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Financial Accounting Theory Question Paper

Financial Accounting Theory

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2008

UNIVERSITY EXAMINATIONS: 2008/2009
SECOND YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 301: FINANCIAL ACCOUNTING THEORY
DATE: DECEMBER 2008 TIME: 2 Hours
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
a) In the preparing the accounts of your company you are faced with a number of
problems. These are summarized below:
(i) The managing director wishes the company’s good industrial relations to be
reflected in the accounts.
(ii) The long term future success of the company is extremely uncertain.
(iii) Although the sales have not yet actually taken place, some liable customers of
the company have placed several large orders that are likely to be extremely
profitable.
(iv) One of the owners the company have invested his drawings in some stocks and
shares.
2
(v) At the year end, an amount is outstanding for electricity that has been consumed
during the accounting period.
Required:
State which rule the accountant would normally follow in dealing with each of the above
problems; explain briefly what each rule means and how each should be applied.
(10 Marks)
b) Discuss the importance of interim financial reporting (10 Marks)
c) Discuss the minimum component of an interim report (10 Marks)
QUESTION TWO
a) Is it possible for a company to report a net profit in the income statement and yet
suffer from cash flow problems? Discuss. (8 Marks)
b) Why is it not possible to develop a universally agreed conceptual frame work?
Discuss. (12 Marks)
QUESTION THREE
a) What is accounting theory? Discuss the methods that accountants can use in
developing accounting theory. (10 Marks)
b) Discuss the steps involved scientific theory development. (10 Marks)
QUESTION FOUR
a) Human resource accounting serves as a system for providing measurements of the
cost and value of people to an organization. Briefly discuss the various approaches
that exist in valuation of human resources. (10 Marks)
b) List and briefly explain the major benefits of Human Resource Accounting.
(10 Marks)
3
QUESTION FIVE
a) List and briefly explain the limitations of historical cost Accounting. (10 Marks)
b) The effect of inflation on financial accounting and reporting as well as the
rationale for providing supplementary information disclosing these effects have
been discussed by government and by accounting profession in selected countries.
Current purchasing power (CPP) accounting is one of the recommended methods
of computing that supplementary information.
Required:
i. Explain the meaning of current purchasing power (CPP) accounting and give the
justification of its use as a method of accounting for inflation. (10 Marks)

Financial Accounting Theory Question Paper

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