THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD

A Committee of the Council of ICPAU

CPA (U) EXAMINATIONS

LEVEL ONE

FINANCIAL ACCOUNTING – PAPER 1

MONDAY 14 MARCH, 2022

INSTRUCTIONS TO CANDIDATES:
1. Time allowed: 3 hours 15 minutes.
The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. This examination contains Sections A and B.
3. Section A is bound separately from Section B.
4. Attempt all the 20 multiple–choice questions in Section A. Each question
carries 1 mark.
5. Attempt four of the five questions in Section B. Each question carries 20
marks.
6. Write your answer to each question on a fresh page in your answer
booklet.
7. Please, read further instructions on the answer booklet, before attempting
any question.

 2022 Public Accountants Examinations Board

 Financial Accounting - Paper 1

SECTION B
Attempt four of the five questions in this section.
Question 2
(a) Explain purpose of a three column cash book and describe how it feeds
into financial statements.
(5 marks)
(b) Explain the term timing differences in bank reconciliation and give two
examples of such differences.
(4 marks)
(c) Night cave Ltd had the following information for the month of December,
2021.
Night Cave bank statement for the month December 2021.
Date Details Debit Shs Credit Shs Balance Shs
1 Bal b/d 112,456,000
1 Cash 5,500,000 117,956,000
1 Chq no.112 6,000,000 123,956,000
2 Chq no. 9 2,300,000 121,656,000
2 Chq no.10 1,100,000 120,556,000
4 Bank charges 35,000 120,521,000
4 Stamp duty 1,050 120,519,950
5 Chq no. 321 8,400,000 128,919,950
6 Chq no. 666 6,600,000 135,519,950
7 Commission received 1,200,000 136,719,950
7 Chq no.245 4,640,000 141,359,950
9 Chq no. 11 2,300,000 139,059,950
10 Chq no. 12 540,000 139,599,950
11 Cash 9,500,000 149,099,950
12 S.O Insurance 1,400,000 147,699,950
15 Chq no. 422 13,300,000 160,999,950
17 Chq no.89 7,600,000 168,599,950
21 Chq no. 13 420,000 168,179,950
22 S.O Rent 3,340,000 164,839,950
30 Chq no. 456 4,600,000 169,439,950

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 Financial Accounting - Paper 1

Cash book (Bank column) for December 2021.

Date Details Debit Shs ‘000’ Date Details Credit Shs ‘000’
Bal b/d 112,456 2 Chq no. 9 2,300
1 Bank 5,500 2 Chq no.10 110
1 Chq no.112 6,000 5 Chq no. 321 4,800
6 Chq no. 666 660 9 Chq no. 11 2,300
7 Chq no.245 4,640 10 Chq no. 12 540
11 Cash 9,500 21 Chq no. 13 4,200
15 Chq no. 422 13,300 22 S.O Rent 3,340
20 Chq no.909 3,750 22 Chq no.14 2,100
23 Chq no. 345 6,580 25 Salary 6,500
24 Chq no.774 6,230 26 Chq no. 15 5,200
29 Chq no. 890 7,890 28 Chq no.16 1,650
30 Chq no. 456 4,600 17 Chq no.89 760
- 31 Bal c/d 147,306
181,106 181,106
Additional information:
1. The bank made errors in cheques no. 12 and 13.
2. Other errors are deemed to have occurred in the cashbook.
3. Cheques no. 890 and 16 were dishonored by the bank.
Required:
Prepare for Night Cave Ltd for the month of December 2021:
(i) adjusted cash book. (6 marks)
(ii) bank reconciliation statement. (5 marks)
(Total 20 marks)
Question 3
(a) Explain depreciation in relation to:
(i) Matching concept. (2 marks)
(ii) Consistency concept. (2 marks)
(iii) Prudence cost concept. (2 marks)
(b) Kawomera Ltd processes and bottles juice from mangoes and oranges.
Kawomera Ltd has provided the following information in relation to its non-
current assets.
Details: Shs ‘million’
Cost 900
Accumulation depreciation as at 1 January, 2019 320

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 Financial Accounting - Paper 1

Additional information:
1. On 3 January 2019, a new bottle cleaning machine was bought from
Germany. The purchase price was Shs 50 million, refundables taxes
Shs 12 million, non refundable taxes Shs 20 million, freight costs Shs
3 million and installation and testing Shs 500,000.
2. On 28 December 2019, Kawomera Ltd disposed of bottle filling
machine which had been acquired on 8 January, 2015 at a cost Shs
80 million at shs 40 million.
3. On 5 January 2020, the bottle capping machine which was acquired
on 12 February 2015 at Shs 75 million was traded in with a new
capping machine. The old machine was valued at Shs 35 million and
Kawomera Ltd topped up cash of Shs 45 million.
4. The depreciation policy of Kawomera Limited is to depreciate plant
and equipment at a rate of 10% on cost. In addition, full years
depreciation is provided for in the year of acquisition and none in the
year of disposal.
5. All company transactions are done through the bank.
6. The financial year of Kawomera Ltd ends 31 December.
Required:
Prepare for the year ended 31 December, 2019, 2020 and 2021, a
combined;
(i) non-current asset account. (5 marks)
(ii) accumulated depreciation account. (6 marks)
(iii) disposal account. (3 marks)
(Total 20 marks)

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 Financial Accounting - Paper 1

Question 4
Asio, Acham and Amirah are in partnership and their audit firm is registered as
AAA Associates. Asio, Acham and Amirah share profits in ratio of 2:3:1
respectively.
AAA Associate’s trial balance as at 31 December, 2021.
Debits Credits
Account title: Shs ‘000’ Shs ‘000’
Motor vehicles at cost 120,000
Furniture at cost 12,000
Computers at cost 24,000
Accrued income 42,500
Prepaid income 24,200
Consultancy fee 60,500
Rent expense 6,500
Utilities 850
Salaries 12,400
General expenses 4,950
Accumulated depreciation as at 1 January, 2021
Motor vehicles 30,000
Furniture 1,800
Computers 4,800
Capital balances:
Asio 50,000
Acham 60,000
Amirah 40,000
Current balances:
Asio 2,600
Acham 1,200
Amirah 16,500
Bank overdraft 1,200
Drawings:
Asio 12,000
Acham 11,600
Amirah 13,000 -
276,300 276,300
Additional information:
1. Utilities Shs 150,000 remained outstanding while rent Shs 500,000 was
prepaid.

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2. Consultancy fees Shs 6.8 million received from the clients for the services
rendered during the year was omitted completely from the books. In
addition, consultancy fees income provided in the trial balance, includes
Shs 3 million received for services to be rendered in the future.
3. Effective 1 October, 2021, all partners received salary Shs 150,000 each
per month. This transaction was not effected in the books.
4. It is the policy of the partnership business to depreciate non-current assets
as follows:
Non-current asset Depreciation rate per annum Method
Motor vehicles 25% Straight line
Furniture 15% Straight line
Computers 20% Straight line
5. Interest on capital is 2% while on drawings is 15% per annum.
6. It is the partnership’s policy to maintain 20% of the profit as un-
appropriated.
7. The net profit for the year after appropriations but before deducting the
un- appropriated profit is Shs 4,490,000.
Required:
(a) Determine the profit to be shared and each partner’s profit share.
(2 marks)
(b) Partners’ capital and current account.
(11 marks)
(c) Prepare a statement of financial position as at 31 December, 2021.
(7 marks)
(Total 20 marks)
Question 5
(a) Explain the role of entrepreneurship in economic development of Uganda.
(5 marks)
(b) Cindelera owns a wholesale shop in Kikubo but doesn’t keep books of
account following double entry principles. The business started on 1
January 2020.

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 Financial Accounting - Paper 1

She has approached you for assistance and provided the following
information.
31 December, 2020 31 December, 2021
Assets & liabilities Shs ‘000’ Shs ‘000’
Building 150,000 ?
Furniture 16,000 ?
Delivery van 60,000 ?
Accounts payable 24,500 8,900
Accounts receivable 12,600 54,500
Prepaid utilities - 250
Accrued salaries & wages - 1,500
Bank balance 14,450 ?
18% bank loan 50,000 ?
Inventory 32,500 24,800
Cash 9,750 ?
Additional information:
1. The capital on 1 January, 2021 is Shs 220.8 million.
2. The following were some of the payments made through the bank
during the year.
Shs ‘000’
Drawings (son’s wedding) 1,050
Purchases 26,400
Utilities 350
Salaries & wages 4,200
General expenses 3,250
Accounts payable 28,960
3. Cash payments during the year were:
Shs ‘000’
Utilities 2,540
Repairs & maintenance 850
Drawings (son’s wedding) 2,000
Purchases 18,500
4. Cash sales for the year amounted to Shs 28.4 million.
5. She normally withdraws Shs 100,000 every week from the bank and
uses it as cash for the business.
6. Cinderela paid Shs 10 million through the bank, covering full interest
on the loan for the year and the balance is part payment on the loan
principle.
7. She received Shs 35 million cash and Shs 2.5 million by cheque from
debtors.
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8. She provides for depreciation on all non-current assets using the

reducing balance method as follows:
Percentage rate per annum
Building 12%
Furniture 15%
Delivery van 25%
9. Cinderella had her personal land valued at Shs 25 million. She has
now decided to use this land for business purposes.
10. Rental income earned from renting out part of the business building
is Shs 24,860,000. This was received through the bank.
11. She sends cash Shs 10,000 every week plus sending charges of Shs
1,500 to her mother in the village. She picks this money from the
business safe.
Required:
For the year ended 31 December 2021, prepare for Cindelera a
statement of:
(i) profit or loss. (5 marks)
(ii) Cash book. (4 marks)
(iii) financial position. (6 marks)
(Hint: provide all the necessary working)
(Total 20 marks)
Question 6
The book keeper of TIK Ltd prepared a trial balance for the year ended 31
December, 2020 but the trial balance did not agree. The credits exceeded the
debits by 3,616,350. The book keeper proceeded to draft financial statements,
with the difference being presented as a suspense in the statement of financial
position. The draft statement of profit or loss showed a profit of Shs 15,689,000
for the year ended 31 December, 2021.
Further scrutiny of the accounting records revealed the following omissions and
errors:
1. The balance due to one of the suppliers, Kikuubo United Enterprises, was
overstated by Shs 1,470,500.
2. Purchase of a motor vehicle Shs 45 million had been debited to the
purchases account.
3. Carriage outwards Shs 2,150,000 had been credited to the return outwards
account as Shs 215,000.
4. The sales account was overcast by Shs 3,450,200.

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5. The discount totals from the three column cash book were posted to
discount accounts only. The figures were Shs 2,330,500 and Shs
3,250,150 for discount received and discount allowed respectively.
6. Utilities paid of Shs 670,000 and a supplier invoice Shs 5,660,000 received
28 December, 2021 were completely omitted from the books of account.
7. Rental income Shs 6.5 million was posted as Shs 5.6 million in the rent
account but posted properly in the cash book.
8. Bank charges Shs 45,000 were properly posted to the bank charges
account. Erroneously, the book keeper debited the cash book with bank
charges of Shs 4,500.
9. A credit note Shs 2.4 million was properly posted to the customer’s
account but recorded in the corresponding account as Shs 4.2 million.
Required:
Prepare for TIK Ltd for the year ended 31 December, 2021:
(i) Journal entries to correct the errors. (10 marks)
(ii) Suspense account. (5 marks)
(iii) Corrected net profit. (5 marks)
(Total 20 marks)

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