Question Tag: Sole Trader

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FA – May 2013 – L1 – SA – Q10 – Financial Statements Preparation

This question tests the calculation of a sole trader’s net profit.

Question

Which of the following is used to derive a sole trader’s net profit for a period?

A. Closing net assets + drawings – capital introduced – opening net assets
B. Closing net assets – drawings + capital introduced – opening net assets
C. Closing net assets – drawings – capital introduced – opening net assets
D. Closing net assets + drawings + capital introduced – opening net assets
E. Closing net assets + drawings + capital introduced + opening net assets

Answer

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Tags: Closing Net Assets, Net Profit, Sole Trader
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2013

FA – May 2017 – L1 – SA – Q14 – Accounting from Incomplete Records

Calculates profit or loss for a sole trader based on capital and drawings.

Question

The following information is obtained from the books of a sole trader:
(i) Opening capital as at January 1, 2015 N300,000
(ii) Closing capital as at December 31, 2015 N65,000
(iii) Additional capital introduced during 2015 N120,000
(iv) Cash withdrawn during 2015 N320,000

Calculate the profit or loss during the period.

A. N285,000 loss
B. N35,000 loss
C. N35,000 profit
D. N225,000 profit
E. N522,500 profit

Answer

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Tags: Capital, Drawings, Profit Calculation, Sole Trader
Level: Level 1

Topic: Accounting from Incomplete Records
Series: MAY 2017

FA – May 2016 – L1 – SA – Q4 – Financial Statements Preparation

A question regarding the net assets of a sole trader after considering profit, drawings, and additional capital.

Question

Ajonibode runs a business as a sole trader and the following information relates to the business:
On January 1, 2015, the net assets of the business were N1,675,000. During the year to December 31, 2015, the business made a profit of N625,000 and Ajonibode took out N550,000 in drawings. Due to a shortage of cash, he paid in additional capital of N100,000 in early December 2015.
What are the net assets of the business as of December 31, 2015?
A. N1,675,000
B. N1,850,000
C. N2,300,000
D. N2,400,000
E. N2,950,000

Answer

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Tags: Drawings, Net Assets, Profit, Sole Trader
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2016

FA – MAY 2015 – L1 – SA – Q6 – Users of Accounting Information and Their Needs

Identify the incorrect statement about differences between sole traders and limited liability companies.

Question

Which of the following is NOT correct in differentiating between sole trader and limited liability companies?
A. A sole trader is fully and personally liable for any losses that the business might make.
B. Drawings would only appear in the financial statements of a sole trader.
C. Only companies have share capital.
D. A sole trader’s financial statements are private and never made available to any other equity holder.
E. Companies’ financial statements are sent to shareholders and may be publicly filed.

Answer

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Tags: Financial Statements, Limited Liability Companies, Sole Trader
Level: Level 1

Series: MAY 2015

FA – Mar/July 2020 – L1 – SA – Q17 – Users of Accounting Information and Their Needs

Identifying users not interested in the financial statements of sole traders and partnerships

Question

Which of the following users is NOT likely to be interested in the financial statements of a sole trader and a partnership business?
A. Employees and proprietors of the business
B. The stock exchange and shareholders
C. Auditors and financial analysts
D. Banks and insurance companies
E. The government and tax authorities

Answer

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Tags: Financial Statements, Partnership, Sole Trader, Users
Level: Level 1

Topic: Users of Accounting Information and Their Needs
Series: MAR/JULY 2020

FA – Nov 2019 – L1 – Q2 – Correction of errors

Calculate specific financial ratios, discuss the advantages and disadvantages of ratio analysis, and explain the responsibilities of directors and auditors towards financial statements.

Question

a) Nene Koba, a sole trader with a small business, extracted a trial balance as at 30 June 2018, which did not agree. The credits exceeded the debits by GH¢3,275, and the difference was entered in a suspense account.

A detailed examination of the books was undertaken, and the following matters were uncovered:

Purchases returns of GH¢19,350 were credited to sales returns as GH¢11,175, and the corresponding entry was correctly entered.
An addition error was discovered in the sales returns day book, resulting in an understatement of GH¢1,600.
An amount of GH¢245 cash received from a customer was debited to the customer’s account and credited to the cash account.
The cash at hand balance of GH¢5,350 as at 30 June 2018 was omitted from the trial balance in error.
Building repairs of GH¢4,300 were undertaken during the month ended 30 June 2018. The amount was paid by cheque, and GH¢1,800 was incorrectly credited to the building account.
On 1 January 2017, rent for the year ended 31 December 2017 of GH¢22,500 was paid and accounted for correctly. Nene Koba’s landlord has indicated that rent for 2018 will increase to GH¢30,000, but no invoice has been received. Nene Koba, however, has not paid any rent for 2018 and has made no accounting entry for it because no invoice was received.
A credit sale of GH¢12,500 (excluding tax) was recorded by debiting sales with GH¢12,500 and crediting receivable with GH¢12,500. The tax rate is 15%.

Required:

i) Prepare journal entries with appropriate narrations necessary to correct the above errors. (8 marks)
ii) Prepare the Suspense account. (2 marks)

b) Ama, Baah, and Cain are in partnership, providing management services, sharing profits in the ratio 5:3:2 after charging annual salaries of GH¢6,000 each. Current accounts are not maintained. On 30 June 2019, Ama retired, and Doh was admitted into the partnership. Doh is entitled to 30% of the profits of the new partnership, with the balance being shared between Baah and Cain.

Required:

Prepare the Statement of Profit or Loss account and the Appropriation account for the year ended 30 June 2019. (10 marks)

Answer

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Tags: Correction of Errors, Journal Entries, Sole Trader, Suspense account
Level: Level 1

Topic: Correction of errors
Series: NOV 2019

FA – Nov 2016 – L1 – Q6 – Preparation of accounts from incomplete records

Preparation of Statement of Profit or Loss and Statement of Financial Position for Ato from incomplete records and additional information.

Question

Ato commenced business several years ago as a sole trader. Ato pays all the sales receipts into the business bank account. He has prepared the following bank account summary for the year ended 31st December 2015.

Bank account summary for the year ended 31st December 2015

	GHȼ	GHȼ
Cash sales	16,420
Receipt from customers	200,400
Rent received	14,500
Balance b/d		4,820
General expenses		20,000
Wages		30,180
Payments to suppliers		120,320
Motor vehicles		16,000
Equipment		15,000
Drawings		24,520
Balance c/f		480
	231,320	231,320

The following information is also available: i) The assets and liabilities of the business at the beginning and end of the year were:

	1st January 2015 (GHȼ)	31st December 2015 (GHȼ)
Trade receivables	20,100	25,400
Trade payables	16,200	18,320
Inventory at cost	21,000	16,200
General expenses prepaid	1,000	800
Rent received prepaid	600	–
Rent received owing	–	1,100
Wages owing	2,100	400
Premises	80,000	80,000
Equipment	25,200	23,800
Motor vehicles	62,500	66,100

ii) Discounts received from suppliers amounted to GHȼ2,500 for the year ended 31st December 2015. iii) Ato allowed his customers discounts of GHȼ3,000 during the year ended 31st December 2015. iv) An allowance of receivables of 3% of receivables is to be created. v) Ato has taken goods at a cost price of GHȼ2,800 for his personal use.

Required: a) Prepare the Statement of Profit or Loss for Ato for the year ended 31st December 2015. (11 marks)

b) Prepare the Statement of Financial Position for Ato as at 31 December 2015. (9 marks)

Answer

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Tags: Bank Account Summary, Financial Position, Incomplete Records, Profit and Loss Statement, Sole Trader
Level: Level 1

Topic: Preparation of accounts from incomplete records
Series: NOV 2016

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

Question

BBT, a sole trader, prepared the following Trial Balance from his accounts on 30th September 2016.

	Dr (GHȼ)	Cr (GHȼ)
Sales		181,200
Sales returns	1,810
Purchases	79,310
Discounts received		1,520
Carriage outwards	420
Rent and rates	30,800
Insurance		780
Salaries	20,400
Motor expenses	6,200
General expenses	7,450
Irrecoverable debts	240
Allowance for receivables		280
Drawings		12,100
Loan interest	600
10% Loan		8,000
Motor vehicles	20,000
Accumulated depreciation for motor vehicles		7,600
Equipment	48,050
Accumulated depreciation for Equipment		15,890
Inventory at 1st October 2015	6,200
Receivables	15,000
Payables		16,120
Bank	1,250
Capital		20,000
	250,610	250,610

The following information is also available: i) The closing inventory as at 30th September 2016 was valued at GHȼ6,480. At 30th September 2016, loan interest owing amounted to GHȼ200; rent owing was GHȼ450; whilst insurance was prepaid by GHȼ120. ii) BBT had included his son’s school fees of GHȼ1,400 in general expenses. iii) Receivables have been analysed as follows:

	GHȼ
Current month	8,000
30 to 60 days	4,000
60 to 90 days	2,000
Over 90 days	1,000

Allowance to be made for receivables is as follows:
30 to 60 days: 1%
60 to 90 days: 2.5%
Over 90 days 5%: (after writing off GHȼ500)

iv) One half of the 10% loan is repayable during the year ending 30th September
2016, and the balance after that date.
v) Depreciation is to be provided for as follows.

Equipment: 10% per annum on cost using the straight line method. There were no additions or disposals during the year.
Motor vehicles: 20% per annum by the reducing balance method. There were no additions or disposals during the year.

Required:

a) Prepare, for BBT, the Statement of profit or loss for the year ended 30th September 2016. (12 marks)

b) Prepare, for BBT, the Statement of Financial Position as at 30th September 2016. (8 marks)

Answer

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Tags: Financial Position, Profit and Loss Statement, Sole Trader, Trial Balance
Level: Level 1

Topic: Preparation of financial statements of a sole trader
Series: NOV 2016

FA – May 2013 – L1 – SA – Q10 – Financial Statements Preparation

This question tests the calculation of a sole trader’s net profit.

Question

Which of the following is used to derive a sole trader’s net profit for a period?

Answer

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Tags: Closing Net Assets, Net Profit, Sole Trader
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2013

FA – May 2017 – L1 – SA – Q14 – Accounting from Incomplete Records

Calculates profit or loss for a sole trader based on capital and drawings.

Question

Calculate the profit or loss during the period.

A. N285,000 loss
B. N35,000 loss
C. N35,000 profit
D. N225,000 profit
E. N522,500 profit

Answer

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Tags: Capital, Drawings, Profit Calculation, Sole Trader
Level: Level 1

Topic: Accounting from Incomplete Records
Series: MAY 2017

FA – May 2016 – L1 – SA – Q4 – Financial Statements Preparation

A question regarding the net assets of a sole trader after considering profit, drawings, and additional capital.

Question

Answer

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Tags: Drawings, Net Assets, Profit, Sole Trader
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2016

FA – MAY 2015 – L1 – SA – Q6 – Users of Accounting Information and Their Needs

Identify the incorrect statement about differences between sole traders and limited liability companies.

Question

Answer

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Tags: Financial Statements, Limited Liability Companies, Sole Trader
Level: Level 1

Series: MAY 2015

FA – Mar/July 2020 – L1 – SA – Q17 – Users of Accounting Information and Their Needs

Identifying users not interested in the financial statements of sole traders and partnerships

Question

Answer

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Tags: Financial Statements, Partnership, Sole Trader, Users
Level: Level 1

Topic: Users of Accounting Information and Their Needs
Series: MAR/JULY 2020

FA – Nov 2019 – L1 – Q2 – Correction of errors

Calculate specific financial ratios, discuss the advantages and disadvantages of ratio analysis, and explain the responsibilities of directors and auditors towards financial statements.

Question

A detailed examination of the books was undertaken, and the following matters were uncovered:

Purchases returns of GH¢19,350 were credited to sales returns as GH¢11,175, and the corresponding entry was correctly entered.
An addition error was discovered in the sales returns day book, resulting in an understatement of GH¢1,600.
An amount of GH¢245 cash received from a customer was debited to the customer’s account and credited to the cash account.
The cash at hand balance of GH¢5,350 as at 30 June 2018 was omitted from the trial balance in error.
Building repairs of GH¢4,300 were undertaken during the month ended 30 June 2018. The amount was paid by cheque, and GH¢1,800 was incorrectly credited to the building account.
On 1 January 2017, rent for the year ended 31 December 2017 of GH¢22,500 was paid and accounted for correctly. Nene Koba’s landlord has indicated that rent for 2018 will increase to GH¢30,000, but no invoice has been received. Nene Koba, however, has not paid any rent for 2018 and has made no accounting entry for it because no invoice was received.
A credit sale of GH¢12,500 (excluding tax) was recorded by debiting sales with GH¢12,500 and crediting receivable with GH¢12,500. The tax rate is 15%.

Required:

i) Prepare journal entries with appropriate narrations necessary to correct the above errors. (8 marks)
ii) Prepare the Suspense account. (2 marks)

Required:

Prepare the Statement of Profit or Loss account and the Appropriation account for the year ended 30 June 2019. (10 marks)

Answer

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Tags: Correction of Errors, Journal Entries, Sole Trader, Suspense account
Level: Level 1

Topic: Correction of errors
Series: NOV 2019

FA – Nov 2016 – L1 – Q6 – Preparation of accounts from incomplete records

Preparation of Statement of Profit or Loss and Statement of Financial Position for Ato from incomplete records and additional information.

Question

Bank account summary for the year ended 31st December 2015

	GHȼ	GHȼ
Cash sales	16,420
Receipt from customers	200,400
Rent received	14,500
Balance b/d		4,820
General expenses		20,000
Wages		30,180
Payments to suppliers		120,320
Motor vehicles		16,000
Equipment		15,000
Drawings		24,520
Balance c/f		480
	231,320	231,320

The following information is also available: i) The assets and liabilities of the business at the beginning and end of the year were:

	1st January 2015 (GHȼ)	31st December 2015 (GHȼ)
Trade receivables	20,100	25,400
Trade payables	16,200	18,320
Inventory at cost	21,000	16,200
General expenses prepaid	1,000	800
Rent received prepaid	600	–
Rent received owing	–	1,100
Wages owing	2,100	400
Premises	80,000	80,000
Equipment	25,200	23,800
Motor vehicles	62,500	66,100

Required: a) Prepare the Statement of Profit or Loss for Ato for the year ended 31st December 2015. (11 marks)

b) Prepare the Statement of Financial Position for Ato as at 31 December 2015. (9 marks)

Answer

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Tags: Bank Account Summary, Financial Position, Incomplete Records, Profit and Loss Statement, Sole Trader
Level: Level 1

Topic: Preparation of accounts from incomplete records
Series: NOV 2016

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

Question

BBT, a sole trader, prepared the following Trial Balance from his accounts on 30th September 2016.

	Dr (GHȼ)	Cr (GHȼ)
Sales		181,200
Sales returns	1,810
Purchases	79,310
Discounts received		1,520
Carriage outwards	420
Rent and rates	30,800
Insurance		780
Salaries	20,400
Motor expenses	6,200
General expenses	7,450
Irrecoverable debts	240
Allowance for receivables		280
Drawings		12,100
Loan interest	600
10% Loan		8,000
Motor vehicles	20,000
Accumulated depreciation for motor vehicles		7,600
Equipment	48,050
Accumulated depreciation for Equipment		15,890
Inventory at 1st October 2015	6,200
Receivables	15,000
Payables		16,120
Bank	1,250
Capital		20,000
	250,610	250,610

	GHȼ
Current month	8,000
30 to 60 days	4,000
60 to 90 days	2,000
Over 90 days	1,000

Allowance to be made for receivables is as follows:
30 to 60 days: 1%
60 to 90 days: 2.5%
Over 90 days 5%: (after writing off GHȼ500)

iv) One half of the 10% loan is repayable during the year ending 30th September
2016, and the balance after that date.
v) Depreciation is to be provided for as follows.

Equipment: 10% per annum on cost using the straight line method. There were no additions or disposals during the year.
Motor vehicles: 20% per annum by the reducing balance method. There were no additions or disposals during the year.

Required:

a) Prepare, for BBT, the Statement of profit or loss for the year ended 30th September 2016. (12 marks)

b) Prepare, for BBT, the Statement of Financial Position as at 30th September 2016. (8 marks)

Answer

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Tags: Financial Position, Profit and Loss Statement, Sole Trader, Trial Balance
Level: Level 1

Topic: Preparation of financial statements of a sole trader
Series: NOV 2016

Question Tag: Sole Trader

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FA – May 2013 – L1 – SA – Q10 – Financial Statements Preparation

This question tests the calculation of a sole trader’s net profit.

You're reporting an error for "FA – May 2013 – L1 – SA – Q10 – Financial Statements Preparation"

FA – May 2017 – L1 – SA – Q14 – Accounting from Incomplete Records

Calculates profit or loss for a sole trader based on capital and drawings.

You're reporting an error for "FA – May 2017 – L1 – SA – Q14 – Accounting from Incomplete Records"

FA – May 2016 – L1 – SA – Q4 – Financial Statements Preparation

A question regarding the net assets of a sole trader after considering profit, drawings, and additional capital.

You're reporting an error for "FA – May 2016 – L1 – SA – Q4 – Financial Statements Preparation"

FA – MAY 2015 – L1 – SA – Q6 – Users of Accounting Information and Their Needs

Identify the incorrect statement about differences between sole traders and limited liability companies.

You're reporting an error for "FA – MAY 2015 – L1 – SA – Q6 – Users of Accounting Information and Their Needs"

FA – Mar/July 2020 – L1 – SA – Q17 – Users of Accounting Information and Their Needs

Identifying users not interested in the financial statements of sole traders and partnerships

You're reporting an error for "FA – Mar/July 2020 – L1 – SA – Q17 – Users of Accounting Information and Their Needs"

FA – Nov 2019 – L1 – Q2 – Correction of errors

Calculate specific financial ratios, discuss the advantages and disadvantages of ratio analysis, and explain the responsibilities of directors and auditors towards financial statements.

You're reporting an error for "FA – Nov 2019 – L1 – Q2 – Correction of errors"

FA – Nov 2016 – L1 – Q6 – Preparation of accounts from incomplete records

Preparation of Statement of Profit or Loss and Statement of Financial Position for Ato from incomplete records and additional information.

You're reporting an error for "FA – Nov 2016 – L1 – Q6 – Preparation of accounts from incomplete records"

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

You're reporting an error for "FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader"

FA – May 2013 – L1 – SA – Q10 – Financial Statements Preparation

This question tests the calculation of a sole trader’s net profit.

You're reporting an error for "FA – May 2013 – L1 – SA – Q10 – Financial Statements Preparation"

FA – May 2017 – L1 – SA – Q14 – Accounting from Incomplete Records

Calculates profit or loss for a sole trader based on capital and drawings.

You're reporting an error for "FA – May 2017 – L1 – SA – Q14 – Accounting from Incomplete Records"

FA – May 2016 – L1 – SA – Q4 – Financial Statements Preparation

A question regarding the net assets of a sole trader after considering profit, drawings, and additional capital.

You're reporting an error for "FA – May 2016 – L1 – SA – Q4 – Financial Statements Preparation"

FA – MAY 2015 – L1 – SA – Q6 – Users of Accounting Information and Their Needs

Identify the incorrect statement about differences between sole traders and limited liability companies.

You're reporting an error for "FA – MAY 2015 – L1 – SA – Q6 – Users of Accounting Information and Their Needs"

FA – Mar/July 2020 – L1 – SA – Q17 – Users of Accounting Information and Their Needs

Identifying users not interested in the financial statements of sole traders and partnerships

You're reporting an error for "FA – Mar/July 2020 – L1 – SA – Q17 – Users of Accounting Information and Their Needs"

FA – Nov 2019 – L1 – Q2 – Correction of errors

Calculate specific financial ratios, discuss the advantages and disadvantages of ratio analysis, and explain the responsibilities of directors and auditors towards financial statements.

You're reporting an error for "FA – Nov 2019 – L1 – Q2 – Correction of errors"

FA – Nov 2016 – L1 – Q6 – Preparation of accounts from incomplete records

Preparation of Statement of Profit or Loss and Statement of Financial Position for Ato from incomplete records and additional information.

You're reporting an error for "FA – Nov 2016 – L1 – Q6 – Preparation of accounts from incomplete records"

FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader

Preparation of Statement of Profit or Loss and Statement of Financial Position for a sole trader from given trial balance and additional information.

You're reporting an error for "FA – Nov 2016 – L1 – Q3 – Preparation of financial statements of a sole trader"

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