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In an effort to promote accountability and transparency in governance, the
administration has adopted and implemented the International Public Sector
Accounting Standards (IPSAS) from January 2014. The governments (Federal, State,
Local) and other public institutions adopted IPSAS in the reporting and presentation
of financial statements to improve the quality and comparability of financial
information, and to be in conformity with other advanced nations of the world. IPSASCASH is already adopted in the budgeting, accounting and presentation of financial
statements, while IPSAS-ACCRUAL takes effect from January 2016.
You are required to:
Identify any SIX benefits of migration from IPSAS-CASH basis to IPSAS ACCRUAL basis.
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D’favour owns several properties in Lagos that are let out to tenants. The summary of transactions at December 31, 2014, is given below:
| Item | N’000 |
|---|---|
| Accrued rent at December 31, 2013 | 440 |
| Prepaid rent at December 31, 2013 | 250 |
| Rent received during 2014 | 2,550 |
| Accrued rent at December 31, 2014 | 350 |
| Prepaid rent at December 31, 2014 | 480 |
| Uncollectable rent to be written-off | 35 |
| Agreement fee received | 50 |
Required:
Prepare the Rental Income Account to determine the amount of rent to be recognized in the Statement of Profit or Loss. (8 Marks)
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Oluyemi Ventures prepares its financial statements to March 31 each year. The business pays rent quarterly in advance on January 1, April 1, July 1, and October 1 each year. The annual rent is N600,000. On June 30, 2013, the rent was increased to N900,000 per annum.
Required:
i. Calculate the amount of rent that will be recognized in the Statement of Profit or Loss for the year ended March 31, 2014. (3 Marks)
ii. Calculate the amount to be recognized in the Statement of Financial Position as at March 31, 2014. (1 Mark)
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Accounting for the effects of transactions and other events and circumstances on a reporting entity’s economic resources and claims in the period in which those effects occur, even if the resulting cash receipts and payments occur in a different period, is governed by which of the following accounting concepts?
A. Cash basis
B. Accrual
C. Matching
D. Consistency
E. Going concern
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On June 1, 2015, Nkiwe Enterprises received a rent of N240,000 for 12 months to May 31, 2016. The reporting date of Nkiwe is December 31. What are the entries in the statement of profit or loss for the year ended, and statement of financial position as at, December 31, 2015?
Profit or loss Statement of financial position
N N
A. 100,000 income 140,000 liability
B. 100,000 expenses 140,000 asset
C. 140,000 income 100,000 liability
D. 140,000 expenses 100,000 asset
E. 240,000 income no entry
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In the process of drawing up financial statements, adjustments are made for prepaid expenses and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Accrual
E. Consistency
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It is often argued that historical cash flow is more useful in appraising a company than historical profit, particularly because cash flows are factual and do not involve the exercise of judgment.
Required:
Explain FOUR arguments against this view. (4 marks)
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Below is the Trial Balance of the Consolidated Fund of Ghana for the year ended 31 December 2020.
| Item Description | DR (GH¢ million) | CR (GH¢ million) |
|---|---|---|
| Cash and Bank | 61,350 | |
| Established Post Salaries | 13,524 | |
| Non-Established Post Salaries | 4,016 | |
| Communications Service Tax | 5,144 | |
| PAYE | 6,940 | |
| Non-Tax Revenues | 2,312 | |
| Travel and Transport | 468 | |
| Administration Cost | 6,704 | |
| Conferences and Seminars | 2,510 | |
| Foreign Travel Cost | 1,490 | |
| Stationery Inventories | 20 | |
| Stationery Purchased | 220 | |
| Vehicles Income Tax | 2,316 | |
| Corporate Tax | 4,626 | |
| Grants | 1,150 | 2,516 |
| Customs and Excise Duties | 1,286 | |
| Subsidies for Consumption | 1,282 | |
| Subsidies for Production | 722 | |
| Value Added Tax | 7,716 | |
| Social Benefits | 760 | |
| State Protocol | 100 | |
| Allowance | 300 | |
| Domestic Debt Interest | 2,906 | |
| External Debt Interest | 3,482 | |
| Motor Vehicle | 4,800 | 1,920 |
| Equipment | 8,400 | 1,680 |
| Computers | 18,400 | 5,240 |
| Railway (Completed) | 5,000 | |
| Work in Progress | 400 | |
| Equity and Security Investment | 1,960 | |
| Loans and Advances | 1,120 | |
| Gold and Other Reserves | 1,620 | |
| Judgement Debt | 280 | |
| Treasury Bills | 22,240 | |
| Domestic Debt | 26,924 | |
| Payables | 34,844 | |
| External Debt | 45,726 | |
| Trust Fund and Deposits | 4,470 | |
| Other Expenditure | 1,800 | |
| Rent Receivable | 1,600 | |
| Accumulated Fund | 29,516 |
Total: 175,900, 175,900
Additional information:
i) It is the policy of the Controller and Accountant General to use Accrual Basis of Accounting in preparing the Public Accounts of the Consolidated Fund financial statements in compliance with the Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 L.I 2378, and the International Public Sector Accounting Standards (IPSAS).
ii) Inventory in respect of stationery outstanding as at 31 December 2020 cost GH¢18 million and has a current Replacement Cost of GH¢12 million. Meanwhile, the Net Realisable value of the Inventories is estimated at GH¢14 million. No market exists for unused inventories.
iii) An Established Post Salary in arrears as a result of a salary increment in the fourth quarter of 2020 was GH¢56 million, and Public Debt Interest outstanding as at 31 December 2020 amounts to GH¢14 million.
iv) Consumption of Fixed Capital is charged on a Straight-Line Basis for the year as follows:
| Asset | Useful life |
|---|---|
| Motor Vehicle | 5 years |
| Equipment | 10 years |
| Computers | 5 years |
| Railway | 20 years |
v) The Multilateral Partners have extended their Debt Forgiveness policy to the Government, which has resulted in the External Debt write-off amounting to GH¢4 billion in the year. However, this transaction has not been accounted for in the books.
vi) In the year 2019, GH¢8 billion was spent in acquiring Equipment to boost Government projects. However, these transactions were recognised in the accounts as Goods and Services Expenditure in the year 2019. This error has since not been rectified.
Required:
a) Prepare in a form suitable for publication and in accordance with the relevant Financial Laws and IPSAS:
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You have received an official email from your Director which reads:
“Hello Accountant,
Hope you are doing well. We have closed from a workshop organized by the Controller and Accountant General’s Department on public financial management not long ago and the discussion was all about the adoption of accrual accounting in the public sector. It was emphasized that migration from cash basis to accrual basis is necessary to improve financial reporting and transparency in the public sector. You know I have little knowledge in Accountancy so I was completely lost in the discussions and I wished you had attended the workshop with me.
Another issue discussed was commitment accounting. We were made to understand that commitment accounting strengthens public financial management and therefore departments must ensure that every expenditure is committed in accordance with the appropriation prior to spending.
Please could you help me with some information on these issues?
Thank you, Director.”
Required: i) Explain to the Director THREE differences between accrual accounting and cash accounting. (3 marks)
ii) Identify THREE justifications for adopting accrual accounting in the public sector. (3 marks)
iii) Explain the term commitment accounting and illustrate how it could strengthen public financial management. (4 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
In an effort to promote accountability and transparency in governance, the
administration has adopted and implemented the International Public Sector
Accounting Standards (IPSAS) from January 2014. The governments (Federal, State,
Local) and other public institutions adopted IPSAS in the reporting and presentation
of financial statements to improve the quality and comparability of financial
information, and to be in conformity with other advanced nations of the world. IPSASCASH is already adopted in the budgeting, accounting and presentation of financial
statements, while IPSAS-ACCRUAL takes effect from January 2016.
You are required to:
Identify any SIX benefits of migration from IPSAS-CASH basis to IPSAS ACCRUAL basis.
Find Related Questions by Tags, levels, etc.
D’favour owns several properties in Lagos that are let out to tenants. The summary of transactions at December 31, 2014, is given below:
| Item | N’000 |
|---|---|
| Accrued rent at December 31, 2013 | 440 |
| Prepaid rent at December 31, 2013 | 250 |
| Rent received during 2014 | 2,550 |
| Accrued rent at December 31, 2014 | 350 |
| Prepaid rent at December 31, 2014 | 480 |
| Uncollectable rent to be written-off | 35 |
| Agreement fee received | 50 |
Required:
Prepare the Rental Income Account to determine the amount of rent to be recognized in the Statement of Profit or Loss. (8 Marks)
Find Related Questions by Tags, levels, etc.
Oluyemi Ventures prepares its financial statements to March 31 each year. The business pays rent quarterly in advance on January 1, April 1, July 1, and October 1 each year. The annual rent is N600,000. On June 30, 2013, the rent was increased to N900,000 per annum.
Required:
i. Calculate the amount of rent that will be recognized in the Statement of Profit or Loss for the year ended March 31, 2014. (3 Marks)
ii. Calculate the amount to be recognized in the Statement of Financial Position as at March 31, 2014. (1 Mark)
Find Related Questions by Tags, levels, etc.
Accounting for the effects of transactions and other events and circumstances on a reporting entity’s economic resources and claims in the period in which those effects occur, even if the resulting cash receipts and payments occur in a different period, is governed by which of the following accounting concepts?
A. Cash basis
B. Accrual
C. Matching
D. Consistency
E. Going concern
Find Related Questions by Tags, levels, etc.
On June 1, 2015, Nkiwe Enterprises received a rent of N240,000 for 12 months to May 31, 2016. The reporting date of Nkiwe is December 31. What are the entries in the statement of profit or loss for the year ended, and statement of financial position as at, December 31, 2015?
Profit or loss Statement of financial position
N N
A. 100,000 income 140,000 liability
B. 100,000 expenses 140,000 asset
C. 140,000 income 100,000 liability
D. 140,000 expenses 100,000 asset
E. 240,000 income no entry
Find Related Questions by Tags, levels, etc.
In the process of drawing up financial statements, adjustments are made for prepaid expenses and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Accrual
E. Consistency
Find Related Questions by Tags, levels, etc.
It is often argued that historical cash flow is more useful in appraising a company than historical profit, particularly because cash flows are factual and do not involve the exercise of judgment.
Required:
Explain FOUR arguments against this view. (4 marks)
Find Related Questions by Tags, levels, etc.
Below is the Trial Balance of the Consolidated Fund of Ghana for the year ended 31 December 2020.
| Item Description | DR (GH¢ million) | CR (GH¢ million) |
|---|---|---|
| Cash and Bank | 61,350 | |
| Established Post Salaries | 13,524 | |
| Non-Established Post Salaries | 4,016 | |
| Communications Service Tax | 5,144 | |
| PAYE | 6,940 | |
| Non-Tax Revenues | 2,312 | |
| Travel and Transport | 468 | |
| Administration Cost | 6,704 | |
| Conferences and Seminars | 2,510 | |
| Foreign Travel Cost | 1,490 | |
| Stationery Inventories | 20 | |
| Stationery Purchased | 220 | |
| Vehicles Income Tax | 2,316 | |
| Corporate Tax | 4,626 | |
| Grants | 1,150 | 2,516 |
| Customs and Excise Duties | 1,286 | |
| Subsidies for Consumption | 1,282 | |
| Subsidies for Production | 722 | |
| Value Added Tax | 7,716 | |
| Social Benefits | 760 | |
| State Protocol | 100 | |
| Allowance | 300 | |
| Domestic Debt Interest | 2,906 | |
| External Debt Interest | 3,482 | |
| Motor Vehicle | 4,800 | 1,920 |
| Equipment | 8,400 | 1,680 |
| Computers | 18,400 | 5,240 |
| Railway (Completed) | 5,000 | |
| Work in Progress | 400 | |
| Equity and Security Investment | 1,960 | |
| Loans and Advances | 1,120 | |
| Gold and Other Reserves | 1,620 | |
| Judgement Debt | 280 | |
| Treasury Bills | 22,240 | |
| Domestic Debt | 26,924 | |
| Payables | 34,844 | |
| External Debt | 45,726 | |
| Trust Fund and Deposits | 4,470 | |
| Other Expenditure | 1,800 | |
| Rent Receivable | 1,600 | |
| Accumulated Fund | 29,516 |
Total: 175,900, 175,900
Additional information:
i) It is the policy of the Controller and Accountant General to use Accrual Basis of Accounting in preparing the Public Accounts of the Consolidated Fund financial statements in compliance with the Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 L.I 2378, and the International Public Sector Accounting Standards (IPSAS).
ii) Inventory in respect of stationery outstanding as at 31 December 2020 cost GH¢18 million and has a current Replacement Cost of GH¢12 million. Meanwhile, the Net Realisable value of the Inventories is estimated at GH¢14 million. No market exists for unused inventories.
iii) An Established Post Salary in arrears as a result of a salary increment in the fourth quarter of 2020 was GH¢56 million, and Public Debt Interest outstanding as at 31 December 2020 amounts to GH¢14 million.
iv) Consumption of Fixed Capital is charged on a Straight-Line Basis for the year as follows:
| Asset | Useful life |
|---|---|
| Motor Vehicle | 5 years |
| Equipment | 10 years |
| Computers | 5 years |
| Railway | 20 years |
v) The Multilateral Partners have extended their Debt Forgiveness policy to the Government, which has resulted in the External Debt write-off amounting to GH¢4 billion in the year. However, this transaction has not been accounted for in the books.
vi) In the year 2019, GH¢8 billion was spent in acquiring Equipment to boost Government projects. However, these transactions were recognised in the accounts as Goods and Services Expenditure in the year 2019. This error has since not been rectified.
Required:
a) Prepare in a form suitable for publication and in accordance with the relevant Financial Laws and IPSAS:
Find Related Questions by Tags, levels, etc.
You have received an official email from your Director which reads:
“Hello Accountant,
Hope you are doing well. We have closed from a workshop organized by the Controller and Accountant General’s Department on public financial management not long ago and the discussion was all about the adoption of accrual accounting in the public sector. It was emphasized that migration from cash basis to accrual basis is necessary to improve financial reporting and transparency in the public sector. You know I have little knowledge in Accountancy so I was completely lost in the discussions and I wished you had attended the workshop with me.
Another issue discussed was commitment accounting. We were made to understand that commitment accounting strengthens public financial management and therefore departments must ensure that every expenditure is committed in accordance with the appropriation prior to spending.
Please could you help me with some information on these issues?
Thank you, Director.”
Required: i) Explain to the Director THREE differences between accrual accounting and cash accounting. (3 marks)
ii) Identify THREE justifications for adopting accrual accounting in the public sector. (3 marks)
iii) Explain the term commitment accounting and illustrate how it could strengthen public financial management. (4 marks)
Find Related Questions by Tags, levels, etc.
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