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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
UNIVERSITY EXAMINATIONS 2009/2010
INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 410: PUBLIC SECTOR ACCOUNTING
TUESDAY 20TH JULY 2010
TIME: 2.00 P.M. - 4.00 P.M.
Answer any FOUR questions.
The following transactions relate to Meru town for the year ending June 30th 2009.
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
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.
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.
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
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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.
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
Prepare summary journals entries to reflect their impact on year-end fund
financial statement prepared on a modified accrual basis.
The General Fund trial balance of the Town of Kwale as of January 1, 2007 was
Taxes Receivable -
Estimated uncollectible taxes
Fund Balance - Reserved for
Fund balance - Unreserved
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
Fines, Forfeits, and Penalties
Expenditures and Other Financing users
Culture and Recreation
Encumbrances outstanding at the end of 2006 were reestablished.
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.
Purchase orders issued in 2007:
Culture and recreation
Cash collection and transfers:
Fines, Forfeits, and penalties
Page 3 of 7
Purchase orders issued in 2007 were filled in the following amounts
Culture and Recreation
Purchase orders issued in 2006 in the following amounts were filled in 2007.
viii) Addition accounts payable for salaries and wages (not encumbered)
Accounts paid amounted to kshs 570,000; the transfer out, kshs
30,000, was made in cash.
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.
Page 4 of 7
Explain the meaning of the following terms as used in public sector
Internal service funds
Inter fund transfers
Non exchange transaction
How do government account for capital projects funds.
How should Exchange transactions be accounted for?
The following revenue collected during 2008/2009 in respect of Revenue head
150-080 - Miscellaneous Taxes was follows:
Estimated Receipts Actual Receipts
901 - Hotel accommodation
902 - Entertainment tax
903 - Betting / Casino tax
904 - Rates and Pools tax
905 - Stamp duty
Addition information available:
Payments to the exchequer during the year ksh 17,616,500.
Balance of revenue on hand kshs 624,000
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
Arrears of revenue as at 30th June 2009.
Races/ Pools tax
The arrears of revenue are not accrued in the accounts.
A statement of Revenue for the year 2008/2009.
Reasons for material differences between estimated receipts and actual
Statement of arrears of Revenue as at 30th June 2009.
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.
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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
The accountant of the union presented the following balances from the books as
at 31st December, 2005.
Due for purchases -
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:
The union’s Revenue Account.
Revenue distribution Account.
The Penalty Account.
A statement showing the amount due to or by each member society.
Page 7 of 7
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