CERTIFIED ACCOUNTING TECHNICIAN
STAGE 3 EXAMINATION
S3.1: FINANCIAL ACCOUNTING
DATE: MONDAY 26, FEBRUARY 2024
INSTRUCTIONS:
1. Time allowed: 3 hours.
2. This examination has three sections: A, B and C.
3. Section A has 10 multiple choice questions equal to 2
marks each.
4. Section B has 2 questions equal to 10 marks each.
5. Section C has 3 questions equal to 20 marks each.
6. All questions are compulsory.
7. The question paper should not be taken out of the
Examination room.
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SECTION A
QUESTION ONE
Which of the following are the differences between a partnership and a limited liability
company in Rwanda?
A Both partnership partners and companies pay taxes imposed by government
B Liability of partners is unlimited while that of company is limited.
C Only companies have capital invested into the business this a similarity
D Partners in partnership receive share of profits based on capital contribution while
shareholders receive dividends when companies make profit alone, which is not true
preference dividend must be paid whether company make profit or not
(2 Marks)
QUESTION TWO
Kwesi and Ruhango are both employees of the same company based in Musanze. Kwesi is a
financial accountant while Ruhango is a management accountant, they are seeking your advice on
the difference between their role as they consider an accountant to be accountant.
Among the following, what should be the correct advice to them?
A Management accounting is purely for internal purposes unlike financial accounting for internal
and external
B Management accounting information is a must to be prepared as per IAS and must be
published
C Both financial accounting and management accounting is governed by standards
D All of the above
(2 Marks)
QUESTION THREE
Which one of the following is the main fundamental characteristics that explain faithful
representation of a good financial information?
A Complete, neutral and free from error
B Complete, timely, neutral and free from error
C Material, timely and based on standards
D All of the above
(2 Marks)
QUESTION FOUR
The following scenarios have been provided to you for financial advice
Company F is a group company that owns shares in other companies as follows:
(i) Company F has 12% of the voting rights in Company S giving no control
(ii) Company F has 20% of the voting rights in company S and also has the right to appoint or
remove all the directors of Company S.
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(iii) Company F has 10% of the voting rights in S, plus supply 80% of the key raw materials
Which of these scenarios does not show a significant influence?
A (i), (ii), and (iii)
B (i) and (ii)
C (ii) and (iii)
D (i) only
(2 Marks)
QUESTION FIVE
NIDAK Solutions Ltd operates transport company in Nyarugenge, at the beginning of the year
2023 the company acquired a new lorry for FRW 18 million in addition to the existing vehicles
with a revalued book value of FRW 36 million as at 31 December 2022. The directors of the
company made a decision on 31st June 2023 to exchange one of the old vehicles which had cost of
FRW 3 million three years ago for FRW 1 million for a new one costing FRW 7 million. if the
company provides depreciation at a rate of 12% on straight line basis per annum proportionately
based
Which one of the following is the net book value of the vehicles at year end?
A FRW 52.18 million
B FRW 53.1 million
C FRW 51.76 million
D FRW 51.1 million
(2 Marks)
QUESTION SIX
Which of the following is a condition that must be met before a contingent asset is recognised
as an asset in the financial statements?
A When the flow of economic benefit associated with the asset becomes remote.
B When the flow of economic benefit associated with the asset becomes receivable.
C When the flow of economic benefit associated with the asset becomes probable.
D When the flow of economic benefit associated with the asset becomes possible.
(2 Marks)
QUESTION SEVEN
Which of the following controls can be used to ensure that there is no overstated claims by
employees working overtime and paid on the basis of extra time?
A Employees to fill the overtime forms which should be signed
B Employees to work under a supervisor who should fill the overtime forms and signed by
employees
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C Overtime pay should be recorded in books of accounts and paid by different person
D Overtime should be paid differently with Normal pay
(2 Marks)
QUESTION EIGHT
Which one of the following is a limitation of internal control systems?
A Employees may deliberately circumvent the controls
B The cost of the internal controls system always outweighs the benefits
C They are subject to change based on change of business environment
D A and C
( 2 Marks)
QUESTION NINE
Which of the following is an example of Efficiency ratios?
A Quick ratio.
B Debt ratio.
C Interest cover.
D Asset turnover ratio.
(2 Marks)
QUESTION 10
Among the following, which one is not a characteristic of public sector in Rwanda?
A The primary objective is to provide services to the public without payment for the service
B They are mainly funded through taxes imposed by government agencies
C Their financial year and standards applicable in preparation of financial statements are
different from those of the private sector.
D B and C
(2 Marks)
S3.1 Page 4 of 12
SECTION B
QUESTION 11
(a) As at June 2022, the company had the following capital structure:
Details FRW
Ordinary shares (10,000 shares of FRW 30 each). 300,000
Share premium 75,000
Retained profit 320,000
Preference shares (4,000 shares of FRW 30) 120,000
During the year ended the company made a bonus issue of one share for every five-share held
using the retained profit, subsequently a right issue of one for every three held at FRW 30. In 2023
financial year converted half of the preferences shares into ordinary shares by approval of
shareholders meeting at par value.
Required:
Calculate the new final capital structure at the end of year 2023. (5 Marks)
(b) Meza Ltd is private company operating as a supplier of electronics within Kigali and adjacent
towns within Rwanda. They have provided the following information for consideration in financial
statements for the year ended November 2023
1. They give warranty to its customer for all new electronics and the statistics show that 15% of
sale give rise to warranty claims
2. The company expects to receive a compensation of FRW 10 million due to breach of contract
by one of a major supplier
3. The revenue authority has imposed fine of FRW 8 million for failure to renew license on time
which is subject to confirmation by court law that is pending
4. The company guaranteed a loan of FRW 50 million to one of its subsidiary companies and the
subsidiary company is unable to pay the loan The likely hold of the liability has been assessed
as possible
Required:
Explain the effect of each of the case above to the financial statements of Meza Ltd. (5 Marks)
(Total: 10 Marks)
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QUESTION 12
(a) The various parties interested in the financial statements of a company are sometimes referred
to as stakeholders. Although they will each judge the financial statements by different criteria, they
will all gain assurance from learning that what they are reading has been subject to an independent
review.
Required:
As an accountant, discuss four key interest of creditors and two key interests of government
in financial statement of the company. (6 Marks)
(b) Recently many of the fast-growing companies in Rwanda have of late been adopting use
management information systems to facilitate their operations including financial accountant
Required:
Explain the purposes of these management information systems within these companies in
Rwanda? (4 Marks)
(Total: 10 Marks)
S3.1 Page 6 of 12
SECTION C
QUESTION 13
(a) In accordance with IAS 1, briefly explain key components of financial statement that are
considered as change in the statement of changes in equity as at the end of financial year and
disclosures recognized in the financial statement. (5 Marks)
(b) Below is a trial balance of Rubavu Ltd, that has been prepared by the junior accountant for the
period ended 31st December 2023.
Description FRW "000"
Revenues 105,000,000
Return inwards 600,000
Cost of sales 67,600,000
Operating expenses 22,000,000
Discount received 1,800,000
Provision for bad and doubtful debts 2,400,000
Administrative expenses 18,000,000
Finance cost 3,000,000
Tax payables as at 31st December 2022 2,000,000
Commercial land 5,000,000
Rusinzi Commercial Building 12,000,000
Kigali Commercial Building 32,000,000
Plant and machinery 24,000,000
Accumulated depreciation 12,000,000
Office Equipment 4,000,000
Inventories 42,000,000
Investment income 34,000,000
Cash and bank 7,200,000
Trade Receivable 32,400,000
Share capital 98,000,000
Share premium 16,000,000
Revaluation surplus 14,000,000
Retained earnings (31st December 2022) 38,400,000
Long-term Loan 40,000,000
Trade Payables 9,000,000
Tax payable (31stDecember 2023) 4,200,000
Additional Information:
1. During the month of March 2023, the company was sued by a revenue authority due to under
declaration of income for tax evasion. The company lost the case and was ordered by the court
to pay FRW 3 billion to the revenue authority within two months.
2. Inventories with a carrying value of FRW 1,200,000,000 was damaged and could only recover
FRW 950,000,000 after evaluation by an expert. This had not been accounted for in the
inventories reflected in the trial balance.
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3. One of the plants and machinery with a useful life of 6 years was disposed in December 2022,
the machine was acquired in January 2019 at a cost FRW 2,400,000,000. The accountant had
erroneously accounted for its depreciation which has been included in the administration
expense.
4. The provision for bad and doubtful debts was adjusted to FRW 2,200,000,000 since the
balance was only as reflection of the previous year balance.
5. Rubavu Ltd decided to cease its operations in Rusinzi commercial building at year end and
leased it out under an operating lease which will generate a monthly rental income of FRW
20,000,000. effective next year. Due to business uncertainties, the management agreed to
repair the building before leasing. These costs have not been included in the trial balance even
though the cost of repairs was FRW 100,000,000 for the building.
6. The financial statement audit started 15th January 2023, and as part of auditing receivables,
they requested confirmations from all customers with material closing balances. A customer
that owed Rubavu Ltd FRW 1,640,000,000 was confirmed to be bankrupt by court of law in
March 2023.
7. At 30th June of the 2023 Rubavu Ltd borrowed a loan at 14% of FRW 24,000,000,000 from a
local bank and only half of this amount was received, due to existing loan that had not been
previously cleared on time, the principal amount was correctly recorded in books of accounts,
however the resulting interest expense is yet to be recorded.
Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended
31st December 2023. (15 Marks)
(Total: 20 Marks)
S3.1 Page 8 of 12
QUESTION 14
The following statements of financial position were extracted from the books of two
companies. Yego Ltd and Meza Ltd as at 31st December 2023.
Yego Ltd Meza Ltd
Description FRW”000” FRW”000”
Non-current assets
Property, plant and Equipment 126 000 42,000
Investment shares in Meza Ltd 81,000
Total Non-current Assets 207,000 42,000
Current Assets 250,000 36,000
Total Assets 457,000 78,000
Equity
Share capital 210,000 20,000
Share premium 80,000 15,000
Retained Earnings 95,000 18,000
Total share capital 385,000 46,000
Current Liabilities 72,000 25,000
Total capital and liabilities 457,000 78,000
Additional Information:
1. Yego Ltd acquired all of the share capital of Meza Ltd one year ago. The retained earnings of
Meza Ltd stood at FRW 8,000,000 on the day of acquisition. Goodwill is calculated using the
fair value method and there has been no impairment of goodwill since the acquisition.
2. During the year, Meza Ltd had sold goods worth FRW 60,000,000 to Yego Ltd at FRW
80,000,000, a quarter of these goods were in store as the year end and yet to be paid to Meza
Ltd
3. One of the properties and equipment from Yego Ltd was revalued upwards by FRW 2,000,000
at year end, this transaction has not been accounted for in the books of account.
Required:
Prepare the consolidated statement of financial position of Yego Ltd as at 31st December
2023. (20 Marks)
(Total: 20 Marks)
S3.1 Page 9 of 12
QUESTION 15
The following financial statements have been provided by Kwesa Ltd for years of 2022 and 2023
Income Statement for two Years 2022 and 2023.
Year 2022 Year 2023
Details FRW”000” FRW”000”
Sales 956,500 879,500
Less cost of sales
Opening stock 87,000 99,500
Purchases 602,000 589,500
Less closing stock 144,500 149,000
Cost of sales (544,500) (510,000)
Gross profit 412,000 369,500
Less expense’s
Selling and distribution 42,000 30,000
Depreciation 8,400 10,000
Total expenses (234,400) (175,000)
Earnings before interest and 186,000 194,500
tax
Less interest 15,000 15,000
Earning before tax 171,000 179,500
Less tax 111,000 75,000
Net profit 60,000 104,500
Statement of Financial Position for Two Years 2022 and 2023.
Details Year 2022 FRW “000” Year 2023 FRW “000”
Non- Current Assets
Land and Buildings 250,000 360,000
Plant & Machinery 80,000 72,000
Total Non-Current Assets 330,000 432,000
Current Assets
Inventory 149,000 126,500
Receivables 80,090 69,500
Less: Provision 4,000 4,200
Cash 24,900 36,700
Total Assets 579,990 660,500
Financed By
Issued share capital (20000 share of 200,000 300,000
FRW10 each
Share premium 9,000 23,000
Retained profit 60,000 164,500
Total Equity 350,000 339,450
Long term Liabilities 90,990 150,000
S3.1 Page 10 of 12
Current Liabilities 13,000 28,000
Total Liabilities
Total Capital and Liabilities 579,990 660,500
Required:
(a) Calculate the following ratios for the year 2022 and 2023? Assume of the current
liabilities are usually payables,
1. Return on capital employed. (1 Mark)
2. Cash ratio (1 Mark)
3. Receivables collection period (1 Mark)
4. Payable period. (1 Mark)
5. Acid test ratio. (1 Mark)
6. Total assets turnover (1 Mark)
7. Operating efficiency ratio (1 Mark)
8. Cost of sales ratio (1 Mark)
9. Gearing ratio. (1 Mark)
10. Debt to equity ratio (1 Mark)
(b) Interpret the above ratios while giving relevant trends to the company as a financial
expert. (10 Marks)
(Total: 20 Marks)
End of question paper
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