Q1. (a) List and explain the main reasons why conceptual framework of accounting is
important. [4 marks]
(b) What is the difference between sale with recourse and sale without recourse for receivables. [3 marks]
(c) How is materiality related to proper presentation of accounting information?
[3 marks]
(d) The following record of Traders Limited was for the month of May 2009.
May 1 Balance of 200 units valued at 4000/=
May 10 Sales of 150 units @ 39/=
May 15 Bought 180 units @ 19/=
May 20 Sold 120 units @ 41/=
May 31 Bought 200 units @ 20/=
Required: (i) Cost of goods sold
(ii) Profit arising
(iii) Stock value (using LIFO) [7 marks]
(e) The concept of lower of cost or market value is important in stock valuation.
Discuss. [3 marks]
Q2. (a) On April 1st, 2002, traders acquired 3 plant machinery to improve on
satisfying his demand for goods at a cost of Ksh.1,000,000 each. He used the machines upto the year 2004 when he decided to sell one and realized Ksh.500,000 on 30 September 2004.
The policy of the company has been to depreciate fully on the year of acquisition and prorate on the year of sale. The depreciation rate has been 7% reducing balance method.
Required: Show the plant account, accumulated depreciation account and plant disposal A/c for the years 2002, 2003 and 2004. The financial year runs from January to December 31st .
[Show your workings] [15 marks]
(b) Distinguish depreciation and depletion as cost allocation exercise. [5 marks]
Q3. (a)balance of debtors as at 31st December 2009 is KSh.3,000,000. He
has always observed that 7% of debtors as doubtful. At the close of the year 31st December 2008, the balance in allowance for bad debts was KSh.41,000.
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