KIKAAYA VOCATIONAL SCHOOL

END OF TERM EXAMS 2008

PRINCIPLES OF ACCOUNTS
TIME: 1 ½ HOURS

ATTEMPT ALL QUESTIONS IN BOTH SECTIONS

1. Capital employed is calculated using

A) CE = A – L C) CE = FA + CA
B) CE = FA + Two D) CE = FA +CL

2. How do we determine capital owned by a firm?

A) Subtracting fixed assets from current assets
B) Deducting current liabilities from current assets
C) Adding up all the current assets
D) Subtracting all the liabilities from assets

3. Why should we extract a balance that

A to prove the arithmetic accuracy of ledgers
B. To determine the profit and losses
C. To show the principal position of the business
D. To determine capital

4. Give an example of a long term liability

(A. loan B. patent right C. Credit D. Debtor

5. ………………….. shows the financial picture of the business at a particular

date
A. balance sheet B. assets C. statement of accounts
D. trial balance

6. Working capital (WC) is determined by the formula

A. WC = A – L B. WC = CA – CL C. WC = TA – CA
D. WC = FA + CL

7. A liability is the indebtedness of the………………….. to the………….

A. Business, outsider B. Outsider, business C. Owners,
business
D. owners, insiders

8. Working capital is,

A. the amount of capital invested in a business
B. capital less drawings
C. the excess of current assets over current liability
D. fixed assets over current assets
9. ……………. Is a dealing involving immediate cash payment
 A. credit transaction B. cash transaction C. trading D. retailing

10. …………………. Is the most important book in accounting known as

principle book.
A. ledger B. cash book C. journal D. trial balance.

SECTION B

11. Why do we study accounts? Give 5 reasons.

12. Who are the users of accounting information? Give 5

13. Differentiate between the following:

(a) Accounting and book keeping. (b) Assets and liabilities
(c) Cash transaction and credit transaction
(d) Sales ledger and purchases ledger
(e) Solvency and insolvency

14. Prepare a balance sheet in the vertical format of Abdul Nasse and sons
Ltd as at 31st Jan 2008
Capital 340,000
Good will 65,000
Land 100,000
Buildings 180,000
Furniture 120,000
4 years loan 45,000
3 years loan 60,000
Motor van 90,000
Stock 70,000
Debtors 5,000
Creditors 70,000
Bank over draft 60,000
Cash 100,000
Accrued expenses 50,000
Out standing rent 55,000

15. Draw a balance sheet of Maggie M and family advocates in the order of
liquidity as at 31stJan 2001 and determine capital using C = A – L

Premises 60,000
Wood will 40,000
5 years loan 60,000
2 years loan 50,000
Fitting 30,000
Motor van 25,000
Cash at hand 45,000
Bank overdraft 40,000
Furniture 30,000
Creditors 60,000
Stock 100,000
Debtors 45,000
Accrued rent 70,000
Outstanding insurance 60,000
Land 25,000

END