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(a) Write short notes on the following:-

(i) Real Accounts. (1 Mark)

(ii) Nominal Accounts. (1 Mark)
(iii) Personal Accounts. (1 Mark)
(iv) Contra entry. (1 Mark)

(b) S. Kiwanuka opened a textile business on 1 January 1995. His transactions for the
month of January were as follows:-

January: 2 Opened a bank account and deposited cash of Shs.50,000

and retained Shs.10,000 cash.
3 Paid Shs.3,000 for rent in cash.
4 Purchased clothes for Shs.60,000 from Mulwa and Co. on
5 Sold clothes for Shs.60,000 in cash.
6 Purchased new office furniture for Shs.50,000 by cheque.
9 Banked cash Shs.30,000.
10 Purchased clothes worth Shs.30,000 from Matthew and
Mati Drapers and paid half of the amount by cheque.
11 Sold clothes worth Shs.20,000 on credit to Bagaya
12 Hired transport for Shs.3,000 and paid in cash.
13 Bagaya Exporters returned some clothes costing Shs.3,000
and were given a credit note for the same.
16 Received cheque for Shs.6,000 from Bagaya Exporters on
18 Purchased clothes for Shs.9,000 on credit from Samuel
21 Sold clothes worth Shs.5,000 on credit to B.C. Boutique.
23 Paid Mulwa and Co. Shs.15,000 by cheque on account.
24 Withdrew Shs.6,000 from the bank for personal use.
25 Bought clothes for Shs.8,300 and paid by cheque.
28 Sold clothes for Shs.5,400 to Sunshine Boutique and
received a cheque for Shs.1,400.
30 Paid Matthew and Mati Drapers by cheque the full amount
due to them less 5% discount.
31 Paid salaries Shs.5,000 in cash and a water bill Shs.700 by


(a) Three column cashbook for the month of January. (5 Marks)

(b) Make relevant entries in the ledger and balance all accounts. (6 Marks)

(c) Extract a trial balance as at 31 January, 1995. (5 Marks)

(Total: 20 Marks)


(a) Write short notes on the following:-

(i) Books of original entry. (1 Mark)

(ii) Trade discount. (1 Mark)
(iii) Cash discount. (1 Mark)
(iv) Quantity discount. (1 Mark)

(c) Enter up the Sales, Purchases, Returns inwards and Returns outwards journals
from the following details then post the items to the relevant accounts in the Sales
and Purchases ledgers. Transfer the totals of the journals to the relevant accounts
in the ledger.

May: 1 Credit sales: T. Mzungu Shs.560; L. Kangethe Shs.1,480;
K. Wanga Shs.1,450.
3 Credit purchases: P. Pamba Shs. 1,440; H. Masunde
Shs250; B. Sukuma Shs.760.
7 Credit sales: K. Kihara Shs.890; N. Musinga Shs.780; N.
Osoro Shs.2,570.
9 Credit purchases: B. Kiugu Shs.240; H. Masunde Shs.580;
H. Maina Shs.1,230.
11 Gods returned by us to: P. Pamba Shs.120; B. Sukuma
14 Goods returned to us by: T. Mzungu Shs.50; K. Wanga
Shs.110; K. Kihara Shs.140.
17 Credit purchases: H. Masunde Shs.540; B. Kiugu Shs.650;
L. Nabenga Shs.750.
20 Goods returned by us to B. Sukuma Shs.140.
24 Credit sales: K. Kuria Shs.570; K. Kihara Shs.650; O.
Mbare Shs.1,120.
28 Goods returned to us by N. Musinga Shs.240.
31 Credit sales: N. Osoro Shs.550.

16 Marks

(Total: 20 Marks)


(a) Define the term imprest system for petty cash. (1 Mark)

(b) G. H. Wholesalers operate an imprest system for petty cash with a float of
Shs.50,000. Disbursements are made every two weeks or when the cash balance
in hand falls below Shs.5,000 whichever comes earlier.

The following were the transactions for the month of October, 1997:-
October 1 Balance 15,400
2 Travelling expenses 4,050
2 Purchase of stationery 2,560
3 Office expenses 1,625
3 Salary advances 4,800
4 Medical expenses 545
6 Office expenses 1,548
6 Travelling 2,745
8 Purchase of stationery 5,675
15 Salary advances 23,500
15 Medical expenses 2,350
15 Cleaning materials 375
21 Office expenses 2,870
21 Electricity charges 5,670
21 Cleaning materials 987
27 Purchase of stationery 1,540
27 Purchase of office furniture 15,365
27 Repairs of equipment 5,670
30 Salaries and wages 8,675
30 Travelling 5,690
30 Office expenses 8,940
31 Purchase of office equipment 15,000
31 Office expenses 3,000


(a) Write up the imprest petty cash book for the month of October, 1997 and bring
down the balance. (14 Marks)

(b) Post the total monthly expenses to the relevant ledger accounts. (5 Marks)

(Total: 20 Marks)


(a) Explain the errors that do not affect the agreement of the trial balance. (5 Marks)

(b) Show the journal entries necessary to correct the following errors:-

(i) A sale of goods Shs.678 to J. Alawa had been entered in J. Alwanga’s

account. (3 Marks)

(ii) The purchase of a machine on credit from K. Kamau for Shs.4,390 had
been completely omitted from our books. (3 Marks)

(iii) The purchase of a motor van Shs.38,000 had been entered in error in the
Motor Expenses account. (3 Marks)

(iv) A sale of Shs.221 to F. Mathenge had been entered in the books, both
debit and credit as Shs.212. (3 Marks)

(v) Commission received Shs.257 had been entered in error in the sales
account. (3 Marks)

(Total: 20 Marks)