Question Tag: Financial Accounting

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  • 20 Marks

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

Even with the increase in profits in 2011 and 2012, the Managing Director was of the opinion that it is better to cut the company’s losses, once and for all, by winding-up the company. However, the Finance Director disagreed and argued that since the company’s performance was now improving, it should continue to operate.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year Profits (₦)
Year ended 31 May 2009 540,000
Year ended 31 May 2010 300,000
Seven months to 31 December 2010 645,000
Year ended 31 December 2011 1,575,000
Year ended 31 December 2012 1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

a. Identify the steps involved in the event that HOPEFUL Limited adopts the change of accounting date. (6 Marks)
b. Compute the Assessable profits for 2011 – 2013, if the option to change accounting date is accepted, using both the old and the new dates. (7 Marks)
c. Compute the Assessable profits for the relevant years if the cessation option is accepted using the normal basis and the revised basis of assessment. (7 Marks)

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  • 1 Marks

FA – Nov 2013 – L1 – SA – Q8 – Scope and Purpose of Accounting

Identifying the first phase of financial accounting.

Accounting has been defined in several ways, each emphasising a particular feature of the subject. In general, the first phase of financial accounting is the:

A. Preparation of financial statements
B. Analysis of financial statements
C. Writing of source documents
D. Drawing up of trading account
E. Wooing customers to buy goods

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  • 12 Marks

FA – Nov 2023 – L1 – SB – Q1B – Roles of Accountants in Business and the Economy

Describe various types of accounting and their roles.

Explain the various types of accounting and their respective roles in providing relevant information to different users of financial information.

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  • 1 Marks

MI – Nov 2019 – L1 – SA – Q10 – Information Systems

This question asks to identify the requirement under which integrated accounts are generally prepared.

The integrated accounts are generally prepared in line with ………. requirement:
A. Cost accounting
B. Responsibility accounting
C. Control account
D. Management account
E. Financial accounting

 

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  • 1 Marks

BM – May 2024 – L1 – SA – Q20 – Basics of Business Finance and Financial Markets

Understanding the terminology used for the difference between assets and liabilities in nonprofit organizations.

The difference between the assets and liabilities of a not-for-profit organization is called:
A. Net asset
B. Net liability
C. Accumulated fund
D. Working capital
E. Net capital

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  • 1 Marks

BMF- May 2024 – L1 – SA – Q12 – Investment Decisions

Determining profit based on given assets, liabilities, and additional capital information.

Given the following information:

Total assets at December 31, Year 2: ₦150,400
Total assets at December 31, Year 1: ₦125,000
Total liabilities at December 31, Year 2: ₦43,200
Total liabilities at December 31, Year 1: ₦34,800
Additional capital input on December 31, Year 2: ₦10,000

What was the profit of the business for the year ended December 31, Year 2?
A. ₦7,000
B. ₦17,000
C. ₦27,000
D. ₦90,200
E. ₦107,200

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  • 14 Marks

MA – Nov 2016 – L2 – Q1a – Introduction to management accounting

Discuss the importance of Management Accounting in a modern business environment and compare it with Financial Accounting.

The Management Accountant plays an important role in the modern business environment, and his/her activities may be categorized as providing information under the key headings of planning, control, and decision making.

You have just been appointed to a new role as Management Accountant in Akwaba Ltd, a large engineering company producing a wide range of parts for the automobile industry. This new role has been created following a majority decision of the Board of Directors based on the advice of the company’s auditors. However, the Managing Director comes from a marketing background and does not understand why the company needs another accountant as there is already a Financial Accountant employed on a full-time basis. She voted against the creation of the new position and considers the cost of your remuneration to be an unwelcome burden which will only serve to reduce the company’s reported profits. According to her, the equation Y = a – bx which management accountants always use is not relevant in the modern-day business environment.

You are aware of the strong opinion of the Managing Director, and as your first task, you decide to attempt to convince her of the importance of Management Accounting in the modern business environment and also suggest some ways that you can ensure your future role in Akwaba Ltd is financially viable.

Required:

Prepare a Memorandum to the Managing Director in which you address her concerns using the following guidelines:

i) Distinguish clearly between Financial Accounting and Management Accounting under any FOUR different headings. (6 marks)

ii) For each of the THREE key headings of planning, control, and decision making, outline one Management Accounting technique and how it would lead to stronger commercial success for the company. (6 marks)

iii) Identify any THREE qualitative (non-financial) issues that you should consider as a Management Accountant when providing information for decision making in Akwaba Ltd. (2 marks)

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  • 20 Marks

FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework

Explains the purpose and differences between Financial and Management Accounting, prepares ledger accounts, and links prudence concept to allowance for receivables.

a) Financial Accounting and Management Accounting are similar with regard to the determination of costs, their assignment to different accounting periods, and allocation of costs to different departments and segments. This implies that the concepts and principles that are used in Financial Accounting may be suitable for Management Accounting.

Required:
i) Explain the purpose and scope of financial accounting. (4 marks)
ii) Explain THREE (3) differences between Financial Accounting and Management Accounting. (6 marks)

b) On 1 January 2021, Mankessim Traders had the following entries in its ledger accounts:

  • Insurance: GHȼ600 owing
  • Commission receivable: GHȼ500 owing to Mankessim Traders
  • Allowance for receivables: GHȼ1,600 credit balance

The following information is available for the financial year ended 31 December 2021:

  • Insurance was paid as follows:
    • 26 February 2021 GHȼ2,000
    • 15 October 2021 GHȼ2,600
    • The payment on 15 October 2021 relates to the period 1 October 2021 to 31 March 2022.
  • Commission receivable was as follows:
    • 10 January 2021 GHȼ400
    • 18 January 2021 GHȼ200
    • 13 November 2021 GHȼ3,000
  • On 31 December 2021, GHȼ600 was owing in commission to Mankessim Traders.
  • The trade receivables balance at 31 December 2021 was GHȼ38,400. The allowance for receivables is to be provided as GHȼ600 for a specific debt, plus 2% on the remainder of receivables.

Required:
Prepare the following ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
i) Insurance. (2 marks)
ii) Commission receivable. (2 marks)
iii) Allowance for receivables. (2 marks)

c) Explain why maintaining an allowance for receivables is an application of the prudence concept. (4 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

a) Management accounting can be described as the process of supplying the managers and employees in an organization with relevant information, both financial and non-financial, for making decisions, allocating resources, monitoring, evaluating, and rewarding performance.

Required:
In relation to the description of management accounting provided above:
State THREE (3) important changes that have taken place in the business environment that have influenced management accounting practice. (3 marks)

b) Financial Accounting and Management Accounting share important similarities since both are based on financial information and other quantitative information about business operations.

Required:
Identify FOUR (4) differences between financial accounting and management accounting. (4 marks)

c) Mr. Osei Nyarko, an engineer by training, established Kotmat Ltd three years ago with five employees. His only source of information concerning the performance of Kotmat Ltd has been the half-yearly financial statements, which he receives ten weeks after the end of each half-year. A proposal has been submitted to Mr. Osei Nyarko to install a cost and management accounting system.

Required:
i) Identify FOUR (4) benefits Mr. Nyarko will derive from installing a cost and management accounting system. (4 marks)
ii) Enumerate FOUR (4) types of information which could be obtained from the cost and management accounting system that cannot be obtained from the current system. (4 marks)

**d) State and explain TWO (2) useful pieces of information generated by marginal and absorption costing systems. (5 marks)

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  • 20 Marks

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

Even with the increase in profits in 2011 and 2012, the Managing Director was of the opinion that it is better to cut the company’s losses, once and for all, by winding-up the company. However, the Finance Director disagreed and argued that since the company’s performance was now improving, it should continue to operate.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year Profits (₦)
Year ended 31 May 2009 540,000
Year ended 31 May 2010 300,000
Seven months to 31 December 2010 645,000
Year ended 31 December 2011 1,575,000
Year ended 31 December 2012 1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

a. Identify the steps involved in the event that HOPEFUL Limited adopts the change of accounting date. (6 Marks)
b. Compute the Assessable profits for 2011 – 2013, if the option to change accounting date is accepted, using both the old and the new dates. (7 Marks)
c. Compute the Assessable profits for the relevant years if the cessation option is accepted using the normal basis and the revised basis of assessment. (7 Marks)

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  • 1 Marks

FA – Nov 2013 – L1 – SA – Q8 – Scope and Purpose of Accounting

Identifying the first phase of financial accounting.

Accounting has been defined in several ways, each emphasising a particular feature of the subject. In general, the first phase of financial accounting is the:

A. Preparation of financial statements
B. Analysis of financial statements
C. Writing of source documents
D. Drawing up of trading account
E. Wooing customers to buy goods

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  • 12 Marks

FA – Nov 2023 – L1 – SB – Q1B – Roles of Accountants in Business and the Economy

Describe various types of accounting and their roles.

Explain the various types of accounting and their respective roles in providing relevant information to different users of financial information.

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  • 1 Marks

MI – Nov 2019 – L1 – SA – Q10 – Information Systems

This question asks to identify the requirement under which integrated accounts are generally prepared.

The integrated accounts are generally prepared in line with ………. requirement:
A. Cost accounting
B. Responsibility accounting
C. Control account
D. Management account
E. Financial accounting

 

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  • 1 Marks

BM – May 2024 – L1 – SA – Q20 – Basics of Business Finance and Financial Markets

Understanding the terminology used for the difference between assets and liabilities in nonprofit organizations.

The difference between the assets and liabilities of a not-for-profit organization is called:
A. Net asset
B. Net liability
C. Accumulated fund
D. Working capital
E. Net capital

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  • 1 Marks

BMF- May 2024 – L1 – SA – Q12 – Investment Decisions

Determining profit based on given assets, liabilities, and additional capital information.

Given the following information:

Total assets at December 31, Year 2: ₦150,400
Total assets at December 31, Year 1: ₦125,000
Total liabilities at December 31, Year 2: ₦43,200
Total liabilities at December 31, Year 1: ₦34,800
Additional capital input on December 31, Year 2: ₦10,000

What was the profit of the business for the year ended December 31, Year 2?
A. ₦7,000
B. ₦17,000
C. ₦27,000
D. ₦90,200
E. ₦107,200

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  • 14 Marks

MA – Nov 2016 – L2 – Q1a – Introduction to management accounting

Discuss the importance of Management Accounting in a modern business environment and compare it with Financial Accounting.

The Management Accountant plays an important role in the modern business environment, and his/her activities may be categorized as providing information under the key headings of planning, control, and decision making.

You have just been appointed to a new role as Management Accountant in Akwaba Ltd, a large engineering company producing a wide range of parts for the automobile industry. This new role has been created following a majority decision of the Board of Directors based on the advice of the company’s auditors. However, the Managing Director comes from a marketing background and does not understand why the company needs another accountant as there is already a Financial Accountant employed on a full-time basis. She voted against the creation of the new position and considers the cost of your remuneration to be an unwelcome burden which will only serve to reduce the company’s reported profits. According to her, the equation Y = a – bx which management accountants always use is not relevant in the modern-day business environment.

You are aware of the strong opinion of the Managing Director, and as your first task, you decide to attempt to convince her of the importance of Management Accounting in the modern business environment and also suggest some ways that you can ensure your future role in Akwaba Ltd is financially viable.

Required:

Prepare a Memorandum to the Managing Director in which you address her concerns using the following guidelines:

i) Distinguish clearly between Financial Accounting and Management Accounting under any FOUR different headings. (6 marks)

ii) For each of the THREE key headings of planning, control, and decision making, outline one Management Accounting technique and how it would lead to stronger commercial success for the company. (6 marks)

iii) Identify any THREE qualitative (non-financial) issues that you should consider as a Management Accountant when providing information for decision making in Akwaba Ltd. (2 marks)

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  • 20 Marks

FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework

Explains the purpose and differences between Financial and Management Accounting, prepares ledger accounts, and links prudence concept to allowance for receivables.

a) Financial Accounting and Management Accounting are similar with regard to the determination of costs, their assignment to different accounting periods, and allocation of costs to different departments and segments. This implies that the concepts and principles that are used in Financial Accounting may be suitable for Management Accounting.

Required:
i) Explain the purpose and scope of financial accounting. (4 marks)
ii) Explain THREE (3) differences between Financial Accounting and Management Accounting. (6 marks)

b) On 1 January 2021, Mankessim Traders had the following entries in its ledger accounts:

  • Insurance: GHȼ600 owing
  • Commission receivable: GHȼ500 owing to Mankessim Traders
  • Allowance for receivables: GHȼ1,600 credit balance

The following information is available for the financial year ended 31 December 2021:

  • Insurance was paid as follows:
    • 26 February 2021 GHȼ2,000
    • 15 October 2021 GHȼ2,600
    • The payment on 15 October 2021 relates to the period 1 October 2021 to 31 March 2022.
  • Commission receivable was as follows:
    • 10 January 2021 GHȼ400
    • 18 January 2021 GHȼ200
    • 13 November 2021 GHȼ3,000
  • On 31 December 2021, GHȼ600 was owing in commission to Mankessim Traders.
  • The trade receivables balance at 31 December 2021 was GHȼ38,400. The allowance for receivables is to be provided as GHȼ600 for a specific debt, plus 2% on the remainder of receivables.

Required:
Prepare the following ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
i) Insurance. (2 marks)
ii) Commission receivable. (2 marks)
iii) Allowance for receivables. (2 marks)

c) Explain why maintaining an allowance for receivables is an application of the prudence concept. (4 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

a) Management accounting can be described as the process of supplying the managers and employees in an organization with relevant information, both financial and non-financial, for making decisions, allocating resources, monitoring, evaluating, and rewarding performance.

Required:
In relation to the description of management accounting provided above:
State THREE (3) important changes that have taken place in the business environment that have influenced management accounting practice. (3 marks)

b) Financial Accounting and Management Accounting share important similarities since both are based on financial information and other quantitative information about business operations.

Required:
Identify FOUR (4) differences between financial accounting and management accounting. (4 marks)

c) Mr. Osei Nyarko, an engineer by training, established Kotmat Ltd three years ago with five employees. His only source of information concerning the performance of Kotmat Ltd has been the half-yearly financial statements, which he receives ten weeks after the end of each half-year. A proposal has been submitted to Mr. Osei Nyarko to install a cost and management accounting system.

Required:
i) Identify FOUR (4) benefits Mr. Nyarko will derive from installing a cost and management accounting system. (4 marks)
ii) Enumerate FOUR (4) types of information which could be obtained from the cost and management accounting system that cannot be obtained from the current system. (4 marks)

**d) State and explain TWO (2) useful pieces of information generated by marginal and absorption costing systems. (5 marks)

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