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  • 40 Marks

FR – May 2021 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare financial statements from a trial balance, including adjustments for provisions, tax, asset disposals, depreciation, and development costs.

The following is the trial balance of Almajiri Nigeria Limited as at September 30, 2018:

Account Debit (₦’m) Credit (₦’m)
Revenue 60,000
Cost of sales 40,800
Distribution costs 2,900
Administrative expenses 4,440
Interest on bank borrowings 40
Research and development costs 1,720
Leasehold property (at valuation Oct 1, 2017) 10,000
Plant and equipment (at cost) 15,320
Plant and equipment (accum. depr. at Oct 1, 2017) 4,920
Capitalised development expenditure (Oct 1, 2017) 4,000
Development expenditure (accum. amortiz. at Oct 1, 2017) 1,200
Closing inventory (30 Sept 2018) 4,000
Trade receivables 8,620
Bank 260
Trade payables & provisions 4,760
Preference dividend paid 160
Dividend paid on ordinary shares 1,200
Ordinary shares at 25k each 10,000
8% Redeemable preference shares at N1 each (year 2020) 4,000
Retained earnings brought forward 4,900
Deferred tax 1,160
Leasehold property revaluation reserve 2,000
Total 93,200 93,200

Additional information:
(i)
One of the reputable customers of Almajiri Nigeria Limited sued the company for
N
400 million for breach of contract over a cancelled order. Almajiri Nigeria
Limited obtained a legal opinion that there is 20% chance that Almajiri will lose the
case.
Accordingly, it has provided for N
80 million (N
400 million x 20%) included in
administrative expenses in respect of the claim. The unrecoverable legal cost of
defending the action was estimated at N20 million and these have not been
provided for as the legal action will not go to court until next year.
(ii)
The directors of the Company have estimated the provision for income tax for the
year ended September 30, 2018 at N2,280 million. The required deferred tax
provision at September 30, is N
1,200 million.
(iii) The redeemable preference shares were issued on April 1, 2018 at par. They are
redeemable at a large premium which gives them an effective finance cost of 12%
per annum.
(iv) The leasehold property had a remaining life of 20 years at October 1, 2017. The
company‟s policy is to revalue its property at each year end and as at September
30, 2018 it was revalued at N
8,600 million.
(v) On October 1, 2017 an item of plant and equipment was disposed of for N500
million cash. The proceeds have been treated as revenue by the company. The
plant is still included in the company‟s trial balance figure at the cost of N
million and accumulated depreciation of N
1,600
800 million (to date of disposal). All
plants and equipment are depreciated at 20% per annum using reducing balance
method. Depreciation and amortisation of all non-current assets are charged to
cost of sales.
(vi) In addition to capitalised development expenditure of N
4,000 million further
research and development cost were incurred on a new project which commenced
on October 1, 2017. The research stage of the new project lasted until December
31, 2017 and incurred N
280 million costs, from that date the project incurred
development cost of N160 million per month. On April 1, 2018 the directors
became confident that the project would be successful and yield a profit well in
excess of its costs. The project is still in development as at September 30, 2018.

Capitalised development expenditure is amortised at 20% per annum using straight
line method. All expensed research and development expenditure is charged to
cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended
September 30, 2018.

b. Statement of changes in equity for the year ended September 30, 2018.

c. Statement of movement in property, plant and equipment to be included in
published financial statements.

d. Statement of financial position as at September 30, 2018.

 

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  • 10 Marks

FR – Nov 2020 – L2 – Q2d – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Required adjustments for Eko Transport Company’s overstated inventory, dividend error, and omitted share issue.

Eko Transport Company (ETC) Limited is preparing its financial statements for the year ended August 31, 2019. The draft statement of changes in equity is presented as follows:

 

Additional Information:

  1. On January 10, 2020, ETC Limited discovered that inventory was overstated by N105 million as at August 31, 2019, and by N90 million as at August 31, 2018.
  2. There was a transposition error in reporting dividend payments in the statement of changes in equity. The correct figure as at August 31, 2019, was N105 million.
  3. The company income tax rate is 30% in each year.
  4. On August 31, 2019, additional shares of 50,000,000 were issued at N1.25 per share. The par value of ETC Limited shares is N1.00 per share. This was inadvertently omitted in the record.

You are required to prepare:
i. Revised Comparative Income Statements after necessary adjustments for the years ended August 31, 2018, and 2019. (3 Marks)
ii. Adjusted Statement of Changes in Equity as at August 31, 2019. (5 Marks)
iii. The journal entries to correct the errors in (2) and (4) above. (2 Marks)

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FR – May 2020 – L2 – Q3c – Statement of Changes in Equity

Prepare a statement of changes in equity for Badu Trading Ltd, including dividends, revaluation reserves, and retained profits adjustments for the year ending May 31, 2020.

Prepare the following information in a form suitable for publication for Badu Trading Ltd’s financial statements for the year ended 31 May 2020.

c) Statement of changes in equity. (6 marks)

 

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  • 20 Marks

FA – Nov 2015 – L1 – SB – Q2 – Bank Reconciliation

Preparing an adjusted cash book and bank reconciliation for a club with discrepancies.

a. Bank Statement is a mirror of any entity’s cash book, and they are expected to have equal balances at any point in time. However, this is not usually the case. Based on the ongoing statement, state five reasons that could cause the bank statement balance to differ from the cash book balance. (5 Marks)

b. The Treasurer of Young Star Social Club (YSSC) did not keep proper records for receipts and payments for the month of December 2014, causing mistrust among members. He has decided to seek your assistance to prepare a bank reconciliation statement before presenting the account to the club members.

The bank statement and the receipts and payments cash book of the club on December 31, 2014, showed a credit balance of N205,000 and N2,078,000, respectively. A comparison of the bank statement with the receipts and payment cash book of the club revealed the following:

i. Cheque drawn but not presented N3,160,000
ii. Amount lodged in the bank but not credited N725,000
iii. Entries in bank statement not recorded in receipts and payments cash book:

  • Standing order for loan refund N35,000
  • Interest received on deposit account N18,000
  • Bank charges N15,000
  • Cheque paid-in but returned with “refer to drawer” N120,000

Required:
i. Prepare an adjusted cash book as at December 31, 2014; (8 Marks)
ii. Prepare the Bank Reconciliation Statement showing the balance on December 31, 2014. (7 Marks)

(Total 20 Marks)

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  • 1 Marks

FA – Nov 2015 – L1 – SA – Q5 – Financial Statements Preparation

The question identifies the term for an extended trial balance that incorporates adjustments.

The extension of a trial balance to incorporate details of accounting adjustments, in order to arrive at the final trial balance for the preparation of statement of profit or loss and statement of financial position is referred to as:
A. Extension summary sheet
B. Spread sheet analysis
C. Extended Accounts balances lists
D. Extended trial balance
E. Extended balance sheet

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  • 20 Marks

FA – Nov 2021 – L1 – SB – Q3 – Trial Balance

This question involves preparing financial statements based on a given trial balance and additional adjustments.

The following balances remained in the books of Chukwu Limited as at December 31, 2020:

Accounts ₦’000
200,000,000 ordinary shares of N1 each 200,000
Cash at bank and in hand 500
Inventory (December 31, 2020) 61,200
Receivables 18,005
Payables 15,009
Gross profit 128,942
General reserves 25,000
Salaries and wages 28,430
Prepayments 600
Bad debts written off 500
Accrued expenses 526
Director’s account (Credit) 2,500
Interest on loan notes (half year) 600
Sundry expenses 4,100
Rates and insurance 1,520
6% loan notes 20,000
Lighting and cooling 1,310
Postage and telephones 800
Motor vehicles (Cost ₦25,000,000) 25,000
Office fittings and equipment (Cost ₦65,500,000) 42,350
Provision for depreciation – Motor vehicles 10,000
Provision for depreciation – Office fittings & equipment 23,150
Profit or loss (January 1, 2020) (Credit) 22,300
Land and buildings (Cost) 239,362

Additional Information:

  1. Office fittings and equipment are to be depreciated at 15% on cost, and motor vehicles at 20% of cost.
  2. Provisions are to be made for:
    • Directors’ fees of N6,000,000
    • Audit fees of N2,500,000
  3. The amount for insurance includes a premium of ₦600,000 paid in September 2020 to cover fire loss for the period September 1, 2020, to August 31, 2021.
  4. A bill for N548,000 in respect of electricity consumed up to December 31, 2020, has not been accounted for.
  5. The directors have recommended:
    • N15,000,000 be transferred to general reserves
    • A 5% dividend on ordinary share capital

You are required to prepare:
a. The trial balance of Chukwu Limited at December 31, 2020. (6 Marks)
b. The statement of profit or loss for the year ended December 31, 2020. (8 Marks)
c. The statement of financial position as at December 31, 2020. (6 Marks)
Note: Ignore taxation.

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  • 1 Marks

FA – Nov 2022 – L1 – SA – Q15 – Bank Reconciliation

Identify the bank statement item that should not be adjusted in the cash book balance.

Which of the following bank statement items should NOT be added or subtracted from the cash book balance to determine the adjusted bank balance?
A. Bank service charges
B. Unpresented cheques
C. Direct transfer
D. Cash book error
E. Value added tax

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  • 20 Marks

FR – April 2022 – L2 – Q3 – Preparation of Financial Statements and Adjustments

Prepare the statement of comprehensive income and statement of financial position for Caput Plc for the year ended 31 December 2020, incorporating necessary adjustments.

The trial balance of Caput Plc, as at 31 December, 2020 is provided below:


Additional Information:
1. An inventory count at 31 December 2020 amounted to GH¢15,750,000. This includes damaged goods with a cost of GH¢1,200,000. These will require remedial work costing GH¢675,000 and could be sold for GH¢1,425,000.
2. Finance cost is made up of the full year’s preference and ordinary dividends paid.
3. Non-Current Assets:

  • Land and Building were revalued at GH¢22,500,000 and GH¢72,000,000 respectively on 1 January 2020, resulting in revaluation gain of GH¢11,000,000 for the current year. At that date, the remaining life of the building was 15 years. Depreciation is on a s

    • traight-line basis. Ignore deferred tax implications.

  • Depreciation on Plant and Equipment is at 12.5% on a reducing balance basis.
  • Investment Property: On 31 December 2020, a qualified surveyor valued the property at GH¢20,250,000. Caput Plc uses the fair value model under IAS 40: Investment Property to value its investment property.
  • It is the policy of the company to charge depreciation on a full-year basis

    • .

4. The directors have estimated the provision for income tax for the year ended 31 December 2020 at GH¢12,000,000. The deferred tax for the year ended 31 December 2020 is to be adjusted so that the tax base of the company’s net assets is GH¢18,000,000 less than the carrying amount. Assume the rate of tax is 30%.
5. On 1 October 2020, Caput Plc imported a piece of equipment from a European supplier for €1 million and agreed to settle the bill in six months’ time. The relevant exchange rates are provided below:

No entries have been made for the above transaction. Any exchange difference on translation should be debited or credited to operating expenses.
Required:
Prepare for Caput Plc:
a) Statement of Comprehensive Income for the year ended 31 December 2020. (10 marks)
b) Statement of Financial Position as at 31 December 2020. (10 marks)

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  • 20 Marks

FA – May 2016 – L1 – SB – Q3 – Financial Statements Preparation

Preparing profit or loss and financial position for Uche & Sons as of September 30, 2015.

The following balances were extracted from the books of Uche and Sons as at September 30, 2015.

Additional Information:
(i) Inventories at September 30, 2015, was valued at N198,712,000
(ii) Rent prepaid at September 30, 2015, amounted to N3,200,000
(iii) Depreciation is to be provided on the motorcycle at the rate of 20% of cost per annum
(iv) Salaries and wages outstanding at September 30, 2015, amounted to N6,024,000
(v) Commission not yet due but already received at the trial balance date was N800,000
(vi) Additional irrecoverable debts of N2,840,000 are to be written off
(vii) Bank interest of N100,000 has fallen due but is yet to be received
(viii) Allowances for receivables are to be adjusted to 5% of receivables
(ix) Drawings by the owner of goods costing N1,600,000 and cheques of N2,400,000 are yet to be recorded

Using the extended trial balance, you are required to prepare:
a. Statement of profit or loss of Uche & Sons for the year ended September 30, 2015
b. Statement of financial position of Uche & Sons as at September 30, 2015

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  • 14 Marks

FA – May 2015 – L1 – Q4b – Trial Balance: Usefulness and Limitations

Prepare a trial balance from the extracted balances of Omoba Enterprises and recompute the entity’s capital for the period under review.

The following balances were extracted from the books of Omoba Enterprises as at 31 December 2013:

Details N’000
Accumulated depreciation 85,000
Administrative expenses 775,000
Accounts payables 585,000
Subscription 15,000
Rent and rates 130,000
Accounts receivables 475,000
Postage and stationery 125,000
Newspapers & periodicals 40,000
Utility 35,000
Allowances for Bad debt 85,000
Property, plant and equipment 925,000
Retained earnings 575,000
Audit fees 85,000
Revenue 2,500,000
Cost of sales 800,000
Other income 82,000
Cash and bank balances 882,000
Capital 375,000

Required:
i. Use the information above to extract a trial balance of Omoba Enterprises as at 31 December, 2013. (12 Marks)
ii. Use the information below to recompute the entity’s capital for the period under review:

  • Drawings: N250,000
  • Profit for the period: N315,000

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  • 20 Marks

FA – MAY 2015 – L1 – SB – Q2 – Financial Statements Preparation

Prepare an extended trial balance and adjustments for Salfo Enterprises based on ledger balances.

The following is a list of balances extracted from the ledger of Salfo Enterprises:

N
Inventory on 1 January 2013 30,600
Revenue 245,340
Purchases 160,200
Salaries and wages 52,110
Furniture and fittings 92,500
Office expenses 16,200
Trade receivables 50,400
Trade payables 22,400
Cash in hand and at bank 6,230
Drawings 15,500
Capital 156,000

Additional information:

  1. Inventory on 31 December 2013: N38,000
  2. Prepaid office expenses: N2,300
  3. Accrued wages: N1,500
  4. Depreciation is to be charged on furniture and fittings at 10% per annum on cost.

Required: a. Prepare the initial trial balance. (4 Marks)
b. Record the necessary adjustments. (8 Marks)
c. Prepare the adjusted trial balance. (8 Marks)

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  • 1 Marks

FA – MAY 2015 – L1 – SA – Q18 – Bank Reconciliations

Calculate the adjusted cash book balance from given data.

Use the following information to answer questions 18 and 19:
Balance as per cash book: N220,000
Dishonored cheques: N100,000
Bank charges: N10,500
Uncredited cheques: N70,000

The adjusted cash book balance is:
A. N100,000
B. N109,500
C. N155,500
D. N209,500
E. N309,500

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  • 10 Marks

PT – Nov2019 – L2 – Q4a – Corporate Tax Liabilities

This question asks to compute the chargeable income of Valentine Ghana Limited for the 2018 tax year based on the provided financial statements and additional information.

Valentine Ghana Limited is a producer of love greeting cards, and the following was extracted from its financial statements for the year ended 31 December 2018.
a) Valentine Ghana Limited is a producer of love greeting cards and the following was
extracted from its financial statements for the year ended 31 December,2018.

Deduct:

Net Profit: GH¢346,110
Additional Information:
i) Capital allowances for the year were GH¢204,000, as agreed with the Ghana Revenue Authority (GRA).
ii) The figures for repairs and maintenance include an amount of GH¢33,150 for the cost of erecting a new gate to the factory.
iii) 50% of other income was the personal rental income of the Managing Director.
iv) One-third of vehicle running expenses was expended on the personal car of the Managing Director, used for the company’s operation based on company policy.

Required:
Calculate the chargeable income of Valentine Ghana Limited for 2018 Year of Assessment.
(8 marks)

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  • 15 Marks

CR – May 2019 – L3 – Q3 – Business valuations

The question involves redrafting financial statements of PFC based on additional information provided and calculating a range of possible issue prices for an IPO using Net Assets Method and Earnings Yield/Price Earnings Ratio Method.

The Board of Pogas Furniture Ltd (PFC), after a few years of incorporation, has decided to get the company listed on the Ghana Stock Exchange. The Board has contacted you to assist in determining the true value of the business as at 31 December 2018 and to provide a range of possible issue prices based on the Net Assets Method and the Earnings Yield Method. Oliso Ltd, a listed company and a competitor of PFC, current results show a price-earnings ratio of 5 and earnings yield of 20%. The summarised unaudited financial statements of PFC are as follows:

Statement of Profit or Loss for the year ended 31 December 2018

GH¢’000
Sales Revenue (note i) 150,000
Cost of Sales (72,000)
Gross Profit 78,000
Operational Expenses (34,800)
Finance Costs (Interest on debenture stocks) (1,200)
Net Profit 42,000
Taxation (@ 25%) (10,500)
Profit for the period 31,500

Statement of Financial Position as at 31 December 2018

GH¢’000
Non-current assets
Property at Valuation (Land GH¢3 million; buildings GH¢27 million) 30,000
Plant and Equipment 24,000
Intangible Asset – Patent Right 3,000
Financial Asset (fair valued through profit or loss at 1/1/2018) 7,500
Total Non-current Assets 64,500
Current Assets 30,000
Total Assets 94,500
Equity and Liabilities
Stated Capital (4 million shares issued at GH¢3.00 per share) 12,000
Retained Earnings 57,960
Total Equity 69,960
Non-current liabilities
20% Debenture Stocks (2018-2020) 6,000
Deferred Tax provision (1 January 2018) 4,500
Total Non-current Liabilities 10,500
Current Liabilities
Trade Payables 3,540
Current Tax liability 10,500
Total Current Liabilities 14,040
Total Equity and Liabilities 94,500

Additional Information:

i) The sales revenue includes GH¢24 million of revenue for credit sales made on a ‘sale or return’ basis. At 31 December 2018, customers who had not paid for the goods had the right to return GH¢7.8 million of them. PFC applied a markup on cost of 30% on all these sales. In the past, PFC’s customers have sometimes returned goods under this type of agreement.

ii) The depreciable non-current assets have not been depreciated for the year ended 31 December 2018.

  • PFC has a policy of revaluing its land and buildings at the end of each accounting year. The values in the above statement of financial position are as at 1 January 2018 when the buildings had a remaining life of 18 years. A qualified surveyor has valued the land and buildings at 31 December 2018 at GH¢33 million.
  • Plant and equipment are depreciated at 12.5% per annum on the reducing balance basis. As at 31 December 2018, the value in use and the fair value less cost to sell were assessed at GH¢21.3 million and GH¢20.25 million respectively.
  • The patent right was acquired in January 2018 at a cost of GH¢3 million. It is expected to be used for five years after which the right of usage would have to be renewed in January 2023.

iii) The financial assets at fair value through profit or loss are held in a fund whose value changes directly in proportion to a specified market index. At 1 January 2018, the relevant index was 240.0, and at 31 December 2018, the index was 259.2.

iv) In late December 2018, the directors of PFC discovered a material fraud perpetrated by the company’s credit controller. Investigations revealed that a total of GH¢9 million of the trade receivables (included in current assets) as shown in the statement of financial position at 31 December 2018 had in fact been paid and the money had been stolen by the credit controller. An analysis revealed that GH¢3 million had been stolen in the year to 31 December 2017, with the rest being stolen in the current year. PFC is not insured for this loss and it cannot be recovered from the credit controller since his whereabouts are unknown.

v) As at 31 December 2018, the company’s taxable temporary differences had increased to GH¢24 million. The deferred tax relating to the increase in the temporary differences should be taken to profit or loss. The applicable corporate tax rate is 25%. The above figures do not include the estimated provision for current income tax on the profit for the year ended 31 December 2018. After allowing for any adjustments required in items (i) to (iv), the directors have estimated the provision of current tax liability for 2018 at 25% of adjusted profit. (This is in addition to the deferred tax effects of item (v)).

Required:

a) Redraft the financial statements above (taking into consideration the additional information (i) – (v) above). (11 marks)

b) Based on the revised financial statements, provide a range of possible issue prices per share using the Net Assets Method and the Earnings Yield/Price Earnings Ratio Method. (4 marks)

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  • 10 Marks

AT – Nov 2016 – L3 – Q4b – Business income – Corporate income tax

Calculate the tax payable by Bambara Ltd and comment on the treatment of specific income and expenses

b) Bambara Ltd has the following summarized income statement relating to the 2015 year of assessment:

GH¢
Revenue 100,000
Cost of Sales 65,000
Gross Profit 35,000
Operating expenses 20,000
Net profit 15,000

Upon a closer scrutiny, the following came up:

i) Dividend net of withholding tax received from A Ltd was GH¢10,000. The amount received was added to revenue above. Bambara Ltd has 10% equity interest in A Ltd.
ii) Bad debts of GH¢1,000 were recovered. This was adjusted to the Income Surplus Account.
iii) A penalty of GH¢2,000 was paid and has been added to operating costs to determine the net profit as disclosed.
iv) Capital allowance agreed with Ghana Revenue Authority was GH¢1,000, and depreciation of GH¢1,300 was added to operating costs.
v) Taxes paid in previous quarters amounting to GH¢1,200 were added to operating costs to determine the net profit.
vi) It came to light that an amount of GH¢11,400 net of 5% withholding tax relating to the supply of goods was not brought into the accounts at all on account of omission. The withholding tax was certified correct.

Required:
Determine the tax payable by Bambara Ltd and comment on any four reasons for the inclusion and/or non-inclusion of the transactions in the determination of income. (10 marks)

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  • 10 Marks

PSAF – Nov 2023 – L2 – Q1a – General purpose financial reporting framework

Redraft financial statement under cash basis and justify its use.

Revenue GH₵ GH₵
GOG Subvention 152,000
Internally Generated Fund (IGF) 1 187,000
Donations 4 45,000 384,000

Expenditure

Description GH₵ GH₵
Compensation 2 68,000
Use of Goods & Services 3 & 5 35,000
Consumption of Fixed Asset 13,000 (116,000)
Surplus 268,000

Additional Information:

  1. The entity received an IGF of GH¢ 13,000 in advance for the year 2023. This transaction is not included in the IGF amount stated in the financial statement.
  2. Included in Compensation is an amount of GH¢ 17,000 accrued as at the end of 31 December 2022.
  3. Excluded from the Use of Goods & Services is an amount of GH¢ 1,000 paid in advance for the year 2023.
  4. Included in Donations is Motor Vehicle received from a donor partner amounting to GH¢ 12,000.
  5. Included in the Use of Goods and Services is Furniture acquired on 31 December 2022 at the cost of GH¢ 2,000.
  6. The Statement of Financial Performance is prepared under Accrual Accounting Basis.

Required:
i) Redraft the financial statement under Cash Accounting Basis for the year ended 31 December 2022, showing the necessary adjustments. (7 marks)
ii) Justify THREE (3) reasons management would want to prepare the financial statement under Cash Accounting Basis. (3 marks)

 

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  • 20 Marks

FA – Mar 2024 – L1 – Q4 – Non-current assets and depreciation | Preparation of financial statements of a sole trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for Kontiba Enterprise, including necessary adjustments.

Kontiba Enterprise

Statement of Profit or Loss for the year ended 30 September 2023

The following information is also available:
1) Only 10 months’ salaries are shown in the Trial Balance. An equal amount is paid for
salaries for each month of the year.
2) As at 30 September 2023, GH¢2,560 had been prepaid for insurance, whilst GH¢328 was
owing for general expenses.
3) GH¢3,680 had been charged to general expenses for the owner’s private holiday.
4) As at 30 September 2023, inventory was valued at GH¢18,000.
5) A customer, owing GH¢4,032 has been declared bankrupt. This amount is to be written
off in full.
6) An allowance for receivables is to be maintained at 3% of the receivables balance.
7) As at 30 September 2023, the business’s land was valued at GH¢80,000. Land is not
depreciated.
8) Depreciation is to be provided as follows:
Buildings: 4% per annum using the straight line method.
Equipment: 25% per annum using the straight line method.
Page 7 of 20

Motor vehicles: 40% per annum using the reducing balance method.
9) There were no additions or disposals of non-current assets during the financial year.

Required:
i) Prepare the statement of profit or loss for the year ended 30 September 2023. (10 marks)
ii) Prepare the statement of financial position as at 30 September 2023. (10 marks)

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  • 6 Marks

FA – Mar 2024 – L1 – Q3b – Bank reconciliations

Prepare an adjusted cash book and a bank reconciliation statement following identified errors.

The accountant of Abeiku Ltd has prepared a trial balance but found that the total of debit balances is GH¢691,680 and the total of credit balances is GH¢689,720.

On investigation, the following errors were discovered in the book-keeping:

  1. Total purchases were recorded at GH¢80 below their correct value, although the total value of trade payables was correctly recorded.
  2. Total telephone expenses were recorded at GH¢800 above their correct amount, although the total value of the amounts payable was correctly recorded.
  3. Purchase returns of GH¢440 were recorded as a debit entry in the sales returns account, but the correct entry had been made in the trade payables control account.
  4. Equipment costing GH¢1,600 had been recorded as a debit entry in the repairs and maintenance account.
  5. Rental expenses of GH¢4,392 were entered incorrectly as GH¢4,932 in the expense account but were entered correctly in the bank account in the ledger.
  6. Bank charges of GH¢160 have been omitted entirely from the ledger.

Required:

i) Prepare journal entries for the correction of the errors. (6 marks)

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  • 14 Marks

FA – Mar 2024 – L1 – Q3a – Bank reconciliations

Prepare a bank reconciliation statement and an adjusted cash book for Malik & Company.

i) Mr. Malik is a sole trader and carries on business under the name “Malik & Company”. The balance on his cash book at 31 December 2023 did not agree with the balance as per the bank statement, which shows a credit balance of GH¢183,750.

An examination of the cash book and bank statement disclosed the following:

  1. A deposit of GH¢24,600 made on 29 December 2023 and recorded in the cashbook had been credited by the bank on 1 January 2024.
  2. Bank charges of GH¢850 have not been entered in the cash book.
  3. A debit of GH¢2,100 appeared on the bank statement for an unpaid cheque which had been returned marked “out of date”. The cheque was re-dated by his customer and paid into the bank again on 3 January 2024. The earlier transaction was recorded in the cashbook.
  4. A standing order for payment of an annual subscription amounting to GH¢500 has not been entered in the cash book.
  5. On 26 December 2023, Mr. Malik had given the cashier a cheque for GH¢5,000 to pay into his personal account at the bank. The cashier deposited it into the business account by mistake.
  6. On 27 December 2023, a customer had made an online transfer of GH¢24,950 in payment against goods supplied. The advice was received and recorded in the cash book on 2 January 2024.
  7. On 30 September 2023, Mr. Malik entered into a hire purchase agreement and issued a standing order to the bank to pay a sum of GH¢1,300 on day 10 of each month, commencing from October 2023. No entries have been made in the cash book for these payments.
  8. A cheque for GH¢18,200 received from Mr. Adoboe had been entered twice in the cash book.

Required:

i) Prepare the adjusted cash book for Malik & Company in a format which clearly indicates whether each entry is a debit or credit. (7 marks)

ii) Prepare a reconciliation of the bank statement balance to the adjusted cash book balance. (7 marks)

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