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Bac 410: Public Sector Accounting Question Paper

Exam Name: Bac 410: Public Sector Accounting 

Course: Bachelor Of Commerce

Category: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010

INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 410: PUBLIC SECTOR ACCOUNTING

=================================================================
DATE:
TUESDAY 20TH JULY 2010

TIME: 2.00 P.M. - 4.00 P.M.

INSTRUCTIONS
Answer any FOUR questions.

Q.1
The following transactions relate to Meru town for the year ending June 30th 2009.

i)
During the fiscal year 2009 the town levied property taxes of kshs. 154,000,


of which it collected kshs. 120,000 prior to June 30th 2009, and kshs 5,000


over each of the next six months. It is estimated that kshs 4,000 will be


uncollectible.

ii)
In August 20, 2009, it received kshs 12,000 from the central government for


sales taxes collected on its behalf. The payment was for sales made in June


that businessmen were required to remit to the state by July 15th.

iii)
In April the town was awarded a state training grant of kshs 40,000 for the


period June 1st , 2009, through May 31st, 2010. In 2009 the town received the


entire kshs 40,000 but spent only 32,000. The town must return to the state


the amounts that were not used to cover allowable training costs.
iv)
The town requires each vendor who sells in its “farmer’s market” to obtain an
annual permit. The funds generated by the sale of these permits are used to
maintain the market. The permits, which cover the period from June 1
through May 31, are not refundable. In May 2009 the town issued kshs 3,600
of permits.
Page 1 of 7


v)
On June 1, 2009, with kshs 5000 in funds available for temporary investment,
the town acquired two-year, 6% Treasure bonds. The bonds pay interest
upon maturity. On June 30th, the market value of the bond was kshs. 5,400.
vi)
Several years earlier the town received a donation of a parcel of land, upon
which it expected to build. During fiscal 2009 it opted to sell the land for
kshs 135,000. When it acquired by the town, the land had a market value of
kshs 119,000.



Required:


Prepare summary journals entries to reflect their impact on year-end fund


financial statement prepared on a modified accrual basis.
(25 marks)

Q.2
The General Fund trial balance of the Town of Kwale as of January 1, 2007 was

follows:


Debits Credits

Kshs
Kshs
Cash
20,000
Taxes Receivable -
77,200

Delinquent
Estimated uncollectible taxes

9,200
delinquent
Accounts payable

16,000
Fund Balance - Reserved for

8,000
encumbrance
Fund balance - Unreserved
______
64,000

97,200
97,200



The following data pertain to General Fund operations for the town of Kwale for the

fiscal year ended December 31st, 2007.



Page 2 of 7


i)
Budget adopted

Revenues
Kshs
Property taxes
420,800
Fines, Forfeits, and Penalties
160,000
Miscellaneous Revenues
20,000

600,800
Expenditures and Other Financing users

Public safety
390,000
General government
120,000
Culture and Recreation
54,000
Transfers out
30,000

594,000


ii)
Encumbrances outstanding at the end of 2006 were reestablished.

iii)
Property taxes were levied at an amount that would result in revenues of kshs


420,800 after deduction of 4% of the tax levy as uncollectible.
iv)
Purchase orders issued in 2007:











Kshs.


Public Safety


152,000


General Government

80,000


Culture and recreation

54,000







286,000

v)
Cash collection and transfers:







Kshs

Delinquent taxes



39,200

Current taxes



368,000

Fines, Forfeits, and penalties

154,000

Miscellaneous Revenues


20,000

Transfers in



18,000







599,200
Page 3 of 7



vi)
Purchase orders issued in 2007 were filled in the following amounts



Estimated
Actual

Kshs
Kshs
Public safety
148,000
148,000
General Government
80,000
80,000
Culture and Recreation
54,000
54,000

282,000
282,000

vii)
Purchase orders issued in 2006 in the following amounts were filled in 2007.





Estimated

Actual





Kshs

Kshs



Public safety
8,000

8,200

viii) Addition accounts payable for salaries and wages (not encumbered)








Kshs


Public Safety


230,000


General Government

40,000






270,000

ix)
Accounts paid amounted to kshs 570,000; the transfer out, kshs

30,000, was made in cash.


Required:

i)
Prepare for the General Fund of the town of kwale a balance sheet of


December 31st, 2007, and a statement of Revenue, Expenditure, and changes


in fund balance for the year ended December 31, 2007.

(25 marks)



Page 4 of 7

Q.3
a)
Explain the meaning of the following terms as used in public sector


accounting.



i)
Internal service funds


ii)
Inter fund transfers
iii)
Non exchange transaction
iv)
Enterprise funds
v)
Encumbrances





(15 marks)



b)
i)
How do government account for capital projects funds.
(5 marks)


ii)
How should Exchange transactions be accounted for?
(5 marks)

Q.4
a)
The following revenue collected during 2008/2009 in respect of Revenue head


150-080 - Miscellaneous Taxes was follows:



Item
Estimated Receipts Actual Receipts

Kshs
kshs
901 - Hotel accommodation
7,850,000
10,100,000
902 - Entertainment tax
1,225,000
1,120,000
903 - Betting / Casino tax
460,000
620,000
904 - Rates and Pools tax
5,500
31,200
905 - Stamp duty
4,225,000
4,690,800

13,765,000
16,562,000



Addition information available:
i)
Payments to the exchequer during the year ksh 17,616,500.
ii)
Balance of revenue on hand kshs 624,000
iii)
Balance of revenue collected in 2008/2009 but which had not been paid to the
Exchequer as at 30th June 2008 amounted to kshs 1,678,500.




Page 5 of 7

iv)
Arrears of revenue as at 30th June 2009.

Item
2007/2008
2008/2009
Total

Kshs
Kshs
Kshs
Hotel accommodation
20,000
86,700
106,700
Races/ Pools tax
-
55,000
55,000
Stamp duty
-
140
140

416,000
178,000
594,000

436,000
319,840
755,840



The arrears of revenue are not accrued in the accounts.


Required:

a)
A statement of Revenue for the year 2008/2009.


(15 marks)

b)
Reasons for material differences between estimated receipts and actual


receipts.







(5 marks)

c)
Statement of arrears of Revenue as at 30th June 2009.

(5 marks)

Q.5
Githunguri Giant Milk Co-Operative Union has six societies: Kiambu, Kiamwangi,

Kwamaiko Gaturi, Githambo and Kamacharia.


The union receives milk from the societies and markets the milk on their behalf.

The union pays each society a uniform fixed price per litre/kg of milk delivered to

the Union. Nevertheless, each society has a standard percentage and if the society

provides in excess of its standard percentage, it incurs a penalty . The penalty is for

each kg/litre in excess of the agreed quantity. It is calculated at twice the profit per

kilogram of output earned by the union in that year.

The proceeds of the penalties are divided among the societies who produce less than

their standard percentages, prorata to their deficiencies.





Page 6 of 7

The unions profits for the year are distributed in proportion to the actual output for

each year. The respective standard percentages and the actual output of milk for

2005 were as follows:



Standard percentage Actual output
(in thousands
of kilograms)
Kambui
25
3,000
Kiamwangi
10.0
900
Kwamaiko
15.0
1,500
Gaturi
17.5
1,500
Githambo
27.5
2,500
Kamacharia
5.0
600


The accountant of the union presented the following balances from the books as

at 31st December, 2005.


Kshs
Kshs
Sales

430,000,000
Bad debts

1,250,000
Purchase from

375,000,000
members
General expenses

3,000,000
Due for purchases -


Kiamwangi
2,000,000

Gaturi
250,000
2,250,000

The stock balances were kshs 1,000,000 and kshs 250,000 at 1st January 2005 and 31st
December 2005 respectively.

Required as at 31st December 2005:

a)
The union’s Revenue Account.




(5 marks)

b)
Revenue distribution Account.




(8 marks)

c)
The Penalty Account.





(5 marks)

d)
A statement showing the amount due to or by each member society.












(7 marks)
Page 7 of 7




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