Time: 3 hours
3 hours
Write your name and index number in the spaces provided above.
Sign and write the date of the examination in the spaces provided above.
This paper consists of TWO sections, A and B.
Answer ALL the questions in section A and any THREE questions from section B in the spaces provided in this question paper.
Each question in section A carries 4 marks while each question in section B carries 20 marks.
Candidates should answer the questions in English.

SECTION A (40 marks)
Answer ALL the questions in this section in the spaces provided.
I. State four parties who may be interested in the financial statements of a company.
(4 marks)
2. Explain the following accountancy terms:
(a) accrued expenses; (2 marks)
(b) an invoice. (2 marks)

3. Outline four essential features of good objectives. (4 marks)

4. State four objectives of manpower planning. (4 marks)

5. Highlight four errors affecting the trial balance. (4 marks)
6. Identify the type of error made in each of the following cases: (4 marks)

(a) Sales of Sh. 2,440 were recorded in the books as Sh. 4,420.

(b) Cash received Sh. 3,200 from Mwasimba Juma was entered in the accounts of Mwasimba John.
(c) Purchases on credit from Kamau were debited to Kamau”s ace unt and credited to purchases account.
(d) Motor vehicle expenses were debited in the motor vehicle account.

7. State four benefits of policies. (4 marks)

8. Explain the following:

(a) product branding; (2 marks)

(b) product packaging. (2 marks)
9. Correct the following trial balance taken from the books of Owino on 31st January 2009.


10. Identity two assumptions on which McGregor”s Theory X of motivation is based.(4 marks)

SECTION B (60 marks)
Answer any THREE questions from this section in the spaces provided after question 15.
11. (a) The following balances were obtained from the books of Kikwetu Traders as at 31st March 2009:
Buildings ——————————300,000
Motor vehicle————————–200,000
Loan from IBB bank—————–100,000
Cash at bank—————————-160,000
The following transactions then took place:
April 2nd Paid a cheque of Sh. 25,000 to a creditor.
4th Bought goods on credit Sh. 45,000.
6th A debtor paid Sh. 15,000 by cash.
7th Re-paid Sh. 50,000 by cheque to IBB bank.
8th Bought a motor vehicle for Sh. 280,000 from Mbinja Motors on credit.
10th Invested additional capital of Sh. 130,000 by depositing personal savings in the business bank account.
Prepare the balance sheet as at 12th April 2009 after the above transactions. (10 marks)
(b) Explain five reasons why managers do not delegate authority to subordinates. (10 marks)

12. (a) Mwaura is a retailer. Prepare his Trading Profit and Loss account for the year ended
31st December 2008.


Additional information:
(i) Closing stock Sh. 35,000.
(ii) Telephone bill Sh. 500 is outstanding for December 2008
(iii) Rent Sh. 300 is due for December 2008 but not yet received.(10 marks)
(b) Explain five reasons why employees may resist change in an organization. (10 marks)
13. (a) Explain five characteristics of effective control systems. (10 marks)
(b) Outline the steps involved in the decision making process. (10 marks)
14. (a) “Co-ordination is the very essence of management”. Explain five reasons why co-ordination is necessary. (10 marks)
(b) Explain five objectives of advertising. (10 marks)

15. (a) Explain the following terms:
(i) cash float; (2 marks)
(ii) imprest system; (2 marks)
(iii) carriage outward; (2 marks)
(iv) un-presented cheques; (2 marks)
(v) capital reserve. (2 marks)

(b) The following information was extracted from the records of Kaima Limited.Receipts:
February 4th 2,600 units @ Sh. 40
9th 4,000 units @ Sh. 45
15th 3,000 units @ Sh. 50
February 7th 7,000 units
20th 6,200 units
The opening stock was 10,000 units valued @ Sh. 30 per unit.
Prepare a store ledger card under the Last In First Out (LIFO) method.(10 marks)

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