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- 1 Marks
FA – Nov 2013 – L1 – SA – Q12 – Partnership Accounts
Understanding the implications of a purchase consideration paid by a company.
Question
Kowope Nigeria Limited paid purchase consideration of N900,000 for an existing partnership which has assets and liabilities valued as follows: Leasehold building – N500,000; Motor vehicles – N150,000; Furniture – N240,000; Inventory of stationery – N50,000 and Trade payables – N200,000. It means:
A. The company gained N160,000 as capital reserve
B. The company anticipates profit of N160,000
C. The partnership assets and liabilities are inflated by N160,000
D. The partnership is undervalued by N160,000
E. The company is paying N160,000 as goodwill
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- 1 Marks
FA – Nov 2013 – L1 – SA – Q11 – Partnership Accounts
Reason for revaluing assets when partnership composition changes.
Question
Assets must be revalued where there is a change in the partnership composition because:
A. Inflation affects the values of partnership assets
B. The economic value of the partnership must be enhanced
C. Deflation affects the value of partnership assets
D. It helps to prevent injustice to the concerned partners
E. The law insists that there should be a revaluation
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- 1 Marks
FA – Nov 2013 – L1 – SA – Q10 – Partnership Accounts
Necessary entries for writing off net decreases in the Revaluation Account.
Question
The necessary accounting entries to write-off net decrease in the Revaluation Account of a partnership are:
A. Dr. Revaluation Account; Cr. Partners’ Capital Account
B. Dr. Partners’ Capital Accounts; Cr. Revaluation Account
C. Dr. Partners’ Current Accounts; Cr. Revaluation Account
D. Dr. Revaluation Account; Cr. Partners’ Current Account
E. Dr. Revaluation Account; Cr. Realisation Account
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- 1 Marks
FA – Nov 2022 – L1 – SA – Q20 – Partnership Accounts
Identify when goodwill can be valued in a partnership.
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- 1 Marks
BMF – Nov 2019 – L1 – SA – Q1 – The Role of Professional Accountants in Business and Society; Business and Organizational Structures and Choices
Identifying incorrect accountability in different business structures
Question
The management of an organisation is accountable to its owners for the performance of the firm. From the foregoing, which of the following statements is incorrect?
A. Charities are accountable to stakeholders
B. Limited liability partnership is accountable to the government
C. The directors of a company are accountable to equity holders
D. Managers of public sector enterprises are accountable to the government
E. Partners in a business partnership are accountable to the stakeholders
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- 1 Marks
FA – May 2017 – L1 – SA – Q16 – Partnership Accounts
Identifies which types of entities exist primarily to generate profit.
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- 7 Marks
PT – May 2020 – L2 – Q3a – Scope and computation of income tax for partnerships
Assessable income computation for partners in a partnership business.
Question
a) During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and cost of traveling for leave.
David Stella Percy
Profit/loss sharing ratio 3 2 1
Salaries GH¢48,000 GH¢72,000 GH¢96,000
Interest on Capital GH¢30,000 GH¢20,000 GH¢10,000
Cost of traveling for leave GH¢20,000 GH¢30,000 GH¢25,000
Required:
Compute the assessable income for each partner.
(7 marks)
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- Tags: Assessable Income, Income Tax, Partnerships, Profit Sharing
- Level: Level 2
- Topic: Income Tax Liabilities
- Series: MAY 2020
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- 20 Marks
PT – Nov 2020 – L2 – Q3 – Income Tax Liabilities
Compute the assessable income for partners, explain the taxation rules for different workers, and define resident individual for tax purposes.
Question
Shika, Bekwai, and Sena, who are in partnership, have agreed to share profits and losses in the ratio of 2:2:3, respectively. During the year ended 31 December 2018, their books showed an adjusted profit of GH¢210,000 after accounting for the following:
| Shika | Bekwai | Sena | |
|---|---|---|---|
| Salaries | 70,000 | 80,000 | 150,000 |
| Interest on Capital | 12,000 | 16,000 | 12,000 |
| Partners’ Drawings | 6,000 | 4,000 | 10,000 |
You are given the following additional information:
i) Shika is married with two children who are in school and maintained two dependent relatives, who are more than 60 years, on which she spends GH¢10,000 annually.
ii) Shika also has a life assurance policy on herself attracting capital sum of GH¢1,600,000 but pays annual premium of GH¢1,800.
iii) Bekwai took a mortgage for his building and has been paying GH¢4,000 per month as mortgage interest.
iv) Bekwai is undertaking a two-week training program to update his knowledge on how to manage accounting software used in partnership businesses. He has spent GH¢1,500 on the training.
v) Bekwai received a television as a gift valued at GH¢3,000 for being the best worker in 2018 in Ghana.
vi) Sena is 62 years old and unmarried but has three dependent children while Bekwai is also unmarried but has one child who is schooling in Ghana.
Required:
a) Compute the assessable income for each partner for the year 2018. (10 marks)
b) The partnership business has some casual workers, temporary workers, and part-time workers. What are the taxation rules and tax liabilities of such workers? (6 marks)
c) Shika is an ‘international woman’ who travels often. There was confusion in 2018 as to whether she should be taxed as a resident or non-resident. What constitutes a resident individual for taxation purposes in Ghana? (4 marks)
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- 20 Marks
FA – May 2017 – L1 – Q4 – Correction of errors | Non-current assets and depreciation
Differences between companies and partnerships, disadvantages of sole proprietorships, depreciation calculation for Otiko Ltd, and error correction for WD.
Question
a) Partnerships and limited liability companies present several similarities for business owners looking for the right company structure. Both have similar income distribution and tax-reporting formats, and both are simpler to set up and operate than a corporation. Despite their similarities, they have differences.
Required:
Identify and explain THREE fundamental differences between a company and a partnership. (6 marks)
b) Sole proprietorships are the smallest form of business organization, and also the most common in the country. However, while there are certain advantages (it is easier to set up a sole proprietorship than a limited liability company, for instance), there are numerous disadvantages.
Required:
State FOUR disadvantages of the sole proprietorship as a mode of business. (4 marks)
c) Otiko Ltd’s head office building is the only building it owns. Using professional valuers, it revalued this building on 1 January 2016, at GH¢2,100,000. Otiko Ltd has adopted a revaluation policy for buildings from this valuation date and has decided that the original useful life of buildings has not changed as a result of the revaluation. The building was acquired on 1 January 2006. The cost of the building on acquisition was GH¢2,500,000 and the accumulated depreciation to the 31 December 2015 amounted to GH¢500,000. The depreciation up to 1 January 2016 was depreciated evenly since acquisition. The professional valuer believes that the residual value on the building would be GH¢600,000 at the end of its useful life.
Required:
Calculate the depreciation amount of the building for the year ended 31 December 2016 based on the information provided in the above scenario. (6 marks)
d) WD noted in 2016 that in 2015 it had omitted to record a depreciation expense on an asset amounting to GH¢600. Its accounts before the correction of the error are;
| 2016 (GH¢000) | 2015 (GH¢000) | |
|---|---|---|
| Gross profit | 6,000 | 6,900 |
| Distribution costs | (600) | (600) |
| Administration expenses | (1,800) | (1,800) |
| Depreciation | (600) | Nil |
| Profit from operations | 3,000 | 4,500 |
| Income tax | (600) | (900) |
| Net profit | 2,400 | 3,600 |
WD’s retained earnings (income surplus) for the two years before the correction of the error were;
| 2016 (GH¢000) | 2015 (GH¢000) | |
|---|---|---|
| Retained earnings carried forward | 6,900 | 4,500 |
| Retained earnings brought forward | 4,500 | 900 |
Required: Describe how the above error should be corrected in accordance with IAS 8: Accounting policies, changes in accounting estimates and errors. (4 marks)
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- 1 Marks
FA – Nov 2013 – L1 – SA – Q12 – Partnership Accounts
Understanding the implications of a purchase consideration paid by a company.
Question
Kowope Nigeria Limited paid purchase consideration of N900,000 for an existing partnership which has assets and liabilities valued as follows: Leasehold building – N500,000; Motor vehicles – N150,000; Furniture – N240,000; Inventory of stationery – N50,000 and Trade payables – N200,000. It means:
A. The company gained N160,000 as capital reserve
B. The company anticipates profit of N160,000
C. The partnership assets and liabilities are inflated by N160,000
D. The partnership is undervalued by N160,000
E. The company is paying N160,000 as goodwill
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- 1 Marks
FA – Nov 2013 – L1 – SA – Q11 – Partnership Accounts
Reason for revaluing assets when partnership composition changes.
Question
Assets must be revalued where there is a change in the partnership composition because:
A. Inflation affects the values of partnership assets
B. The economic value of the partnership must be enhanced
C. Deflation affects the value of partnership assets
D. It helps to prevent injustice to the concerned partners
E. The law insists that there should be a revaluation
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- 1 Marks
FA – Nov 2013 – L1 – SA – Q10 – Partnership Accounts
Necessary entries for writing off net decreases in the Revaluation Account.
Question
The necessary accounting entries to write-off net decrease in the Revaluation Account of a partnership are:
A. Dr. Revaluation Account; Cr. Partners’ Capital Account
B. Dr. Partners’ Capital Accounts; Cr. Revaluation Account
C. Dr. Partners’ Current Accounts; Cr. Revaluation Account
D. Dr. Revaluation Account; Cr. Partners’ Current Account
E. Dr. Revaluation Account; Cr. Realisation Account
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- 1 Marks
FA – Nov 2022 – L1 – SA – Q20 – Partnership Accounts
Identify when goodwill can be valued in a partnership.
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- 1 Marks
BMF – Nov 2019 – L1 – SA – Q1 – The Role of Professional Accountants in Business and Society; Business and Organizational Structures and Choices
Identifying incorrect accountability in different business structures
Question
The management of an organisation is accountable to its owners for the performance of the firm. From the foregoing, which of the following statements is incorrect?
A. Charities are accountable to stakeholders
B. Limited liability partnership is accountable to the government
C. The directors of a company are accountable to equity holders
D. Managers of public sector enterprises are accountable to the government
E. Partners in a business partnership are accountable to the stakeholders
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- 1 Marks
FA – May 2017 – L1 – SA – Q16 – Partnership Accounts
Identifies which types of entities exist primarily to generate profit.
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- 7 Marks
PT – May 2020 – L2 – Q3a – Scope and computation of income tax for partnerships
Assessable income computation for partners in a partnership business.
Question
a) During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and cost of traveling for leave.
David Stella Percy
Profit/loss sharing ratio 3 2 1
Salaries GH¢48,000 GH¢72,000 GH¢96,000
Interest on Capital GH¢30,000 GH¢20,000 GH¢10,000
Cost of traveling for leave GH¢20,000 GH¢30,000 GH¢25,000
Required:
Compute the assessable income for each partner.
(7 marks)
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- Tags: Assessable Income, Income Tax, Partnerships, Profit Sharing
- Level: Level 2
- Topic: Income Tax Liabilities
- Series: MAY 2020
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- 20 Marks
PT – Nov 2020 – L2 – Q3 – Income Tax Liabilities
Compute the assessable income for partners, explain the taxation rules for different workers, and define resident individual for tax purposes.
Question
Shika, Bekwai, and Sena, who are in partnership, have agreed to share profits and losses in the ratio of 2:2:3, respectively. During the year ended 31 December 2018, their books showed an adjusted profit of GH¢210,000 after accounting for the following:
| Shika | Bekwai | Sena | |
|---|---|---|---|
| Salaries | 70,000 | 80,000 | 150,000 |
| Interest on Capital | 12,000 | 16,000 | 12,000 |
| Partners’ Drawings | 6,000 | 4,000 | 10,000 |
You are given the following additional information:
i) Shika is married with two children who are in school and maintained two dependent relatives, who are more than 60 years, on which she spends GH¢10,000 annually.
ii) Shika also has a life assurance policy on herself attracting capital sum of GH¢1,600,000 but pays annual premium of GH¢1,800.
iii) Bekwai took a mortgage for his building and has been paying GH¢4,000 per month as mortgage interest.
iv) Bekwai is undertaking a two-week training program to update his knowledge on how to manage accounting software used in partnership businesses. He has spent GH¢1,500 on the training.
v) Bekwai received a television as a gift valued at GH¢3,000 for being the best worker in 2018 in Ghana.
vi) Sena is 62 years old and unmarried but has three dependent children while Bekwai is also unmarried but has one child who is schooling in Ghana.
Required:
a) Compute the assessable income for each partner for the year 2018. (10 marks)
b) The partnership business has some casual workers, temporary workers, and part-time workers. What are the taxation rules and tax liabilities of such workers? (6 marks)
c) Shika is an ‘international woman’ who travels often. There was confusion in 2018 as to whether she should be taxed as a resident or non-resident. What constitutes a resident individual for taxation purposes in Ghana? (4 marks)
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- 20 Marks
FA – May 2017 – L1 – Q4 – Correction of errors | Non-current assets and depreciation
Differences between companies and partnerships, disadvantages of sole proprietorships, depreciation calculation for Otiko Ltd, and error correction for WD.
Question
a) Partnerships and limited liability companies present several similarities for business owners looking for the right company structure. Both have similar income distribution and tax-reporting formats, and both are simpler to set up and operate than a corporation. Despite their similarities, they have differences.
Required:
Identify and explain THREE fundamental differences between a company and a partnership. (6 marks)
b) Sole proprietorships are the smallest form of business organization, and also the most common in the country. However, while there are certain advantages (it is easier to set up a sole proprietorship than a limited liability company, for instance), there are numerous disadvantages.
Required:
State FOUR disadvantages of the sole proprietorship as a mode of business. (4 marks)
c) Otiko Ltd’s head office building is the only building it owns. Using professional valuers, it revalued this building on 1 January 2016, at GH¢2,100,000. Otiko Ltd has adopted a revaluation policy for buildings from this valuation date and has decided that the original useful life of buildings has not changed as a result of the revaluation. The building was acquired on 1 January 2006. The cost of the building on acquisition was GH¢2,500,000 and the accumulated depreciation to the 31 December 2015 amounted to GH¢500,000. The depreciation up to 1 January 2016 was depreciated evenly since acquisition. The professional valuer believes that the residual value on the building would be GH¢600,000 at the end of its useful life.
Required:
Calculate the depreciation amount of the building for the year ended 31 December 2016 based on the information provided in the above scenario. (6 marks)
d) WD noted in 2016 that in 2015 it had omitted to record a depreciation expense on an asset amounting to GH¢600. Its accounts before the correction of the error are;
| 2016 (GH¢000) | 2015 (GH¢000) | |
|---|---|---|
| Gross profit | 6,000 | 6,900 |
| Distribution costs | (600) | (600) |
| Administration expenses | (1,800) | (1,800) |
| Depreciation | (600) | Nil |
| Profit from operations | 3,000 | 4,500 |
| Income tax | (600) | (900) |
| Net profit | 2,400 | 3,600 |
WD’s retained earnings (income surplus) for the two years before the correction of the error were;
| 2016 (GH¢000) | 2015 (GH¢000) | |
|---|---|---|
| Retained earnings carried forward | 6,900 | 4,500 |
| Retained earnings brought forward | 4,500 | 900 |
Required: Describe how the above error should be corrected in accordance with IAS 8: Accounting policies, changes in accounting estimates and errors. (4 marks)
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