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Hba2303:Financial Accounting Question Paper
Hba2303:Financial Accounting
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESITON ONE (30 MARKS)
(a) The Accountants Act Cap 531 (1977) establishes the Institute of Certified Public Accountants of Kenya (ICPAK), discuss the functions of ICPAK as outlined by the Act. (10 Marks) (b) One of the requirements of financial statements is that they should be free from material error. Suggest three safeguards, which may exist, inside or outside a company to ensure that the financial statements are free from material error. (6 Marks) (c) Discuss the main problems facing social responsibility accounting. (8 Marks) (d) In APB Opinion No.28, some unique problems of interim reporting are discussed. Discuss any six such problems. (6 Marks)
QUESTION TWO (20 MARKS)
Financial Accounting practice depends upon the guidance provided by a number of accounting concepts, some of which are to be found in IAS 1 and/or in the conceptual framework of the IASC.
Required;
Explain the relevance of the following accounting concepts.
2
(i) Neutrality (ii) Money measurement (iii) Accruals (iv) Substance over form (v) Consistency (20 Marks)
QUESTON THREE (20 MARKS)
(a) Discuss any two approaches to accounting theory development. (6 Marks) (b) Differentiate between regulated and unregulated accounting information market. (4 Marks) (c) Discuss the arguments in favour of unregulated accounting information market. (10 Marks)
QUESTION FOUR (20 MARKS)
(a) Discuss the process used in the development of International Accounting Standards. (12 Marks) (b) FASB Statement No.57, guides the disclosure of related party transactions, discuss four areas of such disclosure. (8 Marks)
QUESTION FIVE (20 MARKS)
Kagondu Ltd engages in real estate business owning only one property. The Company’s main income is rental income. The balance sheet of the company as at the end of the year 1 and year 2 is as follows:
Year 1 Kshs. Year 2 Kshs.
Assets
Building (net) 150,000 105,000
Cash 45,000 90,000
195,000 195,000
The comparative income statements for both year 1 and year 2 are given below:
Year 1 Kshs. Year 2 Kshs. Revenue 82,500 90,755 Expense Depreciation (45,000) (45,000) 37,500 45,755
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Additional Information ? The company was formed on January 1st, year 1 through a cash investment of Ksh.195,000. ? The building was acquired on January 1st year 1 at a cost of 195,000. Expected useful life is 4 1/3 years. ? All revenue is received at the end of the year. ? There are no operating expenses except depreciation. ? All net income is paid out as a dividend. The balance of cash is banked at no interest return. ? The price indexes for Year 1 and Year 2 are as follows: 1st Jan Year 1 100 31st Dec Year 1 105 31st Dec Year 2 110
Required; Prepare the balance sheet and income statements for Kagondu Ltd for the two years using
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