a) Explain what is meant by the terms:

i. Revenue expenditure. [2 marks]
ii. Capital expenditure. [2 marks]

b) Give one example of:

i. Revenue expenditure [1 mark]
ii. Capital expenditure [1 mark]

c) The following information is available for a business run by Paul Simiyu for the year ended 31 December 2011.

Current sales
Gross profits
Net profit
Average stock
Capital
Average Debtors Kshs.
650,000.00
227,500.00
143,000.00
21,125.00
357,500.00
75,000.00

Required:

Calculate for the year 2011

i. Gross profit ratio [2 marks]
ii. Net profit ratio [2 marks]
iii. Rate of stock turnover [2 marks]
iv. Debtors collection period in days [2 marks]

Jane is a treasurer of her own local Tennis club.

i. Name two accounts which Jane would present to the club at the annual General meeting. [4 marks]

ii. Name ONE source of funds available to the club to finance an extension to the clubhouse. [2 marks]

e) Harry and Barry are in partnership. Their not profit for the year was ksh.462,000. Harry started with a balance of ksh.160,000 on 1st January 2011. In his capital account and invested a further ksh.20,000 on 1st January. Barry’s capital account balance on 1st January 2011 was ksh.40,000 with no further investment during the year.

Partnership salaries: Harry ksh.24,000
Barry ksh.30,000

Profits and losses are shared by the partners in the ratio of their capital balances at the end of the year.

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