1.) Explain the primary function of accounting and how it is achieved?

2.) Differentiate between general purpose financial statements and specific purpose financial accounting.

3.) Differentiate between financial accounting and auditing as specializations of accounting.

4) Explain the type of decisions and information needs of the following users of accounting information.

i.) Present and potential investors.

ii.) Lenders, suppliers, and other creditors.

iii.) Employees and their respective groups.

5. The statements of cash flows classifies all cash inflows and outflows into one of three categories: operating activities, investing activities and financial activities.

Required

For each of the following transactions, indicate the appropriate classification category.

i.) Payment of NSSF, NHIF and PAYE dues on behalf of employees

ii.) Issue of bonds payable

iii.) Short-term loans received

iv.) Proceeds from the sale of vehicle by a university

v.) Issue of stock dividends to shareholders

6. The quick ratio of an enterprise is 09:1. State with reasons the effect (would improve, reduce or not alter) of the following transactions on the quick ratio.

i.) Payment of accounts payable

ii.) Purchase of inventory on credit.

iii.) Sale of equipment at a loss for cash

iv.) Sale of inventory at cost for cash

v.) Payment of interim dividend

7. The debt to equity ratio of a comapny is 1:2. State giving reasons the effect (would improve, deteriorate or not alter) of the following on the debt to equity ratio

i.) Redemption of bonds

ii.) Issue of equity shares

iii.) Purchase of merchandaise on credit

8. The following sales data are from records of two retail sales companies

Company A Company B

"Million" "Million"

Sales 21234 43465

Cost of Sales (41864) (34772)

Gross Margin 6370 8693

One of the companies is a high-end store and the other is a middle-low end store.

Required;

Identify which of the enterprises is a high-end store. Give reasons.