost of land includes Sh.1,800,000 paid for a building on site as at 2 January 2021. The building was constructed by the seller on 1 January 2019 at a cost of Sh.2,000,000. Sportsline Ltd. converted this building into a warehouse with effect from 2 January 2021. 2. The cost of constructing the factory building included Sh.800,000 spent on the construction of administration offices. 3. The following assets were purchased and utilised by the company with effect from 1 June 2021: 4. On 1 July 2021, the company constructed a factory extension at a cost of Sh.2,400,000. Processing machinery costing Sh.840,000 was purchased and installed in the factory extension on 15 August 2021. 5. Saloon car purchased on 2 January 2021 was involved in an accident on 1 September 2021. The company received Sh.2,500,000 as insurance compensation for the vehicle. 6. The following costs were incurred on 1 September 2021: Required: Compute the investment allowance due to Sportsline Manufacturing Ltd. for the year ended 31 December 2021. (10 marks) (Total: 20 marks) QUESTION FOUR 1. Discuss FOUR principles of taxation as advocated by Adam Smith. (8 marks) 2.  Safi Ltd., a company dealing with laundry services has provided the following statement of profit or loss for the year ended 31 December 2021: Additional information: 1. Salary and wages includes Sh.6,600 paid to the Revenue Authority as penalties and interests on delayed submission of PAYE deduction. 2. Hire purchase interest relates to interest on loans obtained to purchase a delivery van Sh.14,600 and the chairman’s personal car Sh.26,700. 3. The company directors and senior managers are given free laundry services at the company’s laundry. The cost of cleaning their personal clothing for the year ended 31 December 2021 was Sh.13,300. 4. Legal and professional expenses includes Sh.14,600 incurred while defending the managing director in a private suit. 5. Repair and maintenance include the cost of acquiring a second hand laundry machines for Sh.16,700. 6. The 10% of bad and doubtful debt relate to general provision for bad debt while the balance relate to specific provision for bad debts. 7. Subscription and donations comprise: Sh. • Subscription to the chamber of commerce 32,350 • Donation of books to Watoto School for the blind 3,500 • Donation to political party 1,250 8. Sundry expenses include Sh.26,300 paid to Heal Africa for the Managing Director’s medical cover. He is the only one in the company covered by the medical scheme. 9. Investment allowance for the year ended 31 December 2021 has been agreed with the Commissioner at Sh.432,000. Required: Prepare adjusted taxable profit or loss for Safi Ltd. for the year ended 31 December 2021. (12 marks) (Total: 20 marks) QUESTION FIVE 1. Explain the following terms as used in customs and excise

TUESDAY: 6 December 2022.     Morning Paper.        Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Do NOT write anything on this paper. QUESTION ONE 1.  Describe each of the following sampling techniques: Cluster sampling. (3 marks) Stratified sampling. (3 marks) 2. The table below shows the annual maize output for 100 farmers in a certain locality in the month of March 2022: Required: Compute the: 1. Mean maize output. (3 marks) 2. Modal maize output. (3 marks) 3. Median maize output. (3 marks) 4.Coefficient of variation. (3 marks) Interpret your results in 4 above. (2 marks) (Total: 20 marks) QUESTION TWO 1. Differentiate between an “identity matrix” and a “vector matrix” giving an example in each case. (4 marks) 2. A manufacturer produces 10 units of product R and 30 units of product S at a total cost of Sh.17,000 in week 1. The manufacturer also produces 20 units of product R and 40 units of product S at a total cost of Sh.26,000 in week 2. Required: Determine the cost of producing each unit of product R and each unit of product S using the matrix method. (6 marks) 3. In a bucket, there are 7 red balls and 5 green balls. Three balls are selected from the bucket without replacement. Required: 1. Represent the above information in a tree diagram. (6 marks) 2. Find the probability that the three balls selected are of the same colour. (4 marks) (Total: 20 marks) QUESTION THREE 1. Compute the value of K in the quadratic equation: –2k2 + 7k + 4 = 0 (3 marks) 2. Citing an example in each case, describe the following terms in the context of descriptive statistics: Skewness. (3 marks) Kurtosis. (3 marks) 3. Distinguish between “simple interest” and “compound interest”. (4 marks) 4. Jane Oluoch intends to deposit money in one of her two accounts; A and B. If she deposits Sh.400,000 in account A, it earns a simple interest at a rate of 18% per annum for 5 years. If she deposits Sh.400,000 in account B, it earns interest at a rate of 14% per year compounded quarterly for 5 years. Required: Calculate the interest earned by depositing in account A. (2 marks) Calculate the interest earned by depositing in account B. (3 marks) Citing a reason, advise Jane Oluoch on the most profitable account to invest in. (2 marks) (Total: 20 marks) QUESTION FOUR 1. State four applications of mathematical functions in business. (4 marks) 2. Explain four assumptions of the break even analysis. (8 marks) 3. Hedi Limited has a demand function; 3Q = P – 7 in Sh. “000” where: Q is the quantity of goods produced and sold and P is the selling price in shillings per unit. The variable cost per unit of production is Sh.23,000 and the fixed cost is Sh.200,000. Required: 1. Determine the break even point quantity. (6 marks) 2. Determine the profit maximising output. (2 marks) (Total: 20 marks) QUESTION FIVE 1. Find the derivatives of the following functions: f(x) = x1⁄2 (2 marks) f(x) = 5×2 (x + 47) (2 marks) 2. Kera Omondi is an employee of Hashina Motors Limited. He received a net pay of Sh.113,536.90 for the month of May 2022. The employer had provided him with a house allowance of Sh.20,000 and a medical allowance of Sh.11,000. The net tax payable in May 2022 was Sh.49,563.10.The monthly personal relief provided was Sh.2,400. Other deductions made on his salary in the month of May were as follows: Sacco shares Sh.4,000 NSSF Sh.200 Car loan Sh.6,000 NHIF Sh.1,300 The rates of tax are as shown in the table below: Monthly income Tax rates First Sh.24,000 10% Next Sh.8,333 25% Above Sh.32,333 30% Required: 1. Kera Omondi’s gross salary for the month of May 2022. (3 marks) 2. Net tax payable by Kera Omondi for the month of June if his monthly salary was increased by 15% in June 2022. (3 marks) 3. The following are prices in shillings and quantities in kilogrammes of goods consumed by households in the suburbs of Nairobi City in the years 2020 and 2021. Required: 1. Laspeyres price index. (3 marks) 2. Paasches price index. (3 marks) 3. Marshalls Edgeworth price index. (3 marks) 4. Interpret the result in 3 above. (1 mark) (Total: 20 marks)

MONDAY: 5 December 2022.       Afternoon Paper.        Time Allowed: 3 hours. Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper. QUESTION ONE 1. Explain FOUR decisional roles of management as advocated by Henry Mintzberg. (4 marks) 2. Outline SIX internal environmental factors that may affect business operations in an organisation. (6 marks) 3. Highlight FIVE reasons why managers may not delegate authority to their subordinates. (5 marks) State FIVE principles of delegating responsibility. (5 marks) (Total: 20 marks) QUESTION TWO 1. Democratic leadership style is perceived to be ideal in many organisations. With reference to the above statement, highlight SEVEN advantages of democratic style of leadership. (7 marks) 1. State SEVEN limitations of matrix organisation structure. (7 marks) 2. Enumerate SIX ways of minimising employee resistance to organisational change. (6 marks) (Total: 20 marks) QUESTION THREE 1. Highlight SEVEN merits of a bureaucratic system in an organisatiion. (7 marks) 2. Outline SEVEN advantages of using budgets as a form of control system in an organisation. (7 marks) 3. Groups within an organisation might be used as a medium of change. Examine THREE principles of using groups as a medium of change. (6 marks) (Total: 20 marks) QUESTION FOUR 1.  Assess FIVE characteristics of Fayol’s Administrative Theory. (10 marks) 2. Outline SIX functions of middle level management in an organisation. (6 marks) 3. Highlight FOUR ways in which control could become dysfunctional in an organisation. (4 marks) (Total: 20 marks) QUESTION FIVE 1. Outline SIX benefits that might be obtained by an organisation from effective planning. (6 marks) 2. With reference to Abraham Maslow’s hierarchy of needs theory, and for each level of need, analyse a strategy that managers could employ to promote satisfaction of their employees in an organisation. (10 marks) 3. Enumerate FOUR essential elements of directing. (4 marks) (Total: 20 marks) QUESTION SIX 1. Explain the term “span of control”. (2 marks) Analyse FIVE factors affecting the span of control in organisations. (10 marks) 2. Examine FOUR limitations of “the chain of command principle”. (8 marks) (Total: 20 marks) QUESTION SEVEN 1. Describe FIVE components in the organising process. (10 marks) 2.  Assess FIVE principles of organising. (10 marks) (Total: 20 marks)

MONDAY: 5 December 2022.          Morning Paper.                  Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Do NOT write anything on this paper. QUESTION ONE 1. Citing FOUR reasons, justify why not-for-profit entities should be subject to regulation. (8 marks) 2. Vipi Traders’ financial year ends on 31 March. On 1 April 2021, Vipi Traders had a balance on plant account of Sh.334,800,000 and on accumulated depreciation of plant account of Sh.184,860,000. Vipi Traders’ policy is to provide depreciation using the reducing balance method applied to the non-current assets held at the end of the financial year at the rate of 20% per annum. Depreciation charge is not pro-rated. On 1 September 2021, the company sold for Sh.12,330,000 a plant which it had acquired on 31 October 2018 at a cost of Sh.32,400,000. Additionally, installation costs totalled Sh.3,600,000. During the year ended 31 March 2020, major repairs costing Sh.5,670,000 had been carried out on this plant. A new motor was fitted on the plant on 12 December 2020 at a cost of Sh.3,960,000. Further repairs costing Sh.2,430,000 were carried out during the year ended 31 March 2021. The company acquired a new replacement plant on 30 November 2021 at a cost of Sh.8,640,000 inclusive of installation charges of Sh.6,300,000. Required: Plant account. (4 marks) Accumulated depreciation on plant account. (6 marks) Profit or loss on disposal of plant. (2 marks) (Total: 20 marks) QUESTION TWO 1. The following are summarised financial statements of Tazama Ltd. for the years ended 30 June 2021 and 30 June 2022. Additional information: 1. As at 1 July 2020, opening inventory was valued at Sh.11,000,000. 2. As at 1 July 2020, accounts receivable and accounts payable were valued at Sh.18,000,000 and Sh.17,600,000 respectively. 3. During the years ended 30 June 2021 and 30 June 2022, 80% of sales were on credit while 10% of purchases were on a cash basis. Assume a 365-day year. Required: Compute each of the following ratios for the years ended 30 June 2021 and 30 June 2022: Quick ratio. (2 marks) Inventory turnover. (2 marks) Accounts receivable turnover in days. (4 marks) Accounts payable turnover in days. (4 marks) Times interest earned ratio. (2 marks) Highlight THREE risks that might arise due to each of the following situations: Low inventory turnover. (3 marks) High debtors turnover. (3 marks) (Total: 20 marks) QUESTION THREE Jayden and Imani are in a business partnership trading under the name Jayman Partnership. Jayden and Imani share profits and losses equally. They do not maintain proper books of accounts. They have provided you with the following information for the year ended 30 September: Additional information: 1. Credit sales during the year amounted to Sh.163,116. All purchases made during the year ended 30 September 2022 were on credit. 2. On 1 October 2021, Jayden’s capital was Sh.10,000,000 less than that of Imani. Imani’s capital amounted to Sh.80,000,000. 3. The current accounts for Jayden and Imani each had a balance of Sh.2,616,000 as at 1 October 2021. 4. The capital accounts earn an interest of 1% per annum. 5. During the year ended 30 September 2022, some motor vehicles were disposed of on credit for Sh.32,000,000. Jayden also sold other partnership’s motor vehicles for Sh.12,500,000 and withdrew the cash for personal use. The combined net book value of all these motor vehicles was Sh.33,000,000. These transactions have not been recorded in the books of account. 6. Depreciation is to be provided on a reducing balance method as follows: Asset Rate per annum Motor vehicles 12.5% Furniture and fittings 10% No depreciation is charged in the year of disposal. 7. As at 30 September 2022, pre-paid insurance amounted to Sh.3,000,000. 8. As at 30 September 2022, the outstanding expenses were as follows: Sh.“000” Administrative expenses 180 Electricity expenses 624 Internet and stationery 312 Required: 1. Statement of profit or loss and appropriation account for the year ended 30 September 2022. (10 marks) 2. Partners’ current accounts. (4 marks) 3. Statement of financial position as at 30 September 2022. (6 marks) (Total: 20 marks) QUESTION FOUR The following balances were extracted from the books of Sukari Ltd. as at 31 October 2022:   The following additional information is available: 1. Depreciation is provided annually on cost of the assets as follows: • Building – 20% • Fixtures and fittings – 10% 2. A customer who owed Sukari Ltd. Sh.10,000,000 has been declared bankrupt. 3. The allowance for doubtful debts as at 31 October 2022 is to be adjusted to 5% of outstanding accounts receivable. 4. Additional provision for corporate tax of Sh.25,000,000 is to be made. 5. As at 31 October 2022, administrative expenses accrued amounted to Sh.7,000,000. 6. The company paid the interest on debentures for the year ended 31 October 2022 on 30 November 2022. 7. As at 31 October 2022, closing inventory was valued at Sh.560,000,000 at cost and Sh.480,000,000 on realisable value. 8. The suspense account relates to issue of additional 100,000 ordinary shares at Sh.400. 9. The company’s directors propose the following: • Preference shares dividend be paid. • A dividend of 10% on the ordinary share be paid. • Sh.13,000,000 to be transferred to general reserves. Required: 1. Statement of profit or loss for the year ended 31 October 2022. (12 marks) 2. Statement of financial position as at 31 October 2022. (8 marks) (Total: 20 marks) QUESTION FIVE 1. State FOUR elements of financial statements. (4 marks) 2. Explain FOUR reasons why an organisation’s statement of cash flows might be useful and reliable than its statement of profit or loss. (8 marks) 3.  Argue TWO cases for and TWO cases against the use of accrual method of accounting in the public sector. (8 marks) (Total: 20 marks)

TUESDAY: 6 December 2022.     Morning Paper.         Time Allowed: 3 hours. Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper. QUESTION ONE 1.Identify TWO reasons why a menu driven interface is suitable for a novice user. (2 marks) Outline TWO application areas of a menu driven interface. (2 marks) 2. ABC Ltd. sold a custom-built software to XYZ Company. Summarise FOUR factors that ABC Ltd. would consider in confirming that the software is appropriate to XYZ Company. (4 marks) 3. In a busy office environment, a non-impact printer may be better than an impact printer. State THREE reasons to justify this statement. (6 marks) 4. Application software can either be “off-the-shelf” or “bespoke”. Differentiate between the above two types of application software using the following features: Flexibility. Functionality. Training. (6 marks) (Total: 20 marks) QUESTION TWO 1. Suggest THREE important features to consider when buying a computer keyboard. (3 marks) 2.  Explain TWO basic components of a computer network. (4 marks) 3.  Highlight FIVE reasons why flash disks have become more popular than optical disks. (5 marks) 4. Discuss FOUR salient features of computerised accounting software (CAS). (8 marks) (Total: 20 marks) QUESTION THREE 1.  Explain FOUR activities that are performed by an operating system during management of Input/output devices and ports. (4 marks) 2.  Explain the purpose of a switch and a router in a wireless LAN (WLAN). (4 marks) 3.  Highlight THREE advantages and THREE disadvantages of network operating systems. (6 marks) 4. Assess TWO application areas of spread sheets. (6 marks) (Total: 20 marks) QUESTION FOUR 1.  Outline THREE reasons why it is important to create different user accounts in a computer network. (3 marks) 2.  List FIVE advantages of using 5G technology. (5 marks) 3.  An accounting software is supposed to ensure security, integrity and confidentiality of data. Describe THREE security features that an accounting software should have. (6 marks) 4.  Explain THREE reasons why you would recommend the use of a CAT 6 cable. (6 marks) (Total: 20 marks) QUESTION FIVE 1. Highlight TWO factors to consider when choosing an operating system. (2 marks) 2. Explain THREE criteria that should be considered when setting up a local area network. (6 marks) 3. Evaluate SIX reasons why a business organisation may want to use PDF files. (6 marks) 4. List SIX advantages of Conditional Formatting in a spreadsheet. (6 marks) (Total: 20 marks) QUESTION SIX 1. Define each of the following terms as used in computing: Information. (2 marks) Booting. (2 marks) Processing. (2 marks) Virus. (2 marks) 2.  Joyce Wambua intends to connect all her computers to the internet. Outline THREE hardware requirements she will need to accomplish this task. (3 marks) 3. Explain FOUR file management activities that are done by the operating system. (4 marks) 4. James Okoth was tasked with acquiring an application software for an organisation. Explain FIVE features that he should consider when buying the software. (5 marks) (Total: 20 marks) QUESTION SEVEN 1. Outline THREE benefits of using wireless fidelity technology for network connectivity. (3 marks) 2. Highlight THREE advantages of using a word processor software over a type writer. (3 marks) 3.  State FOUR factors which may prevent computer users from using speech input devices. (4 marks) 4. Outline FOUR reasons why a calculator is regarded as a computer. (4 marks) 5. An operating system provides a standard interface between a computer user and the computer system for communication. Other than a menu driven interface, explain TWO types of interfaces citing their application areas. (6 marks) (Total: 20 marks)

TUESDAY: 6 December 2022.      Afternoon Paper.          Time Allowed: 3 hours. Answer any THREE questions in SECTION I and any TWO questions in SECTION II. ALL questions carry equal marks. Do NOT write anything on this paper. SECTION I QUESTION ONE 1. Define the term “entrepreneurial opportunity”. (1 mark) List SIX qualities of a good entrepreneurial opportunity. (6 marks) 2. Identify FIVE challenges faced by entrepreneurs at the growth stage of the business. (5 marks) 3. Analyse FOUR categories of stakeholders that could contribute to the success of a new business venture. (8 marks) (Total: 20 marks) QUESTION TWO 1. Outline FIVE restrictions that a franchisor could impose on a franchisee. (5 marks) 2. Identify FIVE benefits of marketing to a business organisation. (5 marks) 3. Analyse FIVE reasons that make an executive summary to be the most important component of a business plan. (10 marks) (Total: 20 marks) QUESTION THREE 1. Explain the meaning of a business incubator. (2 marks) Summarise FOUR roles of a business incubator. (8 marks) 2. Highlight FOUR factors that might be considered by an entrepreneur when selecting venture capital. (4 marks) 3. Discuss THREE similarities between a sole proprietorship business and a partnership form of business ownership. (6 marks) (Total: 20 marks) QUESTION FOUR 1. Define the term “imitative entrepreneur”. (1 mark) Identify FIVE characteristics of successful entrepreneurs. (5 marks) 2.  Discuss FOUR key steps taken in new product and service development to ensure a successful launch. (8 marks) 3. Explain THREE advantages of corporate entrepreneurship. (6 marks) (Total: 20 marks) SECTION II QUESTION FIVE 1. Outline FIVE requirements of an effective advertisement. (5 marks) 2. Identify FIVE features of grapevine communication. (5 marks) 3. Analyse FIVE rules of writing an effective business letter. (10 marks) (Total: 20 marks) QUESTION SIX 1. List FIVE reasons that could make an interviewer take notes during a job interview. (5 marks) 2. Highlight FIVE limitations of formal communication. (5 marks) 3. Describe FIVE stages of the listening process followed in order to make oral communication effective. (10 marks) (Total: 20 marks) QUESTION SEVEN 1. State FOUR items that should be included in a notice of an annual general meeting of a public limited company. (4 marks) 2. Identify SIX major elements of the process of communication. (6 marks) 3. With reference to presentations, analyse FIVE reasons of carrying out an audience analysis. (10 marks) (Total: 20 marks)

MONDAY: 5 December 2022.       Afternoon Paper.          Time Allowed: 3 hours. Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper. QUESTION ONE 1. In relation to the law of persons, define the following terms: Domicile of origin. (2 marks) Domicile of dependence. (2 marks) Domicile of choice. (2 marks) 2. Summarise FOUR duties of a lessee. (8 marks) 3. Discuss THREE ethical practices in a business. (6 marks) (Total: 20 marks) QUESTION TWO 1. Identify FIVE grounds of removing a high court Judge from office. (5 marks) 2. List FIVE branches of civil law. (5 marks) 3. Explain FIVE factors to consider when filing a case in court. (10 marks) (Total: 20 marks) QUESTION THREE 1. In relation to alternative dispute resolution: Define the term “mediation”. (2 marks) Highlight THREE principles of mediation. (3 marks) Identify FIVE drawbacks of negotiation. (5 marks) 2. Distinguish between a “general agent” and a “special agent”. (4 marks) 3.  In relation to intellectual property, explain THREE criteria that a patent has to satisfy in order to qualify for protection. (6 marks) (Total: 20 marks) QUESTION FOUR 1. Outline THREE laws that govern ethics in Kenya. (3 marks) 2. In the context of agency relationship: Define the term agency. (2 marks) Highlight THREE duties of an agent. (3 marks) Identify TWO duties of a principal. (2 marks) 3. In relation to sale of goods, explain FIVE differences between a “sale” and an “agreement to sell”. (10 marks) (Total: 20 marks) QUESTION FIVE 1. Enumerate SIX general characteristics of law. (6 marks) 2. Identify FOUR challenges of common law that equity sought to address. (4 marks) 3. Discuss FIVE principles of insurance. (10 marks) (Total: 20 marks)   QUESTION SIX 1. Distinguish between a “contract of indemnity” and a “contract of guarantee”. (4 marks) 2.  With reference to negotiable instruments: Identify FOUR types of bills of exchange. (4 marks) Highlight SIX features of a bill of exchange. (6 marks) 3. Explain THREE rules governing the rights of a hirer to terminate a hire purchase agreement. (6 marks) (Total: 20 marks) QUESTION SEVEN 1.  Distinguish between a “tort” and a “crime”. (4 marks) 2.  In relation to the tort of defamation, define the following terms: Fair comment. (2 marks) Justification or truth. (2 marks) Libel. (2 marks) Slander. (2 marks) Unintentional Defamation. (2 marks) 3.  In the event that a public officer contravenes the code of conduct for public officers, explain THREE ways investigations could be carried out on the public officer. (6 marks) (Total: 20 marks)

MONDAY: 5 December 2022.              Morning Paper.              Time Allowed: 3 hours. Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings. Do NOT write anything on this paper. QUESTION ONE 1.  Identify the accounting principles applied in each of the following statements: (i) John Mrefu withdrew Sh.200,000 from the business bank account for his personal use. (1 mark) (ii) Rita Neno is confident that her business will be in existence in year 2035. (1 mark) (iii) The accountant of one Traders did not pay the electricity bill last month, but has accounted for it. (1 mark) 2.  Distinguish between the various needs and interests of the following users of accounting information: (i) “Investors” and “lenders’. (4 marks) (ii) “Employees” and “government”. (4 marks) 3.The following information is provided by the petty cashier of Dawa Traders for the month of November 2022: November 1 Received Sh.206,400 from the chief accountant November 2 Purchased newspapers and printing papers for Sh.4,800. November 3 Paid for data bundles worth Sh.1,600. November 7 Paid a supplier, Purity, Sh.12,800. November 10 Paid an amount of Sh.21,600 for fuel. November 11 Purchased stationery for Sh.24,000. November 12 Purchased mops and cleaning detergents for Sh.5,440. November 15 Paid for motor vehicle repairs for Sh.25,600. November 22 Paid for fuel of Sh.16,000 November 28 Paid for cleaning services of Sh.6,400. The petty cashier had Sh.33,600 on 1 November 2022. Required: Prepare a petty cash book with the following headings: Internet and stationery. Transport. Cleaning. Ledgers. (9 marks) (Total: 20 marks) QUESTION TWO Citing relevant examples, explain the difference between “real accounts” and “nominal accounts”. (4 marks) Discuss FOUR limitations of the historical cost accounting method. (8 marks) Chakula Traders is a wholesale distributor of foodstuff. They offer credit terms to their customers. Allowance is made for doubtful debts based on the outstanding accounts receivable and general economic conditions. The following data was collected from the books of account of Chakula Traders for the year ended 30 June: Required: Allowance for doubtful debts account for each of the three years. (4 marks) Extract of the statement of profit or loss for the years ended 30 June 2020, 2021 and 2022. (2 marks) Extract of the statement of financial position as at 30 June 2020, 2021 and 2022. (2 marks) (Total: 20 marks) QUESTION THREE The following balances were extracted from the books of Pillar Limited as at 30 June 2022: Additional information: 1. Inventory as at 30 June 2022 was valued at Sh.24,000,000. 2. As at 30 June 2022, accrued insurance expenses amounted to Sh1,700,000 while outstanding salaries and wages amounted to Sh.4,500,000. 3. Depreciation is to be provided per annum as follows: Building 2.5% on reducing balance Equipment 10% on straight line basis Motor vehicles 20% on reducing balance 4. Provide for audit fees and corporate tax for the year ended 30 June 2022 at Sh.6,000,000 and Sh.35,500,000 respectively. 5. Directors proposed: Transfer of Sh.7,500,000 to the general reserve. Dividend of 10% for ordinary shares. Required: Statement of profit or loss for the year ended 30 June 2022. (12 marks) Statement of financial position as at 30 June 2022. (8 marks) (Total: 20 marks) QUESTION FOUR The trial balance of One Zero Ltd. did not balance and thus the difference was posted to a suspense account. The following is One Zero’s statement of financial position as at 30 September 2022: Additional information: Thorough investigation of the books of account revealed the following errors: 1. Purchase day book entries for July 2022 had been undercast by Sh.1,200,000. 2. A receipt of Sh.2,400,000 from a debtor had been credited to sales. 3. An accrual of Sh.318,750 for insurance charges had been omitted from the books. 4. A bad debt of Sh.207,000 had not been written off from the books of account. 5. The sales account had been under cast by Sh.360,000. 6. The bank debit column in the cashbook for August 2022 was undercast by Sh.2,160,000. 7. On 30 September 2022 cheques of Sh.1,890,000 were received from customers and the transactions were not recorded in the books of account until 7 October 2022. 8. Discount allowed of Sh.1,020,000 had not been recorded in the books of account. 9. No entry had been made for a refund of Sh.2,190,000 paid by cheque to a customer who had returned some goods. 10. Payment to a supplier Sharon Lilo of Sh.2,300,000 had been erroneously entered in another suppliers account named Sharon Jana. Required: Journal entries to correct the above errors. (10 marks) (Narrations not required) Suspense account duly balanced. (2 marks) Corrected statement of profit or loss for the year ended 30 September 2022. (4 marks) Adjusted statement of financial position as at 30 September 2022. (4 marks) (Total: 20 marks) QUESTION FIVE 1.  Distinguish between the following terms: (i) “General ledger” and “subsidiary book”. (4 marks) (ii) “Ordinary shares” and “preference shares”. (4 marks) 2.  The following balances were extracted from the books of Kwale Wholesalers as at 30 September 2022: Additional information: 1. A cheque for Sh.1,325,000 from Kiu Limited, a credit customer, has been returned by bank marked “refer to drawer”. 2. Bad debts of Sh.4,615,000 are to be written off and the allowance for doubtful debts is to be raised to 10% of the debts balances at 30 September 2022. 3. On 30 September 2022, a cheque for Sh.928,000 was received from the liquidator of Mirare Traders. This customer owed Kwale wholesalers Sh.6,800,000 when it ceased to trade in May 2020, at the height of Covid-19 pandemic. The debt had been written off as a bad debt in the year ended 30 September 2021. No entry in respect of this amount received has yet been made in the books. Required: Accounts receivable control account for the year ended 30 September 2022. (6 marks) Accounts payable control account for the years ended 30 September 2022. (6 marks) (Total: 20