- 20 Marks
FA – Nov 2020 – L1 – Q1 – Accruals and prepayments | Bad and doubtful debt | The IASB’s Conceptual Framework
Question on various accounting principles and preparation of specific accounts related to rent, rates, bad debts, and doubtful debts.
Question
a) Accounting principles and concepts are of fundamental importance in the preparation of financial statements.
Required:
With the aid of relevant examples, outline your understanding on any FOUR (4) of the following concepts/principles: i) Accruals
ii) Going Concern
iii) Historical Cost
iv) Materiality
v) Break up basis
(10 marks)
b) Patricia Ltd prepares accounts to 31 December each year. The following transactions relate to Rent and Rates: i) 31 December 2018 three months’ rent owing amounted to GH¢6,000.
ii) 31 December 2018 two months rates prepaid amounted to GH¢5,250.
iii) During the year 2019, cash paid for rent and rates amounted to GH¢90,000
iv) Rent owing as at 31 December 2019 amounts to GH¢9,000
v) Rates prepaid as at 31 December 2019 amounts to GH¢2,250
Required:
Prepare a combined rent and rates account to disclose the amount that is chargeable to the profit or loss account for the year ended 31 December, 2019.
(4 marks)
c) The following information was extracted from the books of Maanaa and Co.:
| Year | Bad debts written off (GH¢) | Trade Receivables (GH¢) | Allowance for doubtful debt (%) |
|---|---|---|---|
| 1 | 200,000 | 1,200,000 | 10 |
| 2 | 300,000 | 1,800,000 | 5 |
| 3 | 100,000 | 3,000,000 | 5 |
Required:
Prepare the following accounts for the 3 years to determine the amount chargeable to the Profit or Loss account:
i) Bad debts written off account (2 marks)
ii) Allowance for doubtful debt account (4 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Accruals, Allowance for Doubtful Debt, Bad Debts, Break-up Basis, Going Concern, Historical Cost, Materiality, Rates, Rent
- Level: Level 1