Income and Expenditure Account

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

Question

a) The accountant of Kwadaso Traders has prepared the Trading and Profit and Loss Account for the year ended 31 December 2020 and the forecast for the year ended 31 December 2021. These are reproduced below:

Required:
i) Calculate the following ratios for the year ended 31 December 2020 and for the year ended 31 December 2021.

Gross Profit Margin (1 mark)
Net Profit Margin (1 mark)
Inventory Turnover (1 mark)
Return on Capital Employed (ROCE) (1 mark)

ii) The manager of Kwadaso Traders has set the objective of improving the profitability of the business for the year ending 31 December 2021. Discuss the changes between the two years based on the ratios calculated and the additional information provided, and explain whether or not Kwadaso Traders will achieve its objective.
(8 marks)

iii) Explain the importance of the Return on Capital Employed (ROCE) percentage to a business.
(3 marks)

b) Financial statements prepared by clubs, societies, and associations are different from those prepared by sole traders, partnerships, and limited liability companies. The financial statements prepared by these not-for-profit organizations are the Trading Account, the Income and Expenditure Account, the Receipts and Payment Account, and the Statement of Financial Position.

Required:
Explain TWO (2) differences between an Income and Expenditure Account and a Receipts and Payments Account.
(5 marks)

Answer

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Tags: Financial Ratios, Gross Profit Margin, Income and Expenditure Account, Inventory Turnover, Net Profit Margin, Receipts and Payments Account, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: MAY 2021

FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts

Calculation of Accumulated Fund, preparation of Subscription Account, Income and Expenditure Account, and Statement of Financial Position for a not-for-profit organization.

Question

The Dabi Golf Club prepares its accounts annually on 31st March. The Receipts and Payments Account for the year ended 31st March 2016 was as follows:

	GHȼ	GHȼ
Balance b/d	2,900
Subscriptions received	70,800
Competition receipts	12,000
Dinner dance ticket sales	13,000
Donations	1,000
Sale of equipment	25,000

Competition prizes		2,800
Groundkeepers’ wages		14,000
Dinner dance expenses		6,800
Insurance		9,200
Equipment purchases		40,000
General expenses		30,100
Electricity		1,400
Balance c/d		20,400

	124,700	124,700

The following additional information is available:

i) The remaining assets and liabilities of the Club at the beginning and end of the year were:

	1st April 2015 (GHȼ)	31st March 2016 (GHȼ)
Clubhouse	130,000	130,000
Equipment	140,000	120,000
Electricity owing	400	200
Subscriptions due and unpaid	2,500	2,900
Subscriptions paid in advance	6,200	4,100
Stock of competition prizes	600	200

ii) During the year equipment with a book value of GHȼ30,000 was sold for GHȼ25,000. iii) Of the subscriptions due on 1st April 2015, GHȼ220 remains unpaid. This is to be treated as an irrecoverable debt.

Required:

a) Calculate the Accumulated Fund on 1st April 2015. (3 marks)

b) Prepare the Subscription Account for the year ended 31st March 2016. (4 marks)

c) Prepare: i) the Income and Expenditure Account for the year ended 31st March 2016

ii) Statement of Financial Position as at 31st March 2016. (13 marks)

Answer

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Tags: Financial Position, Income and Expenditure Account, Not-for-profit, Receipts and Payments Account
Level: Level 1

Topic: Preparation of not-for-profit accounts
Series: NOV 2016

FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for ABSU Social Club.

Question

The ABSU Social Club prepares its accounts annually on 31st December. The Receipts and Payments Account for the year ended 31st December 2014 was prepared by the Treasurer as follows:

Receipts and Payments Account for the year ended 31st December 2014

Additional information:
i) The equipment sold during the year was valued in the books at GH¢600 on 1st January 2014. The Club’s policy is to provide a full year’s depreciation in the year of purchase but none in the year of sale.
ii) The savings account (short term) pays a fixed rate of interest of 5% per annum. An additional amount of GH¢400 was paid into the account on 1st July 2014. There were no withdrawals made during the year. Interest due on 31st December 2014 has not been received.

iii) The remaining assets and liabilities of the Club at the beginning and end of the year were:

Description	1st January 2014	31st December 2014
Clubhouse	GH¢230,000	GH¢230,000
Equipment	GH¢26,000	GH¢25,200
Savings account (short term)	GH¢2,000	GH¢2,400
Insurance prepaid	GH¢100	GH¢80
Bar staff wages owing	GH¢180	GH¢160
Subscriptions due and unpaid	GH¢800	GH¢300
Subscriptions paid in advance	GH¢700	GH¢1,000
Bar payables	GH¢2,400	GH¢1,400
Bar inventory	GH¢7,500	GH¢8,700

iv) All subscriptions due for the year 2013, but unpaid on 31st December 2014 are considered to be irrecoverable debts.
v) Bar staff wages are the only expense to be charged to the Bar Trading Account.

Required:
a) Prepare the Bar Trading Account for the year ended 31st December 2014. (5 marks)
b) Prepare the Income and Expenditure Account for the year ended 31st December 2014. (8 marks)
c) Prepare the Statement of Financial Position as at 31st December 2014. (7 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bar Trading Account, Income and Expenditure Account, Statement of Financial Position
Level: Level 1

Topic: Preparation of not-for-profit accounts
Series: MAY 2016

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

Question

Required:
i) Calculate the following ratios for the year ended 31 December 2020 and for the year ended 31 December 2021.

Gross Profit Margin (1 mark)
Net Profit Margin (1 mark)
Inventory Turnover (1 mark)
Return on Capital Employed (ROCE) (1 mark)

iii) Explain the importance of the Return on Capital Employed (ROCE) percentage to a business.
(3 marks)

Required:
Explain TWO (2) differences between an Income and Expenditure Account and a Receipts and Payments Account.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Ratios, Gross Profit Margin, Income and Expenditure Account, Inventory Turnover, Net Profit Margin, Receipts and Payments Account, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: MAY 2021

FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts

Calculation of Accumulated Fund, preparation of Subscription Account, Income and Expenditure Account, and Statement of Financial Position for a not-for-profit organization.

Question

The Dabi Golf Club prepares its accounts annually on 31st March. The Receipts and Payments Account for the year ended 31st March 2016 was as follows:

	GHȼ	GHȼ
Balance b/d	2,900
Subscriptions received	70,800
Competition receipts	12,000
Dinner dance ticket sales	13,000
Donations	1,000
Sale of equipment	25,000

Competition prizes		2,800
Groundkeepers’ wages		14,000
Dinner dance expenses		6,800
Insurance		9,200
Equipment purchases		40,000
General expenses		30,100
Electricity		1,400
Balance c/d		20,400

	124,700	124,700

The following additional information is available:

i) The remaining assets and liabilities of the Club at the beginning and end of the year were:

	1st April 2015 (GHȼ)	31st March 2016 (GHȼ)
Clubhouse	130,000	130,000
Equipment	140,000	120,000
Electricity owing	400	200
Subscriptions due and unpaid	2,500	2,900
Subscriptions paid in advance	6,200	4,100
Stock of competition prizes	600	200

Required:

a) Calculate the Accumulated Fund on 1st April 2015. (3 marks)

b) Prepare the Subscription Account for the year ended 31st March 2016. (4 marks)

c) Prepare: i) the Income and Expenditure Account for the year ended 31st March 2016

ii) Statement of Financial Position as at 31st March 2016. (13 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Position, Income and Expenditure Account, Not-for-profit, Receipts and Payments Account
Level: Level 1

Topic: Preparation of not-for-profit accounts
Series: NOV 2016

FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for ABSU Social Club.

Question

The ABSU Social Club prepares its accounts annually on 31st December. The Receipts and Payments Account for the year ended 31st December 2014 was prepared by the Treasurer as follows:

Receipts and Payments Account for the year ended 31st December 2014

iii) The remaining assets and liabilities of the Club at the beginning and end of the year were:

Description	1st January 2014	31st December 2014
Clubhouse	GH¢230,000	GH¢230,000
Equipment	GH¢26,000	GH¢25,200
Savings account (short term)	GH¢2,000	GH¢2,400
Insurance prepaid	GH¢100	GH¢80
Bar staff wages owing	GH¢180	GH¢160
Subscriptions due and unpaid	GH¢800	GH¢300
Subscriptions paid in advance	GH¢700	GH¢1,000
Bar payables	GH¢2,400	GH¢1,400
Bar inventory	GH¢7,500	GH¢8,700

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bar Trading Account, Income and Expenditure Account, Statement of Financial Position
Level: Level 1

Topic: Preparation of not-for-profit accounts
Series: MAY 2016

Question Tag: Income and Expenditure Account

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FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts

Calculation of Accumulated Fund, preparation of Subscription Account, Income and Expenditure Account, and Statement of Financial Position for a not-for-profit organization.

FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for ABSU Social Club.

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts

Calculation of Accumulated Fund, preparation of Subscription Account, Income and Expenditure Account, and Statement of Financial Position for a not-for-profit organization.

FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for ABSU Social Club.

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FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

You're reporting an error for "FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts

Calculation of Accumulated Fund, preparation of Subscription Account, Income and Expenditure Account, and Statement of Financial Position for a not-for-profit organization.

You're reporting an error for "FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts"

FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for ABSU Social Club.

You're reporting an error for "FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts"

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

You're reporting an error for "FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts

Calculation of Accumulated Fund, preparation of Subscription Account, Income and Expenditure Account, and Statement of Financial Position for a not-for-profit organization.

You're reporting an error for "FA – Nov 2016 – L1 – Q5 – Preparation of not-for-profit accounts"

FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for ABSU Social Club.

You're reporting an error for "FA – May 2016 – L1 – Q6 – Preparation of not-for-profit accounts"

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