December 2023

WEDNESDAY: 6 December 2023. Morning Paper. Time Allowed: 2 hours. This paper is made up of fifty (50) Multiple Choice Questions. Answer ALL questions by indicating the letter (A, B, C or D) that represents the correct answer. Each question is allocated two (2) marks. Do NOT write anything on this paper. 1. When preparing the statement of profit or loss, why is carriage inwards included in the cost of sales? A. Carriage outwards is included in other revenue expenses B. It should decrease the value of purchases C. It is an expense connected with selling goods D. It is an expense connected with buying goods (2 marks) 2. Which of the following is FALSE? A. (i) and (ii) B. (ii) and (iii) C. (i) and (iii) D. (i), (ii) and (iii) (2 marks) 4. What is an allowance for doubtful debts? A. Money set aside in case of future bad debts B. Money set aside to replace bad debts C. Money set aside to pay for debtors who fail to pay D. Money set aside to adjust the net profit (2 marks) 5. Which of the following errors could be disclosed by the trial balance? A. Receipt from Kipepeo recorded in Kikapu’s account B. Distribution expenses recorded in cash book only C. Purchases of Sh.250,000 was omitted from the books of account D. Credit sales of Sh.300,000 recorded as Sh.30,000 in the books of account (2 marks) 6. When the owner of a business takes goods for their own use, the double entry is _______________________. A. Debit drawings account, Credit purchases account B. Debit purchases account, Credit drawing account C. Debit drawing account, Credit inventory account D. Debit sales account, Credit inventory account (2 marks) 7. Which of the following statements explain why a bank statement shows a different balance from cash book bank column? A. Recording too many transactions in a day B. Customers paying money direct to the bank C. Withdrawing any time during working hours D. Failing to balance both bank statement and cash book (2 marks) 8. A cheque paid by the business, but not yet passed through the banking system is _________________. A. Direct deposit cheque B. A dishonoured cheque C. An uncredited cheque D. An unpresented cheque (2 marks) 9. Which one of the following should be accounted for as capital expenditure? A. Repair of windows B. Purchase of furniture for resale C. Legal fees incurred on the purchase of a building D. The cost of repainting a building (2 marks) 10. Preference shareholders have______________________. A. Preferential right as to dividend only B. Preferential right in the management C. Preferential right as to repayment of capital at the time of liquidation of the company only D. Preferential right as to dividend and repayment of capital at the time of liquidation of the company (2 marks) 11. The accountant of Sama Limited debited rent with Sh.1,000,000 instead of Sh.1,500,000 but, credited sales with Sh.1,500,000 instead of Sh.2,000,000. What type of error was committed by these entries? A. Error of original entry B. Compensating error C. Error of principle D. Error of reversal of entries (2 marks) 12. Which of the following items will NOT appear on the same side of the trial balance? A. Drawings and accrued expenses B. Carriage outwards and prepaid expenses C. Carriage inwards and rental income D. Opening inventory and purchases (2 marks) 13. The partnership agreement contains the following items EXCEPT ____________________. A. Partner’s capital B. Profit and loss sharing ratios C. Partners ages D. Partners salaries (2 marks) 14. How are the profits divided among partners in the absence of a partnership deed? A. Depending on the capital invested B. Depending on the work experience C. Unequal D. Equally (2 marks) 15. Why do creditors require accounting information? A. To ascertain the assets the business has B. To ascertain the profit the business makes C. To ascertain the amount a business can borrow D. To ascertain the money the business has in the bank (2 marks) 16. In the sales ledger control account, bad debts written off should be recorded ____________________. A. As a debit B. As a credit C. Both debit and credit D. As a balance carried down (2 marks) 17. What is a “source document”? A. A document that provides information about the business B. A document that provides the accounting information C. A document that provides information concerning the debtors D. A document that provides information concerning the creditors (2 marks) 18. Define books of original entry. A. These are books in which prime entries are recorded B. These are books where credit sales are recorded first C. These are books where credit purchases are recorded first D. These are books which double entries of transactions are entered (2 marks) 19. Where is the information to prepare control accounts obtained from? A. Source documents B. Books of original entry C. Invoices and receipts D. Trade receivable and payables (2 marks) 20. During the month ended 31 October 2023, the following transactions took place in the business of Harry Oliwa: Calculate the net sales for the month of October 2023. A. Sh.1,324,000 B. Sh.1,299,000 C. Sh.1,119,000 D. Sh.1,324,500 (2 marks) Use the following information to answer question 21, 22 and 23. Antony, Ben, and Clara are in a partnership. The following information was extracted from their partnership accounts: (i) Interest on capital is charged at 5% per annum (ii) Interest on drawings is charged at 10% per annum (iii) Ben is entitled to a salary of Sh. 4,800,000 per annum (iv) Capital contributed by partners is as follows 21. Calculate the total interest on drawings from the partnership. A. Sh.998,000 B. Sh.810,000 C. Sh.1,345,000 D. Sh.885,000 (2 marks) 22. Calculate the total interest on capital contributed by partners. A. Sh.2,900,000 B. Sh.2,150,000 C. Sh.2,000,000 D. Sh.1,650,000 (2 marks) 23. Calculate the profit shared amongst the partners. A. Sh.4,683,000 B. Sh.13,728,000 C. Sh.9,483,000 D. Sh.6,028,000 (2 marks) Use the following information to answer Question 24

THURSDAY: 7 December 2023. Morning Paper. Time Allowed: 2 hours. This paper is made up of fifty (50) Multiple Choice Questions. Answer ALL questions by indicating the letter (A, B, C or D) that represents the correct answer. Each question is allocated two (2) marks. Do NOT write anything on this paper. 1. ___________ is responsible for converting the data received from the user into a computer understandable format. A. Output Unit B. Input Unit C. Memory Unit D. Arithmetic & Logic Unit (2 marks) 2. Which of the following ICT resources can access a server? A. Web Client B. User C. Web Browser D. Web Server (2 marks) 3. ________________ is NOT a form of data storage media. A. A database B. Magnetic tape C. Magnetic disc D. Optical disc (2 marks) 4. An example of a browser software is____________. A. Microsoft Word B. Notepad C. Internet navigator D. Microsoft Edge (2 marks) 5. In computer architecture, the cache memory works between _____________. A. ROM and CPU B. RAM and ROM C. CPU and RAM D. Random and secondary memory (2 marks) 6. When discussing technology, which of the following statement best describes a hot spot? A. A small overheated area on a CPU B. A place served by public wireless access C. Jargon for an X-rated Web site D. A faulty area in the programming code (2 marks) 7. A computer virus that actively attacks an anti-virus program in an effort to prevent detection is known as _______. A. Worm B. Retrovirus C. Trojan D. Ghost virus (2 marks) 8. What is World Wide Web? A. A computer game B. A software program C. The part of the Internet that enables information-sharing via interconnected pages D. Another name for the Internet (2 marks) 9. Which of the following forms the foundation of fifth-generation computers? A. Artificial Intelligence B. Vacuum tubes C. VVLSI D. Transistors (2 marks) 10. Which computer generation saw the introduction of the microprocessor? A. First Generation B. Fourth Generation C. Second Generation D. Third Generation (2 marks) 11. _____________ refers to the period of time that a computer spends processing a job. A. Execution Time B. Real Time C. Delay Time D. Waiting Time (2 marks) 12. Which of the following term can be used to refer to a Landscape in context of word processing program? A. A font style B. Paper size C. Page layout D. Page orientation (2 marks) 13. What is a “folder” as applied in operating system? A. A catalogue for files stored on the hard disk of a computer B. A package of instruction that causes the computer to do something C. Storage of all files which are deleted D. A disk used to store bulk data (2 marks) 14. The product of data processing is referred to as______________. A. Information B. Data C. Software Program D. System (2 marks) 15. A new Laptop comes with various characteristics: weighs less, is smaller and uses less power than previous Laptop models. Which of the following technologies has been used to accomplish this feature? A. Universal Serial Bus Mouse B. Faster Random Access Memory C. Blu Ray Drive D. Solid State Hard Drive (2 marks) 16. The data storage hierarchy consists of: A. Bits, bytes, fields, records, files and databases B. Bits, bytes, records, fields, files and databases C. Bits, bytes, fields, files, records and databases D. Bytes, bits, fields, records, files and databases (2 marks) 17. Which one of the following is NOT an operating system? A. Android Donut B. Unix C. Linux D. Microsoft Word (2 marks) 18. Which program translates an entire set of instructions written in a higher-level language into machine language before the instructions can be executed? A. Interpreter B. Assembler C. Compiler D. Debugger (2 marks) 19. Which one of the following is NOT an advantage of computerisation? A. Becomes outdated quickly B. Reduced costs C. Reduced space requirements D. Provides information to management (2 marks) 20. Which one of the following is NOT a part of system software? A. Device drivers B. Word processing C. Utility programs D. Operating system (2 marks) 21. Which one of the following is NOT an example of a utility software? A. Disk defragmenters B. Antivirus software C. Word Processing D. Backup software (2 marks) 22. What is defined as a large capital letter used as a decorative element at the beginning of a paragraph or section where it is made larger, taking up several lines of text or the first few sentences? A. Word wrap B. Word art C. Drop cap D. Typeface (2 marks) 23. Which of the following is NOT a characteristic of impact printers? A. Cheap to buy B. Slow when printing C. Relatively poor quality printout D. Quiet when printing (2 marks) 24. Which of the following is NOT a type of a Chart in a spreadsheet software? A. Pie B. Combo C. Area D. Flow (2 marks) 25. The statement “covers an entire city”, describes which type of a network? A. LAN B. CAN C. MAN D. WAN (2 marks) 26. What is the name of the networking hardware which provides the physical connection between the network and the computer workstation? A. Network interface card B. Router C. Multiplexer D. Gateway (2 marks) 27. The following are characteristics of a microcomputer computer, EXCEPT _________. A. Small size and low cost B. Low computing power C. Runs many applications at the same time D. Easy to use (2 marks) 28. A set of digits that represents the release date and specific changes to a computer software is known as _________. A. Release B. Version C. Deployment D. Configuration (2 marks) 29. The following are important objectives of computer networks, EXCEPT ____________. A. Resource sharing B. Increase reliability C. Security of resources D. Communication (2 marks) 30. A collection of related fields that can be treated as a unit by an application program is called a _______________. A. Field B. Record C. File D. Database

MONDAY: 4 December 2023. 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. Highlight FOUR arguments against introduction of a management accounting system in a business organisation. (4 marks) 2. Sauti Electronics is a popular car radio retailer. The following information was obtained from one of its outlets: Required: Determine the following: The level of stock that a replenishment order will be required. (2 marks) The minimum level of stock possible. (2 marks) The maximum level of stock possible. (2 marks) The average level of stock. (2 marks) 3. Rolly Motors Ltd. is a manufacturer of quality trucks which they sell at Sh.3,500,000 each. The cost of the company can be separated into fixed and variable costs. The following is a budgeted data for the first six months of the year 2024: Fixed costs for the six months have been spread evenly over the period under review to arrive at the monthly projections. Required: Calculate the total fixed costs for the period using high-low method. (4 marks) Determine break-even-point (BEP) in units and sales revenue. (4 marks) (Total: 20 marks) QUESTION TWO 1. Chanzo Ltd. operates a factory which has four operators working in department RPM400. The company uses time rate system of labour remuneration to compensate its workers. The data about the four employees for the month of November 2023 is as follows: Additional information: 1. Affordable housing levy (AHL) tax of 1.5% is charged on gross income per month. 2. NSSF is deducted at a rate of 5% of the gross income 3. NHIF is deducted at a rate of 3% of the basic pay. 4. PAYE is charged at a rate of 30% of gross income. 5. Housing allowance is provided at a rate of 15% of the basic pay. 6. Gross income is the total of basic pay plus house allowance but before any deductions. Required: Prepare a payroll to show the take-home net pay for the month of November 2023 for the four operators. (8 marks) 2. Dodoma Ltd. has submitted the following data relating to component “T” that it currently manufactures: 2. Dodoma Ltd. has determined that Sh.30,000 of fixed indirect labour cost is an unavoidable cost even if component “T” is outsourced. 3. RVD Ltd. has offered to supply 10,000 units of component “T” to Dodoma Ltd. for Sh.16 per unit. 4. All variables costs are avoidable costs if component “T” is bought from RVD Ltd. Required: Advise Dodoma Ltd. whether to make or buy component “T” from RVD Ltd. (8 marks) Summarise FOUR overriding considerations to be met before accepting “make” or “buy” decision. (4 marks) (Total: 20 marks) QUESTION THREE 1. Explain FOUR features of service costing. (8 marks) 2. The following information relates to the books of Digital Watches Ltd. that produced watches in batches during the three months of September, October and November 2023: Required: Total profit per batch for each month. (6 marks) Cost per watch. (3 marks) Profit per watch. (3 marks) (Total: 20 marks)   QUESTION FOUR 1. Identify SIX types of costs classified by function. (6 marks) 2. Dawa Ltd. is a pharmaceutical company which manufactures antibiotic drugs. Dawa Ltd. has two production departments namely; factory plant and assembly department. The company has also two service departments namely; laboratory that deals with efficacy and chemist that is concerned with stocking of the drugs. The overhead analysis sheet showing primary allocation of overheads analysed to production and service departments are as follows: Additional information: 1. Budgeted direct labour hours were 23,780 hours for factory plant department and 15,050 hours for assembly department. 2. The budgeted direct labour rate per hour is Sh.300 in factory plant department and Sh.510 in the assembly department. 3. The total overheads of the service departments are to be apportioned to production departments as follows: Laboratory: 50% to Factory plant department 30% to Assembly department 20% to Chemistry department Chemist: 60% to Factory plant department 30% to Assembly department 10% to Laboratory department Required: Secondary apportionment of service department total overheads using stepwise method. (8 marks) Compute the overhead absorption rate (OAR) for each production department. (2 marks) A special order of antibiotics capsules has been received from a customer. The management accountant has estimated the costs as follows: Direct material Sh. 225,000 Direct labour: Factory plant 300 direct labour hours Assembly 160 direct labour hours Required: Calculate the total cost of the special order. (4 marks) (Total: 20 marks)   QUESTION FIVE 1. Describe the following types of functional budgets: Sales budget. (2 marks) Production budget. (2 marks) Material purchases budget. (2 marks) Cash budget. (2 marks) 2. Summarise FOUR applications of marginal costing. (4 marks) 3. AMA Ltd. is a company that concentrates wholly on the production of refined vegetable oils for exports and domestic markets. In the year ended 31 August 2023, the company produced 100,000 tonnes of oil out of which 90,000 tonnes were sold. The balance was returned to store. The production cost was as follows: Additional information: 1. 60% of the production overheads are fixed. 2. The average selling price for each tonne of oil was Sh.80,000. 3. Selling and administration expenses for the year amounted to Sh.1,200,000,000 of which Sh.300,000,000 were fixed. 4. There was no opening or closing stock of work-in-progress. Required: Statement of profit or loss for the year ended 31 August 2023 under direct costing method. (6 marks) Minimum number of tonnes of oil that must be produced and sold in order to breakeven. (2 marks) (Total: 20 marks)

TUESDAY: 5 December 2023. 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. Enumerate FIVE factors to consider when choosing a source of finance. (5 marks) 2. Highlight SIX similarities between preference share capital and debt capital. (6 marks) 3. The following is the capital structure of Mugune Limited as at 31 December 2022. Additional information: 1. The company has issued 1,000,000 ordinary shares of Sh.20 par value each. The market value of the ordinary share is Sh.30. 2. The shareholders expect a dividend of Sh.5 per ordinary share with a growth rate of 10% per annum. 3. The corporation tax rate is 30%. Required: The cost of equity. (2 marks) The cost of the 12% loan note. (2 marks) The weighted average cost of capital (WACC) for the company using the market value. (5 marks) (Total: 20 marks)   QUESTION TWO 1. Highlight FOUR reasons for the time preference of money. (4 marks) 2. Explain THREE regulatory measures that govern Islamic finance. (6 marks) 3. Ubunifu company is considering an investment in a new project. The project requires an initial investment of Sh.10 million for equipment, Sh.5 million for inventory and Sh.2 million for installation costs. The equipment will be depreciated using straight line depreciation method over 5 years period with no salvage value. The project is expected to generate sales worth Sh.10 million and incur costs of Sh.3 million at the end of each year for the next 5 years. The corporation tax rate is 30%. Assume a discount rate of 10%. Required: Total initial cash outlay. (1 mark) Annual net operating cash flows for each year. (4 marks) Total terminal cash flow at the end of the project. (2 marks) Determine whether the project is worthwhile using the discounted payback period approach. (3 marks) (Total: 20 marks) QUESTION THREE 1. Agency costs refer to the costs incurred to safeguard the shareholders’ interest. In relation to the above statement, describe THREE types of agency costs. (6 marks) 2. Paul Mwangi has borrowed Sh.1,000,000 from a commercial bank at an interest rate of 12% per annum. The loan shall be repaid over a period of five (5) years. The interest on the loan shall be compounded at the end of each year over the five year period. Required: Total amount payable after five years. (2 marks) Total amount payable after five years assuming interest is compounded semi-annually. (2 marks) Total amount payable after five years assuming interest is compounded continuously using the formula: 3. A manufacturing company, Zoe Limited, is seeking to assess its working capital operating cycle to improve its liquidity management. The following financial data is available for the company: 1. Average inventory Sh.150 million. 2. Average accounts receivable Sh.100 million. 3. Cost of goods sold (COGS) Sh.500 million. 4. Annual sales Sh.750 million. 5. Average accounts payable Sh.75 million. Assume 365 days in a year. Required: Explain the concept of working capital operating cycle. (2 marks) Calculate the following components of working capital operating cycle for Zoe Limited. I. Day sales of inventory (DSI). (1 mark) II. Day sales outstanding (DSO). (1 mark) III. Day payables outstanding (DPO). (1 mark) 3. Determine the overall working capital operating cycle (in days) for Zoe Limited. (3 marks) (Total: 20 marks)   QUESTION FOUR 1. Identify FOUR causes of business risk. (4 marks) 2. Summarise SIX factors that could influence the dividend policy of a firm. (6 marks) 3. The ordinary shares of Bidii Ltd. are currently selling at sh.100 each at the securities exchange. The company’s price earnings (P/E) ratio is 10 times. Bidi Ltd. adopts a 60% payout ratio as its dividend policy. It is predicted that the company’s earnings and dividends will grow at an annual rate of 15% for the first three years, 10% for the next two years and 6% thereafter in perpetuity. The investors minimum required rate of return is 12%. Required: The initial dividend per share (DPS). (2 marks) The current intrinsic value of the shares. (6 marks) Advise the investors based on the results in (c) (ii) above on whether to buy or sell the shares of Bidii Ltd. (2 marks) (Total: 20 marks) QUESTION FIVE 1. Highlight FOUR characteristics of capital investments decisions. (4 marks) 2. Enumerate THREE similarities and THREE differences between “accounting” and “finance”. (6 marks) 3. Billy Lenz is considering buying shares of Kenfam Limited which are currently selling at the securities exchange for Sh.200 each. The forecasted market price of each share at the end of one year’s holding period and the corresponding probability of occurrence are given as follows: Required: The expected rate of returns for Kenfam Limited shares. (5 marks) The standard deviation of the returns for Kenfam shares. (5 marks) (Total: 20 marks)

THURSDAY: 7 December 2023. Afternoon Paper. Time Allowed: 2 hours. This paper is made up of fifty (50) Multiple Choice Questions. Answer ALL questions by indicating the letter (A, B, C or D) that represents the correct answer. Each question is allocated two (2) marks. Do NOT write anything on this paper. 1. Which of the following factors distinguishes a “small business owner” from “an entrepreneur”? A. Small business owners are keen on innovation B. Small business owners undertake high risks C. Small business owners have a long-term vision D. Small business owners do not seek new opportunities (2 marks) 2. Which of the following elements makes up an entrepreneur’s micro-environment? A. Government B. Suppliers C. Technology D. Economy (2 marks) 3. Select the statement that describes the term “business opportunity”. A. A concept in the mind that can provide value for customers B. An entity involved in the production of goods and services C. An idea which provides a possibility of a return on investment D. The process of creating a business for leisure (2 marks) 4. Which of the following represent external sources of business ideas? A. Government, employees, and exhibitions B. Media, suppliers, research and development C. Customers, competitors and distribution channels D. Exhibitions, hobbies and current trends (2 marks) 5. What term refers to buyers with common characteristics that a business decides to serve? A. Target market B. Niche market C. Loyal customers D. Satisfied customers (2 marks) 6. Which of the following could be exploited by an entrepreneur as a business opportunity? A. Established competitors B. Availability of substitutes C. Solution to a problem D. Competent employees (2 marks) 7. Identify a reason that could lead to the failure of a new venture. A. Poor timing B. Controlled growth C. Delegation of duties D. Low competition (2 marks) 8. Which of the following is a disadvantage of a sole proprietorship form of business? A. Limited liability B. Ease of formation C. Lack of continuity D. Business inflexibility (2 marks) 9. What term refers to a situation where two companies join together by mutual agreement to form a new entity? A. Partnership B. Merger C. Acquisition D. Joint venture (2marks) 10. The following are benefits of engaging in a franchising arrangement. (i) Royalty payments (ii) Training and guidance (iii) More control over brand (iv) Easy to enter foreign markets (v) Business growth (vi) Proven track record Which of the set below represents benefits that could accrue to a franchisor? A. (ii), (v), (vi) B. (ii), (iii), (iv) C. (i), (iv), (v) D. (ii), (iv), (vi) (2 marks) 11. Which of the following is a benefit of debt financing to an entrepreneur? A. No limit of amount to be acquired B. No conditions and restrictions C. No relinquishment of ownership D. It is a permanent source of finance (2 marks) 12. Identify a benefit of preparing a business plan. A. Helps in reducing competition B. Helps deal with uncertainties C. Increases the demand of a product D. Helps in keeping financial records (2 marks) 13. What term describes the process of managing profitable customer relationships? A. Customer satisfaction B. Customer value C. Market analysis D. Marketing (2 marks) 14. How could a receiver overcome barriers to oral communication? A. Use complex language B. Act on feedback C. Seek clarification D. Information overload (2 marks) 15. Why should a speaker carry out audience analysis before delivering a presentation? A. Determine size of visual aids B. Determine the occasion C. To select an appropriate topic D. Ensure adequate rehearsal (2 mark) 16. Identify one effective way of concluding a presentation. A. State objectives B. Cite the source C. State facts and statistics D. Call for action (2 marks) 17. What could the display of appropriate posture communicate during an interview? A. Confidence B. Knowledge C. Good health D. Status (2 marks) 18. Which of the following is a purpose of holding a staff meeting? A. Determine attendance B. Write minutes C. Prepare agenda D. Give updates (2 marks) 19. Identify a common role played by both the chairperson and secretary of a meeting. A. Sign minutes B. Prepare notice C. Control meeting D. Open meeting (2 marks) 20. Select the function of an entrepreneur. A. Political opinion leader B. Person who bears risk C. A social mobiliser D. A business analyst (2 marks) 21. Choose the statement describing a partnership deed. A. A document of capital appropriation B. Document showing internal rules of a business C. Document that allows transfer of shares D. Document of transfer of assets to partners (2 marks) 22. Identify a rule observed when writing a complaint letter to an organisation. A. Assuming the organisation is to blame B. Suggesting how the mistake occurred C. Using a forceful and unkind language D. Confining to the facts of the matter at hand (2 marks) 23. Choose a limitation of upward communication. A. Delays in passing information to top management B. Minimises understanding among departments C. It boosts the morale and productivity of employees D. Ensures better understanding and efficiency (2 marks) 24. Identify the problem a sender encounters when the receiver fails to give feedback. A. It confirms that the idea has been understood B. It provides a basis for subsequent action C. Limitation in taking appropriate action D. Resolves uncertainties and gives confidence (2 marks) 25. Choose an advantage of face-to-face communication. A. There is no evidence of communication B. Difficult when parties are far apart C. It can be easily misunderstood D. It enhances communication flexibility (2 marks) 26. Choose an effective method of minimising aspects of communication barriers. A. Use of technical language B. Using body language inappropriately C. Attentive and careful listening D. Complex organisation structure (2 marks) 27. Select a feature of “concreteness” in communication. A. Messages are misinterpreted easily B. Makes use of unclear words C. Makes use of ambiguous terms D. Message with facts and figures (2 marks) 28. Choose a benefit of using notices in an organisation.

TUESDAY: 5 December 2023. Morning Paper. Time Allowed: 2 hours. This paper is made up of fifty (50) Multiple Choice Questions. Answer ALL questions by indicating the letter (A, B, C or D) that represents the correct answer. Each question is allocated two (2) marks. Do NOT write anything on this paper. 1. Which of the following method of data presentation can be used to estimate the mode of a distribution? A. Histogram B. Bar chart C. Pie chart D. Cumulative frequency ogive (2 marks) 2. Which of the following is a discount given for prompt payment? A. Cash discount B. Loyalty discount C. Trade discount D. Special offer (2 marks) 3. Profit expressed as a percentage of cost is referred to as ____________________. A. Margin B. Net profit C. Discount D. Mark-up (2 marks) 4. A book seller bought a statistics book for Sh.420. He intends to make a profit margin of 30%. Calculate the selling price of the book. A. Sh.600 B. Sh.180 C. Sh.240 D. Sh.320 (2 marks) 5. Which of the following is a relative measure of dispersion? A. Range B. Variance C. Standard deviation D. Coefficient of variation (2 marks) 6. The profit function of a certain commodity is given by; -Q² +3Q -2. Calculate the profit maximising quantity. A. -2 B. 1.5 C. 1 D. -1.5 (2 marks) 7. Which of the following is a method of solving simultaneous equations? A. Additive rule B. Matrix method C. Derivatives D. Factorisation (2 marks) 8. The probability that an event will not happen is ____________________. A. 0 B. 1 C. -1 D. (2 marks) 9. A deposit of 20% of marked price is paid if a television set is bought on hire purchase terms. The balance amount plus a 25% interest charge on the balance are paid in 12 equal monthly installments of Sh.8,680 each. When bought on cash basis, a 5% cash discount is provided. Calculate the amount saved when the television set is bought on cash basis and not on hire purchase terms. A. Sh.104,160 B. Sh.26,040 C. Sh.98,952 D. Sh.124,992 (2 marks) 10. The 7th term of a given geometric progression is 320 and the 12th term is 480. Determine the product of the 5th term and the 10th term. A. 2,560 B. 204,800 C. 6,553,600 D. 56,002 (2 marks) 11. When computing index numbers, the number of importance assigned to the variable index is referred to as ________. A. Standard numbers B. Weight C. Index D. Interest (2 marks) 12. Find the inverse of the following matrix: 13. Which of the following defines the matrix below? A. Scalar matrix B. Diagonal matrix C. Identity matrix D. Null matrix (2 marks) 14. A quadratic function is determined by any _________ point (s) on the graph. A. 1 B. 2 C. 0 D. 3 (2 marks) 15. All turning points of a curve have a gradient of: A. 0 B. 2 C. 1 D. -1 (2 marks) 16. The method of data collection where all members of the population are investigated is referred to as: A. Sampling B. Population C. Census D. Research (2 marks) 17. If the occurrence or non-occurrence of one event does not affect the occurrence or non-occurrence of the other event, then the two events are said to be: A. Mutually exclusive events B. Complementary events C. Independent events D. Dependent events (2 marks) 18. If the probability of picking a white ball from a bucket is 0.3, how many balls are in the bucket if there are 15 white balls? A. 20 B. 50 C. 40 D. 35 21. Depreciation is the loss of value of an asset due to________. A. Accident B. Misuse C. Normal usage D. None of the above (2 marks) 22. Which of the following statement BEST describes a class size in statistics? A. The difference between the upper-class limit and lower-class limit B. The difference between the upper-class boundary and the lower-class boundary C. The difference between the highest observation and the lowest observation in a data distribution D. The class frequency (2 marks) 23. The grouping of data values into classes with their corresponding frequencies is referred to as__________. A. Polygon B. Frequency distribution C. Histogram D. Ogive (2 marks) 24. A sales agent is paid a commission of 5% of the total sales made. In the month of June 2023, he earned a commission of Sh.12,000. Calculate the total sales made by the agent. A. Sh.120,000 B. Sh.480,000 C. Sh.1,200,000 D. Sh.240,000 26. A consultant earns a gross salary of Sh.150,000. He pays 30% of his salary to income tax, Sh.400 to NSSF, Sh.1,800 to NHIF and contributes 10% towards company pension fund. Calculate the net salary for the consultant. A. Sh.60,000 B. Sh.62,200 C. Sh.105,000 D. Sh.87,800 (2 marks) 27. Jacob, Celestine and Talie are in partnership business. They share profits in the ratio of 2:5:3. Calculate the amount earned by Talie if the partnership earns Sh.2,300,000 in profits. A. Sh.1,380,000 B. Sh.1,150,000 C. Sh.460,000 D. Sh.690,000 (2 marks) 28. A sales woman is paid a commission of 2% on sales worth up to Sh.200,000. She gets an additional 1.5% on sales above this. She is also paid a monthly salary of Sh.22,000. In the month of August 2023, she sold 400 handbags at Sh.1,500 each. Calculate the total earnings made by the sales woman that month. A. Sh.86,000 B. Sh.32,000 C. Sh.10,000 D. Sh.12,000 (2 marks) 29. The demand function of product Zed is given by a straight line of the form P = a + bx where P is the price and x are the units sold. Determine the demand function if the number of units sold when the price is Sh.10 are 60 units and 10 units when the price is Sh.20. A. P = 22 + 0.2x B. P = 22 – 0.2x C. P = 20 – 0.2x D. P = 20 + 0.2x (2 marks) 30. The data value that has the highest frequency

INTRODUCTION TO FINANCIAL ACCOUNTING DECEMBER 2023 PAST PAPER – Click to view INTRODUCTION TO LAW AND ETHICS ACCOUNTING TECHNICIANS DIPLOMA (ATD) DECEMBER  2023 PAST PAPER – Click to view ENTREPRENEURSHIP AND COMMUNICATION DECEMBER 2023 PAST PAPER – Click to view INFORMATION COMMUNICATION TECHNOLOGY DECEMBER  2023 PAST PAPER – Click to view FINANCIAL ACCOUNTING DECEMBER 2023 PAST PAPER – Click to view PRINCIPLES OF MANAGEMENT DECEMBER 2023 PAST PAPER – Click to view BUSINESS MATHEMATICS AND STATISTICS DECEMBER 2023 PAST PAPER – Click to view PRINCIPLES OF TAXATION DECEMBER 2023 PAST PAPER – Click to view PRINCIPLES OF ECONOMICS DECEMBER 2023 PAST PAPER – Click to view FUNDAMENTALS OF MANAGEMENT ACCOUNTING DECEMBER 2023 PAST PAPER – Click to view FUNDAMENTALS OF FINANCE DECEMBER 2023 PAST PAPER – Click to view PRINCIPLES OF AUDITING DECEMBER 2023 PAST PAPER – Click to view

THURSDAY: 7 December 2023. Morning 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. Describe TWO benefits of an integrated tax system to taxpayers in your country. (2 marks) 2. Explain TWO conditions under which each of the following methods of procurement may be used by public sector entities: Restricted tendering. (4 marks) Request for quotations. (4 marks) 3. In an extract from a public finance publication on “Effectiveness of Medium-Term Expenditure Framework (MTEF)”, the author noted that, the Medium-Term Expenditure Framework (MTEF) is considered appropriate in developing countries because there is fragile linkage between the budgeting system and planning. The MTEF is one of the aspects of public financial management, which incorporates planning into budgeting over the medium term. It should encourage ongoing reallocation and broaden the budgeting scope. The MTEF is meant to achieve a balanced budget, shift resources to pro-poor activities and further the practice of good governance. Despite being considered an aspect of effective budgetary management, it has been reported to be complex and challenging, even in developed countries. Public financial management experts criticise the MTEF and its implementation with the experts questioning MTEF effectiveness and reliability in guiding annual budget processes. Although the MTEF is argued to be complex, some public financial management experts argue that it is the contextual environment of the developing countries which constrains MTEF success. Required: From the above extract, analyse FIVE strategies that developing countries could adopt to minimise conflict between the Medium-Term Expenditure Framework (MTEF) and annual budgeting. (10 marks) (Total: 20 marks)   QUESTION TWO 1. XYZ is a developing country and is struggling with the implementation of public finance reforms. You have been appointed to a taskforce to assess the challenges of implementing the reforms and offer possible solutions. Required: Discuss FOUR challenges that XYZ is likely to face during implementation of public finance reforms. (4 marks) Propose FOUR possible solutions to the challenges cited in (1) (i) above. (4 marks) 2. You are an advisor of the National Treasury of your country, and you have been tasked with formulating a framework for national government borrowing. The government is seeking to strike a balance between funding critical projects and maintaining fiscal stability. There is a need for clear guiding principles to govern borrowing decisions. Required: Summarise FOUR key guiding principles that should inform national government borrowing decisions as provisioned by Public Financial Management regulations 183. (4 marks) Identify FOUR policy frameworks that your government could adopt in public debt management and clearly indicate the role of each framework. (8 marks) (Total: 20 marks) QUESTION THREE 1. Your country is considering a large-scale infrastructure development aimed at upgrading the country’s road network. Further, the project will be financed using a public private partnership model. With reference to the above statement, evaluate FOUR areas of potential revenue losses in public-private partnerships (PPPs) models in infrastructure development and services. (8 marks) 2. During the annual audit committee master class held in your country, one of the speakers made the following observation; “Public sector stakeholders have different perceptions and criticisms on the effectiveness of audit committees and have often labelled audit committees as “talk shops”. Required: Citing FOUR reasons, justify the above observation. (4 marks) 3. Explain FOUR different types of public funds, citing how each contributes to the development in your country. (8 marks) (Total: 20 marks)   QUESTION FOUR 1. Explain FOUR challenges faced in the management of state corporations by most developing countries. (8 marks) 2. Evaluate THREE guiding basic principles used by public entities in deciding whether money or sums should be applied as Appropriation-In-Aid as per Public Financial Management regulations. (6 marks) 3. Analyse FOUR provisions relating to confidential reporting of unlawful acts by the Auditor General as provisioned by section 60 of the Public Audit Act. (6 marks) (Total: 20 marks)   QUESTION FIVE 1. In a public finance management seminar, one of the facilitators noted that “there are certain matters specified under Section 6 of the Public Finance Management (PFM) Act, 2012, where in case of any inconsistence with the PFM Act, the Act shall prevail”. With reference to the above statement, outline FOUR such matters where in case of inconsistence with the PFM Act, the Act prevails. (4 marks) 2. Public Financial Management Regulation 170 (Risk based audit assessment strategic plan) requires that internal audit planning should be carried out on the basis of risk assessment and should be set out in a three-year strategic plan, on the basis of which an annual internal audit activity plan should be developed. As the head of internal audit in a government entity, evaluate THREE procedures you would undertake to ascertain that your department is complying with this regulation. (6 marks) 3. Managing revenue in public finance at the county level can be a complex task, and executive committee members responsible for this area face several difficulties and challenges. In light of the above statement, describe FIVE ways in which executive committee members of finance could address these challenges. (10 marks) (Total: 20 marks)

WEDNESDAY: 6 December 2023. 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. With reference to strategic management accounting, evaluate THREE underpinnings of each of the following concepts: Balanced scorecard model. (3 marks) Responsibility accounting. (3 marks) 2. “Carbon credits” and “carbon credit tax” are increasingly being applied in environmental management accounting (EMA) as transparent measurable and result oriented activities aimed at protecting and preventing environmental degradation by adopting environmental management strategies, policies and compliance requirements. Carbon credit tax (CCT) is aimed at enhancing compliance. CCT is levied on pollution caused by carbon emission to the environment. One of the aims of the tax is to discharge organisations from operating with excessive carbon emission and instead encourage a transition to more sustainable alternatives by detecting and preventing external costs of environmental management. Required: With reference to the above statement, identify THREE benefits that might accrue to an organisation as a result of implementation of carbon credit strategies and policies towards: Environmental detection costs. (3 marks) Environmental external failure costs. (3 marks) 3. TL Ltd. sells three types of mosquito nets branded Zerofly, Whyfly and Nofly. Product Whyfly is currently generating profits below target net profit of Sh.750,000. The following table shows selected data for the three products for the previous year ended 30 June 2023: Additional information: 1. The above data is expected to remain unchanged if Tsavo Ltd. continues producing all the three products. 2. The sales manager believes that profits can be increased by dropping Whyfly due to its low contribution margin ratio and concentrate on the sales of Zerofly and Nofly. 3. The entire workforce used to produce Whyfly will be utilised in the production of Nofly. The labour mobility is such that 3 units of Whyfly equal 1 unit of Nofly. To increase demand for Nofly, a 10% price reduction will be allowed next year after dropping Whyfly. 4. Unit fixed cost is Sh.6.5. 5. TL Ltd. prepares statements on marginal costing basis. Required: Prepare a comparative statement of profit or loss before and after dropping Whyfly. (6 marks) Advise the management of TL Ltd. on whether to continue or drop product Whyfly. (2 marks) (Total: 20 marks) QUESTION TWO 1. Chane Ltd. is considering whether to develop and market a new product. The development cost of the new product will be Sh.360,000,000. Additional information: 1. There is a 75% chance that the product development exercise will be successful. 2. The following matrix relates to the new product: 3. The development cost of Sh.360,000,000 has been accounted for in the calculation of the above profits and losses. Required: As the Management Accountant of Chane Ltd., advise the management of the company on whether or not to develop the new product. (10 marks) 2.  Scotts Ltd. has experienced stock outs occasioned by the company’s poor inventory estimation techniques. The company has therefore engaged you to estimate its demand for the year 2024. The company’s accountant had started using regression analysis and availed the following information to you: 1. The demand for the company’s’ product is dependent on disposable income and price of the products. 2. The analysis of variances table: Required: Develop a regression equation that will be used for prediction. (2 marks) Determine the coefficient of determination. Interpret your result. (4 marks) Test the adequacy of the model for prediction (F tables value 11.56). (4 marks) (Total: 20 marks)   QUESTION THREE 1. Evaluate THREE advantages of using simulation analysis in inventory control. (6 marks) 2. Kaza Joy is a small manufacturing enterprise that makes only three products X, Y and Z. Data for the month ended 30 November 2023 is as follows: Required: Using activity based budgeting (ABB), compute the cost and gross profit per unit for each products during the month. (14 marks) (Total: 20 marks)   QUESTION FOUR 1. Highlight FOUR roles of a management accountant in accounting for environmental costs. (4 marks) 2. Discuss the meaning of the following concepts as used in cost estimation: Economic plausibility tests. (2 marks) Learning curve phenomenon. (2 marks) 3. Alumax Ltd. produces a single product branded “Salfa”. The machine used to make Salfa is obsolete and Alumax Ltd. is contemplating replacing it. Additional information: 1. The replacement cost of a new machine is Sh.1 million with expected useful life of five years. 2. The machine will have no salvage value after decommissioning it. 3. It is expected that 20,000 units of Salfa will be produced and sold at a transfer price of Sh.300 per unit over the five year period as follows: 4. Variable costs are expected to be Sh.165 per unit produced and sold. 5. The incremental fixed costs, mainly the wages of a maintenance engineer are expected to be Sh.200,000 per year. 6. Alumax Ltd. uses an imputed interest cost of capital of 13% for the investment appraisal purposes. 7. Depreciation on this machine is calculated on initial cost of the investment at the start of the year. Required: The residual income (RI) for each of the five years. (6 marks) The return on investment (ROI) for each of the five years. (6 marks) (Total: 20 marks)   QUESTION FIVE Simplex Group Ltd., manufacturers new patented electric motorcycles. The group has two divisions, Robox Division and Safari Division. Robox Division manufactures a “dual electric battery” which is the key component for Safari Division. Safari Division is an assembly and distribution division for electric motorcycles. Robox Division sells the dual electric batteries to Safari Division and to external customers. The following budgeted data is provided for both Robox Division and Safari Division: Additional information: 1. Safari Division uses two electric batteries manufactured by Robox Division to assemble one motorcycle and sells motorcycles directly to external customers. 2. Internal transfer price is set at opportunity costs. 3. Robox Division must satisfy the demand of Safari Division before

WEDNESDAY: 6 December 2023. Morning 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. You are the Audit Manager of Baraka and Company LLP, who are the auditors of Miradi Ltd. for the year ended 30 June 2023. The company has net assets of Sh.150 million. The audit has been completed but there is a matter that has not yet been resolved on depreciation of buildings. The directors of Miradi Ltd. have resolved that depreciation on buildings will not be provided for in the financial statements. The buildings were acquired in the year 2020 and no depreciation has been provided since. Required: Describe SIX additional audit procedures and actions that you could take with respect to the above matter. (6 marks) Assume that, according to your workings, the depreciation charge on the buildings for the year ended 30 June 2023 should be Sh.4,200,000 based on the straight line method of depreciation at an annual rate of 5%. Required: Discuss the implications of the above on the financial statements, clearly indicating its effect on the audit report. (8 marks) 2.  Explain SIX audit risks associated with the audit of financial instruments. (6 marks) (Total: 20 marks)   QUESTION TWO 1. The following is an extract from a speech presented in a recent professional forum: “In the private sector, going concern is an area of interest to users of financial statements. Shareholders and lenders wish to know that a business will continue into the foreseeable future before they can make investment or lending decisions. The going concern concept in the public sector differs from that in the private sector. This is because most public bodies, whether government departments, devolved administrations, local public bodies or national funds have a statutory existence that makes technical insolvency almost impossible. Despite that, stakeholders in the public sector still have an interest in knowing whether these institutions are financially sustainable.” Required: In the context of the above statement, discuss EIGHT factors that an auditor would consider in determining the going concern assumption of a public entity. (8 marks) 2. Describe FOUR procedures that an auditor might perform to identify subsequent events occurring after the financial year end in a company. (4 marks) 3. Your audit firm, KKCO LLP, has been the auditor of Express Ltd., a leading online retailer that was established a few years ago. At inception, the company had an average delivery time of a week, but has since grown to an average delivery time of between one and five days. The company started with three employees and has grown to 1,000 employees including a 150 customer service team who are available 7 days a week. It has emerged that an employee stole Sh.20 million by manipulating vendor payment records pointing to the risk of fraud facing their trading platforms. Required: Prepare a proposal to the directors of Express Ltd. explaining: The need for an internal audit function in the company. (4 marks) The benefits of outsourcing the internal audit function. (4 marks) (Total: 20 marks)   QUESTION THREE 1. Compumax Ltd. is one of your audit clients for the year ended 30 June 2023. The company has followed generally accepted accounting principles and had a conservative approach to recognising revenue from its software application sales. Revenue was recognised only when the product was delivered to the customer. Due to increased competition leading to a declining market share, the Chief Executive Officer (CEO) of the company has put pressure on the Chief Finance Officer (CFO) to find ways to improve the company’s financial performance and boost revenue numbers. In reacting to the pressure, the CFO decided that the new policy will be that revenue from software application sales could be recognised as soon as the contract was signed, regardless of the product’s actual delivery to the customer. The CFO did not disclose the change in policy. With the new policy, the company started recognising revenue from software application sales immediately after contract signing, artificially inflating the company’s revenue figures. This allowed the company to present a more favourable financial status, potentially increasing the share price and attracting new investors. Required: With reference to the above scenario: Describe THREE circumstances under which a change in accounting policy is permissible. (3 marks) Summarise THREE disclosures that could be made in the financial statements regarding the change in accounting policy. (3 marks) Discuss FIVE audit procedures that are necessary where an entity has changed an accounting policy. (10 marks) 2. The question on whether a change constitutes a change in policy or a change in estimate has been a major source of discussion among accountants and auditors. Required: Distinguish between a “change in accounting estimate” and a “change in accounting policy”. (4 marks) (Total: 20 marks)   QUESTION FOUR 1. During the audit of the financial statements of WX Company Ltd. for the year ended 31 December 2022, the auditors realised that new information that had not been accounted for when the management prepared the financial statements had come to their notice as follows: 1. A court case in which a customer had sued the company for goods that got lost in transit from one of the company’s stores was decided against the company. Although the company had made a provision for a refund of the deposit paid on the goods, the court also awarded the customer the costs of the suit and general damages. The total amount payable now exceeds the provision. 2. A customer who owed the company a substantial amount of money and had been having problems paying has had to close business after his bank, from which he had obtained a loan, petitioned for liquidation of the business. Although he had invested the bank loan in a building project, the building had stalled before completion. The materials purchased from WX Ltd. had already been used in the project which the bank

TUESDAY: 5 December 2023. 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) QUESTION ONE 1. Assume that you work for a tax consultancy firm. A client, Masterway Ltd., intends to develop a Transfer Pricing Policy document and has approached your firm for advice on information that it should include in the document. Required: Advise Masterway Ltd. on FOUR items that should be included in a transfer pricing policy document. (4 marks) 2. Asili and Tulivu established a partnership business sharing profits and losses in the ratio of 3:2 respectively. The following statement of profit or loss of the business for the year ended 31 December 2022 was provided: Additional information: 1. Purchases and sales of goods were inclusive of value added tax (VAT) at the rate of 16%. 2. Closing inventory was valued at Sh.5,520,000 while opening inventory was 10% of sales net of VAT. 3. The partnership was converted into a limited company by the name Asili Ltd. on 1 April 2022. 4. Income and expenses accrued evenly throughout the year unless otherwise stated. 5. Legal fees comprised: 8. Interest on loan includes interest on partners capital of Sh.300,000 which was shared according to profit and loss sharing ratio. Required: Prepare a statement of adjusted taxable profit or loss for the year ended 31 December 2022 for: Asili and Tulivu partnership business. (6 marks) Asili Ltd. Company. (7 marks) A schedule showing allocation of adjusted partnership profit or loss computed in (b) (i) above, to the partners. (3 marks) (Total: 20 marks)   QUESTION TWO 1. Tax agents play a crucial role in helping micro and small enterprises (MSEs) comply with tax obligations. In light of the above statement, explain THREE potential areas the revenue authority may collaborate with tax agents to bridge tax gaps in MSEs in your country. (3 marks) 2. Explain THREE ways in which the implementation of the Most Favoured Nation (MFN) status may impede the attainment of economic goals of individual member states within the East African Customs Union. (6 marks) 3. ABC Ltd. acquired a building in March 2021 for Sh.8,500,000 and later on renovated it at a cost of Sh.465,000. Other costs incurred during the acquisition were valuation fees of Sh.84,000 and legal costs on acquisition of Sh.450,000. The building was later sold in October 2023 for Sh.12,400,000. The costs incurred in the process of selling the building were; advertisement Sh.140,000, agent fees Sh.128,000 and valuation fees Sh.136,000. Required: Compute the capital gains tax payable by ABC Ltd. (3 marks) 4. The following incomes and expenses were extracted from the accounting records of Turkanah Oil Ltd. for the year ended 31 December 2022: Required: Prepare a statement of taxable profit or loss of Turkanah Oil Ltd. for the year ended 31 December 2022. (6 marks) Identify the clarifications that the tax authority may seek from the company concerning exploration and drilling costs. (2 marks) (Total: 20 marks) QUESTION THREE 1. Tax investigation involves inquiries into a taxpayer’s affairs where the revenue authority has reasonable cause to believe that a taxpayer is not tax compliant. In relation to the above statement, describe FOUR circumstances that could trigger tax investigations. (4 marks) 2. Explain how the adoption of the following policy frameworks would strengthen revenue mobilisation in your country: Fiscal policy options. (2 marks) Tax policy options. (2 marks) 3. Titanic Air Ventures Ltd. is a company incorporated in Kenya that operates a fleet of passenger and cargo aircrafts in Kenya and other neighbouring countries. The trading results for the year ended 31 December 2022 are presented below: 5. The company purchased two aircrafts in the course of the year at a total cost of Sh.560 million. This excludes the aircraft purchase subsidy from the government. Required: Compute the taxable income and tax payable (if any) by Titanic Air Ventures Ltd. for the year ended 31 December 2022. (12 marks) (Total: 20 marks)   QUESTION FOUR 1. Describe FOUR ways through which the Revenue Authority may address potential tax risks associated with the import and export activities of manufacturing firms in your country. (8 marks) 2. The following is a statement of profit or loss for Express Commercial Bank Ltd. for the year ended 31 December 2022: Required: Compute the adjusted taxable income and tax payable by Express Commercial Bank Ltd. for the year ended 31 December 2022. (10 marks) Express Commercial Bank Ltd.’s taxable income for the year ended 31 December 2021 was assessed as Sh.260,000,000. Calculate the tax due as at 31 December 2022 clearly indicating the due dates for the payment of the tax. (2 marks) (Total: 20 marks)   QUESTION FIVE 1. In a tax dispute resolution mechanism workshop, one of the facilitators noted that, “there is need for establishing a specialised tax court within the country to handle tax appeals from the Tax Appeals Tribunal”. Justify the above statement, citing THREE benefits that could be derived from establishing a specialised tax court. (6 marks) 2. You have been appointed as the finance director of Pixes (Kenya) Ltd., which is a subsidiary of Pixes (UK) Ltd. The board of directors of Pixes (Kenya) Ltd. is concerned that the company may currently be incorrectly accounting for value added tax (VAT) following the numerous changes in the Kenyan tax system introduced through the finance Acts. In particular, they have drawn your attention to the following issues: • VAT treatment on exported taxable services. • Time of supply on imported taxable services. • VAT treatment on taxable digital services. Required: Advise the Board of Directors of Pixes (Kenya) Ltd. on each of the THREE issues raised above. (6 marks) 3. Alexia Gosselin was resident in Kenya during the year ended 31 December 2022. She has

MONDAY: 4 December 2023. 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. International Public Sector Accounting Standard (IPSAS) 20 “Related Party Disclosures”, requires the disclosure of the existence of related party relationships where control exists and the disclosure of information about transactions between the entity and its related parties in certain circumstances. Required: Highlight SIX disclosures about related party transactions that would need to be disclosed to meet the objectives of IPSAS 20. (6 marks) 2. Titans Ltd. which is a wholly owned subsidiary of Venus Ltd. is a cash generating unit in its own right. The value of property, plant and equipment of Titans Ltd. as at 31 October 2023 was Sh.6 million and purchased goodwill was Sh.1 million before impairment loss. The company had no other assets or liabilities. An impairment loss of Sh.1.8 million had occurred as at 31 October 2023. The directors wish to know how the impairment loss will affect the deferred tax liability for the year. Impairment losses are not an allowable expense for taxation purposes. The tax base of the property, plant and equipment as at 31 October 2023 was Sh.4 million. Required: Assuming a corporate tax rate of 30%, discuss with suitable computations how the above situation will impact on accounting for deferred tax under IAS 12 (Income Taxes) in the group financial statements of Venus Group. (8 marks) 3. Saruji Ltd. operates a defined benefit scheme which had a net obligation of Sh.120 million as at 31 December 2021. The following details relate to the scheme for the financial year ended 31 December 2022: The rate of interest applicable to corporate bonds was 5% as at 31 December 2021. The cash contributions to the scheme have been correctly accounted for in the financial statements for the year ended 31 December 2022. This is the only adjustment that has been made in respect of the scheme. Required: Recommend to the directors of Saruji Ltd. the correct accounting treatment of the above transactions in the financial statements for the year ended 31 December 2022, including financial statements extracts in accordance with IAS 19 (Employee Benefits). (6 marks) (Total: 20 marks)   QUESTION TWO H Limited, a public limited company whose functional currency is the Kenya Shilling (KSh.) operates in the digital economy sector. The company has recently diversified its operations by acquiring shares in a foreign entity, S Limited. The functional currency of S Limited is the Krona (Kr.). The following statements of financial position were extracted from the financial records of the two companies as at 30 September 2023. Additional information: 1. On 1 October 2022, H Limited acquired an 80% controlling interest in S Limited for a cash consideration of Ksh.3,000 million when the retained earnings of S Limited stood at Kr.540 million. The fair values of the identifiable net assets of S Limited were Kr.2,700 million. The excess of the fair value over the carrying value was due to an increase in value of plant whose remaining economic useful life approximated five (5) years at acquisition. 2. H Limited uses the fair value method to measure the non-controlling interests in subsidiaries. The fair value of the non-controlling interest in S Limited on 1 October 2022 amounted to Kr.900 million. 3. On 1 October 2022, H Limited exported goods worth Ksh.180 million on account to S Limited. This transaction has been recorded by both entities. However, the account payable is still recorded at the rate of exchange that prevailed at the date of the transaction, in the financial statements of S Limited. All these goods had been sold to third parties by S Limited as at 30 September 2023. 4. Goodwill arising on acquisition of S Limited had not been impaired since acquisition. 5. The following foreign exchange rates are relevant: 6. S Limited has not issued any ordinary shares since the date of acquisition. Required: 1. The value of goodwill arising on acquisition of S Limited in Kenya Shillings (KSh.). (6 marks) 2. Consolidated statement of financial position for H Group as at 30 September 2023. (14 marks) (Total: 20 marks)   QUESTION THREE 1.  In the context of International Financial Reporting Standard (IFRS) for Small and Medium-sized Entities (SMEs), the SMEs Standard, briefly explain TWO accounting choices that are not allowed under the SMEs Standard. (4 marks) 2. The purpose of the statement of profit or loss and other comprehensive incomes is to show an entity’s financial performance in a way that is useful to a wide range of users. However, the accounting treatment and guidance with respect to other comprehensive incomes has been criticised recently. Required: Discuss FOUR criticisms that have been raised in respect to the accounting treatment of other comprehensive incomes. (4 marks) 3. A division of Ziwa Ltd. has the following non-current assets which are stated at their carrying values as at 31 December 2022: Since the assets are used to produce a specific product, it is possible to identify the cash flows arising from their use. The management of Ziwa Ltd. believes that the value of these assets may have become impaired, because a major competitor has developed a superior version of the same products. Forecast cash inflows arising from the use of the assets are as follows: The following additional information is useful: 1. The directors are of the opinion that the market would expect a pre-tax return of 12% on an investment in an entity that manufactures a product of this type. 2. The land and buildings are carried at revaluation. The surplus relating to the revaluation of the land and buildings that remain in the revaluation surplus reserve as at 31 December 2022 is Sh.65 million. All other non-current assets are carried at historical cost. 3. The goodwill does not have a market value. It is estimated that the land and buildings