Question Tag: Trial Balance

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PSAF – Nov 2024 – L2 – Q1a – Financial Statements Preparation

Prepare the Statement of Financial Performance for Paja Teaching Hospital following IPSAS guidelines.

Question

Below is a Trial Balance of Paja Teaching Hospital (PTH) under the Ministry of Health for the year ended 31 December 2023.

Debit (GH¢000)	Credit (GH¢000)
Cash and Bank – GoG	3,400
Cash and Bank – IGF	72,200
Cash and Bank – Donor Funds	210,400
Undeposited Cash – IGF	4,000
Petty Cash	100
Investments	2,000
Debtors	661,400
Other Receivables	17,700
Withholding Tax
Trust Funds
Trade Payables
GoG Subsidy – Employee Compensation
GoG Subsidy – Goods & Services
Development Partners Programmes Receipt
Other Non-Operating Income
Medicines & Pharmaceuticals	433,900
Surgical	50,800
Medical	111,400
Investigation	140,900
OPD	238,400
Obstetrics and Gynaecology	135,300
Dental	8,300
Pediatrics	40,300
Ear, Nose & Throat	5,300
Eye Care	7,300
Mortuary	30,000
Ambulance Fees	300
Ophthalmology	3,000
Physiotherapy	3,300
Examination Fees	200
Dialysis	400
Feeding	30,400
Employee Compensation – GoG	3,912,500
Goods & Services – GoG	20,800
Employee Compensation – IGF	148,000
Goods & Services – IGF	978,500
Capital Expenditure – IGF	27,500
Goods & Services – Partners Fund	472,400
Accumulated Fund
Total	6,530,900

Additional Information:

The hospital previously used modified accrual accounting but switched to IPSAS accrual basis in 2023.
The hospital revalued legacy assets as follows:
- Motor Vehicles: GH¢50,250,000
- Buildings: GH¢120,540,000
- Medical Equipment & Other Equipment: GH¢31,500,000
- Land: GH¢15,000,000
Gavi supported the hospital with GH¢200,000,000 in 2023, but 20% was allocated for Q1 of 2024. The Global Fund committed GH¢250,000,000, but only GH¢200,000,000 was received.
NHIA rejected 10% of the hospital’s total claims of GH¢100,300,000.
Parliament approved a write-off of GH¢20,225,000 for unpaid hospital services.
The capital expenditure consists of:
- Medical Equipment: GH¢19,236,000
- Furniture & Fittings: GH¢8,264,000
Depreciation Policy (Straight-Line Basis):
- Building: 5%
- Motor Vehicle: 20%
- Medical Equipment: 10%
- Furniture & Fitting: 25%
Year-end inventory values:

Inventory Type	Cost (GH¢000)	Replacement Cost (GH¢000)	Net Realisable Value (GH¢000)
Medicines (for resale)	146,800	176,100	132,100
Medical Consumables (For use on clients)	29,400	33,800	30,800
Office Consumables	19,600	29,400	18,600

Required:

In compliance with IPSAS, the PFM Act, and the Government of Ghana Chart of Accounts, prepare:
a) A Statement of Financial Performance for Paja Teaching Hospital for the year ended 31 December 2023.

Answer

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Tags: Accrual Accounting, Expenditure, Financial Statements, IPSAS, Public Sector Accounting, Revenue, Statement of Financial Performance, Trial Balance
Level: Level 2

Topic: Preparation and presentation of financial statements for central government
Series: Nov 2024

FR – Nov 2024 – L2 – Q3 – Financial Statements Preparation

Preparation of Fahnbulleh LTD’s Statement of Comprehensive Income and Statement of Financial Position using IFRS.

Question

Fahnbulleh LTD (Fahnbulleh) is a well-known company manufacturing thrill rides. During the current economic climate, Fahnbulleh has experienced some difficulties and has had to close down its Merry Go Round division.

The company’s trial balance as at 31 October 2023 is as follows:

Account Description	Dr (GH¢’000)	Cr (GH¢’000)
Revenue		1,296,000
Cost of Sales	546,480
Distribution Costs	127,080
Administrative Expenses	142,560
Investment Income		28,080
Investment Property	270,000
Interest Paid	17,280
Income Tax	10,800
Property, Plant & Equipment (PPE) – Carrying Value at 1 Nov 2022	1,620,000
Inventories (31 October 2023)	108,000
Trade Receivables	135,000
Bank	64,800
Payables		43,200
Deferred Tax (1 Nov 2022)		75,600
8% Loan Note		432,000
Ordinary Share Capital (GH¢1 per share)		540,000
Retained Earnings (1 Nov 2022)		605,520
Totals	3,031,200	3,031,200

Additional Information:

Revenue Adjustments:
- Revenue includes VAT of GH¢72 million.
Property, Plant & Equipment (PPE):
- A building with a carrying value of GH¢54 million was revalued on 1 November 2022 to GH¢72 million.
- The building had an estimated useful life of 25 years when purchased, and this has not changed after the revaluation.
- All other PPE should be depreciated at 20% per annum (reducing balance method).
- All depreciation should be charged to cost of sales.
Closure of the Merry Go Round Division (Discontinued Operations):
- Closure Date: 1 October 2023
- Division’s Results (1 Nov 2022 – 1 Oct 2023):
Item GH¢’000

Revenue 58,800

Cost of Sales 38,700

Distribution Costs 12,240

Administrative Expenses 11,880
- The division’s net assets were sold at a loss of GH¢19.2 million, recorded in cost of sales.
Investment Property Revaluation (IAS 40):
- Investment property value increased by 5%, which should be incorporated into the financial statements.
Income Tax and Deferred Tax (IAS 12):
- The estimated income tax provision for the year: GH¢140.4 million.
- Deferred tax liability should be adjusted for temporary differences (GH¢129.6 million) at a 25% tax rate.
Damaged Inventory (IAS 2):
- Inventory worth GH¢46 million was damaged.
- It can be reconditioned at a cost of GH¢12 million and sold for GH¢52 million.
- Appropriate adjustments should be made.

Item	GH¢’000
Revenue	58,800
Cost of Sales	38,700
Distribution Costs	12,240
Administrative Expenses	11,880

Required:

Prepare and present the Statement of Comprehensive Income for the year ended 31 October 2023 and the Statement of Financial Position as at 31 October 2023 for Fahnbulleh LTD.

Answer

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Tags: Depreciation, Financial Statements, IFRS, Revaluation, Statement of Comprehensive Income, Statement of Financial Position, Trial Balance
Level: Level 2

Topic: Preparation of Financial Statements
Series: Nov 2024

FA – Nov 2024 – L1 – Q3a – Correction of Errors

Identify and correct accounting errors using journal entries, suspense account, and revised profit calculations.

Question

The trial balance for Aboadze Ltd for the year ended 31 December 2022 failed to agree, showing a difference of GH¢3,600, which was credited to the suspense account. The draft account reported a net profit of GH¢435,000.

During 2023, the following errors were identified:

GH¢30,000 received from the sale of old machinery was incorrectly recorded in the sales account.
The purchase day book was overstated by GH¢48,000.
A private purchase by the director worth GH¢36,000 was included in the company’s purchases.
Bank charges of GH¢14,400 were recorded in the cash book but not posted to the bank charges account.
A sale of GH¢207,000 to Kofi was correctly entered in the sales day book but posted as GH¢270,000 in the personal account.
Discount received of GH¢13,500 was incorrectly posted to the debit side of the discount allowed account.
Wages of GH¢120,000 paid were not posted from the cash book.

Required:

i) Show the journal entries to correct the errors.

ii) Write up the suspense account to eliminate the errors.

iii) Prepare a statement to show the revised profit.

Answer

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Tags: Accounting Adjustments, Error Correction, Financial Statements, Journal Entries, Suspense account, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: Nov 2024

FR – May 2016 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare profit or loss statement and financial position statement for Gbenga Nig. Plc for the year ending December 31, 2015, following IFRS standards.

Question

GBENGANIG Plc. Trial balance as at December 31, 2015 is shown below:

Account	Debit (N)	Credit (N)
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables – 31/12/15		8,625
Inventories – finished goods – 31/12/14	276,750
Work-in-progress – 31/12/14	49,125
Inventories – raw materials at cost-31/12/14	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorized and issued 900,000 ordinary shares of N0.50 each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings-31/12/14		425,250
Patents and trademarks	323,250
Freehold property at cost	375,000
Leasehold property at cost	112,500
Amortization of leasehold property – 31/12/14	22,500
Plant and equipment at cost	225,000
Accumulated depreciation – plant and equipment – 31/12/14		102,750
Furniture and fittings at cost	75,000
Accumulated depreciation – furniture and fittings – 31/12/14		23,625
Motor vehicles at cost	112,500
Accumulated depreciation – motor vehicles 31/12/14		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
Total	4,183,500	4,183,500

Additional Information:

A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
Inventories at December 31, 2015 were:
- Raw materials: N168,900
- Finished goods: N413,025
- Work-in-progress: N56,700
Legal and professional expenses include solicitor’s fees of N7,500 for the purchase of new freehold land.
Provision is to be made for a full year’s interest on the loan notes.
The leasehold land and buildings have an unexpired life of 40 years as of December 31, 2014.
Depreciation for the year is charged as follows:
- Plant and equipment at 8% on cost (production)
- Furniture and fittings at 10% on cost (administration)
- Motor vehicles at 20% on carrying amount (25% to administration and 75% to selling/distribution).
Income tax for the year is estimated at N68,900.
A dividend of N2.25 per ordinary share is recommended by the directors. No dividend was paid in the prior year.

Required:

a. Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2015.
b. Prepare a statement of financial position as at December 31, 2015, in accordance with International Financial Reporting Standards.

Answer

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Tags: Financial Position, IAS Compliance, Profit or Loss Statement, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: MAY 2016

FR – May 2021 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Prepare financial statements from a trial balance, including adjustments for provisions, tax, asset disposals, depreciation, and development costs.

Question

The following is the trial balance of Almajiri Nigeria Limited as at September 30, 2018:

Account	Debit (₦’m)	Credit (₦’m)
Revenue		60,000
Cost of sales	40,800
Distribution costs	2,900
Administrative expenses	4,440
Interest on bank borrowings	40
Research and development costs	1,720
Leasehold property (at valuation Oct 1, 2017)	10,000
Plant and equipment (at cost)	15,320
Plant and equipment (accum. depr. at Oct 1, 2017)		4,920
Capitalised development expenditure (Oct 1, 2017)	4,000
Development expenditure (accum. amortiz. at Oct 1, 2017)		1,200
Closing inventory (30 Sept 2018)	4,000
Trade receivables	8,620
Bank	260
Trade payables & provisions		4,760
Preference dividend paid	160
Dividend paid on ordinary shares	1,200
Ordinary shares at 25k each		10,000
8% Redeemable preference shares at N1 each (year 2020)		4,000
Retained earnings brought forward		4,900
Deferred tax		1,160
Leasehold property revaluation reserve		2,000
Total	93,200	93,200

Additional information:
(i)
One of the reputable customers of Almajiri Nigeria Limited sued the company for
N
400 million for breach of contract over a cancelled order. Almajiri Nigeria
Limited obtained a legal opinion that there is 20% chance that Almajiri will lose the
case.
Accordingly, it has provided for N
80 million (N
400 million x 20%) included in
administrative expenses in respect of the claim. The unrecoverable legal cost of
defending the action was estimated at N20 million and these have not been
provided for as the legal action will not go to court until next year.
(ii)
The directors of the Company have estimated the provision for income tax for the
year ended September 30, 2018 at N2,280 million. The required deferred tax
provision at September 30, is N
1,200 million.
(iii) The redeemable preference shares were issued on April 1, 2018 at par. They are
redeemable at a large premium which gives them an effective finance cost of 12%
per annum.
(iv) The leasehold property had a remaining life of 20 years at October 1, 2017. The
company‟s policy is to revalue its property at each year end and as at September
30, 2018 it was revalued at N
8,600 million.
(v) On October 1, 2017 an item of plant and equipment was disposed of for N500
million cash. The proceeds have been treated as revenue by the company. The
plant is still included in the company‟s trial balance figure at the cost of N
million and accumulated depreciation of N
1,600
800 million (to date of disposal). All
plants and equipment are depreciated at 20% per annum using reducing balance
method. Depreciation and amortisation of all non-current assets are charged to
cost of sales.
(vi) In addition to capitalised development expenditure of N
4,000 million further
research and development cost were incurred on a new project which commenced
on October 1, 2017. The research stage of the new project lasted until December
31, 2017 and incurred N
280 million costs, from that date the project incurred
development cost of N160 million per month. On April 1, 2018 the directors
became confident that the project would be successful and yield a profit well in
excess of its costs. The project is still in development as at September 30, 2018.

Capitalised development expenditure is amortised at 20% per annum using straight
line method. All expensed research and development expenditure is charged to
cost of sales.

You are required to prepare:
a. Statement of profit or loss and other comprehensive income for the year ended
September 30, 2018.

b. Statement of changes in equity for the year ended September 30, 2018.

c. Statement of movement in property, plant and equipment to be included in
published financial statements.

d. Statement of financial position as at September 30, 2018.

Answer

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Tags: Adjustments, Depreciation, Development Costs, Finance Cost, Financial Statements, Provisions, Tax Expense, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: MAY 2021

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

Question

The Trial Balance of Excellent Plc. as at 30 June 2014 is as follows:

The following notes are relevant:
i. Inventories as at 30/6/2013:

The net realisable values of these commodities per unit are as follows:

ii. Inventories on 30 June 2014 amounted to N9,000,000

iii. Prepaid salaries and wages were N10,000,000

iv. Included in the plant and machinery maintenance cost was depreciation of
N14,800,000.

v. The allowances for receivables are no longer required. The outstanding 10%
loan notes interest was paid on 30 June 2014 and this has not been accounted
for. The fair value of goods is N40,000,000 at the end of the year.

vi. The value in use of delivery van for the year 30 June 2014 is N31,000,000. The
prevailing market interest rate is 21% per annum and the Discounting Factor for
this year is 0.8264.

vii. The fair value of delivery van at an arm’s length transaction as at 30 June 2014
was N28,000,000 and the cost to sell was N2,000,000. All non-current assets
were depreciated at 10% per annum on reducing balance basis.

viii. Current tax provision for the year is N165,000,000.

Required:

a. Identify any FOUR of the cost items that are EXCLUDED in the valuation of inventories under IAS 2. (4 Marks)

b. Calculate the following:

(i) Value of opening inventories to be included in the Statement of Profit or Loss and Other Comprehensive Income. (2 Marks)
(ii) The present value in the use of delivery van (1 Mark)
(iii) The fair value and recoverable amount of delivery van (2 Marks)
(iv) The carrying amount and impairment if any on delivery van (2 Marks)

c. Prepare the Statement of Profit or Loss and Other Comprehensive Income (OCI) and Statement of Changes in Equity for the year ended 30 June 2014. (11 Marks)

d. Prepare the Statement of Financial Position as at 30 June 2014. (8 Marks)

Show all relevant workings

Answer

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Tags: Comprehensive Income, Depreciation, Financial Position, Impairment, Inventory Valuation, Trial Balance
Level: Level 2

Topic: Impairment of Assets (IAS 36), Inventory Accounting (IAS 2), Presentation of Financial Statements (IAS 1)
Series: NOV 2014

TAX – Nov 2020 – L1 – SA – Q1 – Introduction to Taxation

Objective questions testing basic financial accounting principles.

Question

Which of the following items is NOT found on the debit column of a trial balance?
A. Capital
B. Motor vehicle
C. Rent and rates
D. Salaries and wages
E. Postage and stationary

Answer

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Tags: Accounting Conventions, Control Account, Financial Statements, Income Statement, Inventory, Partnership, Source Document, Trial Balance
Level: Level 1

Topic: Introduction to Taxation
Series: NOV 2020

FA – May 2012 – L1 – SA – Q17 – Control Accounts

Identifying an advantage not associated with control accounts.

Question

The advantages of Control Accounts do NOT include:

A. Locating errors
B. Facilitating the extraction of trial balance
C. Detecting fraud
D. Checking on the accuracy of ledger entries
E. Discouraging adherence to double entry principle

Answer

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Tags: Control Accounts, Error Detection, Trial Balance
Level: Level 1

Topic: Control Accounts
Series: MAY 2012

FA – May 2012 – L1 – SA – Q3 – Trial Balance

Identifying how a trial balance helps disclose errors.

Question

In which of the following circumstances will the preparation of a Trial Balance assist in disclosing an error?

A. Failure to post an entry journal
B. Posting rent expenses to motor running account
C. Failure to post part of a journal entry
D. Posting the debit of a journal entry as a credit and vice versa
E. Failure to record an entry in the journal

Answer

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Tags: Error Detection, Journal Entries, Trial Balance
Level: Level 1

Topic: Trial Balance: Usefulness and Limitations
Series: MAY 2012

FA – May 2012 – L1 – SA – Q2 – Double-Entry Accounting Principles

Identifying the shortcoming of single entry book-keeping.

Question

Which of the following is NOT a shortcoming of single entry book-keeping?

A. A trial balance is not available
B. Profits are overstated
C. There are no subsidiary books
D. There are no control accounts
E. There are no ledger accounts.

Answer

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Tags: Book-keeping, Control Accounts, Trial Balance
Level: Level 1

Topic: Double-Entry Accounting Principles
Series: MAY 2012

FA – May 2020 – L1 – Q2 – Preparation of Partnership accounts

This question involves preparing a trial balance, correcting errors through a suspense account, and preparing partnership capital and appropriation accounts.

Question

Sodzedo is sole proprietor with a small business. Below is a list of balances of the trial
balance extracted as at 30 June 2019 which failed to agree:
GH¢
Purchases 66,450
Payables 44,520
Sales 213,390
Discount allowed 2,220
Receivables 158,550
Sales Returns 6,300
Expenses 32,130
Non-Current Assets 68,250
Bank Overdraft 9,420
Capital 37,500
VAT Liabilities 18,960

a) Prepare the trial balance for Sodzedo as at 30 June 2019 and derive the balance in suspense account as at 30 June 2019. (5 marks)

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

i) The total in the purchases day book was GH¢126,450, but the figure used when posting to the purchases account was GH¢66,450.
ii) An invoice from a supplier for goods amounting to GH¢25,500 plus VAT at 10% was not recorded in the books and records of Sodzedo.
iii) During the bank reconciliation process, it came to light that GH¢525.70 was earned in interest during the year and has not been accounted for.
iv) A review of the ledgers revealed that receivables were overcast by GH¢75,720.
v) Cash drawings by Sodzedo of GH¢5,610 were treated as cash sales in error.

Required:
Prepare a suspense account to clear the difference. (5 marks)

c) Ansah and Boakye have been in partnership for a number of years. The partners did not have a partnership agreement. The following balances have been extracted from the books as at 1 January 2018:

Capital Accounts:

Partner	Amount (GH¢)
Ansah	160,000
Boakye	240,000

Current Accounts:

Partner	Amount (GH¢)
Ansah	10,400 Dr
Boakye	8,200 Dr

On 1 July 2018, they decided to admit Owusu to the partnership. On this date:
Owusu introduced capital of GH¢150,000 into the partnership. The amount was paid into the bank account.

Non-current assets were revalued from GH¢280,000 to GH¢420,000. Inventory was revalued from GH¢70,000 to GH¢30,000. Goodwill was valued at GH¢150,000. It was decided that goodwill would not remain in the books of the new partnership.

The three partners agreed that:

Profits and losses would be shared equally.
Under the new partnership agreement, 10% interest per annum on capital is allowed. The interest on capital is calculated on the adjusted balances after admission of Owusu.
Each partner would receive a salary of GH¢27,000 per annum. No interest on drawings would be paid.

The net profit before appropriation for the year ended 31 December 2018 was calculated at GH¢471,800. Profits earned accrued evenly throughout the year.

The partners’ drawings were:

Partner	Amount (GH¢)
Ansah	85,000
Boakye	62,000
Owusu	38,000

Required:

i) Prepare the Capital Accounts for Ansah, Boakye, and Owusu for the year ended 31 December 2018. (8 marks)
ii) Prepare the Appropriation Account for Ansah and Boakye for the half year ended 30 June 2018. (2 marks)

Answer

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Tags: Errors Correction, Partnership Accounting, Suspense account, Trial Balance
Level: Level 1

Topic: Preparation of Partnership accounts
Series: MAY 2020

FA – Nov 2017 – L1 – Q3 – Correction of errors

Identification and correction of errors in the trial balance for AB Ltd, including suspense account adjustments, corrected profit or loss, and balance reconciliation.

Question

The trial balance drawn up for the year ended 31 December 2016 for AB Ltd failed to agree with a difference of GH¢7,200. The difference was credited to the suspense account pending investigations.

During 2017 the following errors were identified:

GH¢10,000 received from the sale of old machinery has been entered in the sales account.
The purchase day book has been overstated by GH¢16,000.
Goods taken by the owner for personal use GH¢12,000 have not been recorded.
Bank charges of GH¢4,800 have not been entered in the cash book.
A discount allowed of GH¢4,500 has been debited to discount received account.
The figure for wages in the trial balance, GH¢40,000, has been entered as GH¢4,000.
A cheque payment of GH¢24,000 for stationery has been debited to the purchase account.

Required:

Prepare the necessary journal entries to correct the errors above. (8 marks)
Draw up the suspense account after correcting the errors. (3 marks)
Prepare the corrected profit or loss account for AB Ltd for the year ended 31 December 2016. (3 marks)

b) The cash book of Lexis Limited as at 31 December 2016 discloses a balance of GH¢18,450
which did not agree with the bank statement balance. Investigation revealed the following:
 Cheques received of GH¢52,000, GH¢5,000 and GH¢12,450 were still in the business drawer.
 GH¢1,200 and GH¢1,800 standing orders for the payment of Electricity charges and Insurance
respectively were paid by the bank but this has not been recorded in the cash book of Lexis
Limited.
 The bank charged GH¢150 for a cheque book issued to Lexis Ltd.
 The bank has wrongly debited a cheque of GH¢4,955 into Lexis Ltd account which should
have been placed in another customers account.
 A credit transfer of GH¢5,000 had been made in favour of Lexis Ltd. The transfer has not been
recorded in the cash book.
 A cheque of GH¢70,000 drawn by Lexis limited was correctly entered in the cash book but
debited to the bank statement as GH¢7,000
 The following cheques which were paid in November 2016 had not been presented :
GH¢
00001142: 2,000
00001168: 5,000
00001190: 4,655

Required:
Prepare
i) The adjusted cash book
ii) A statement to reconcile the balance in (i) above to the bank statement balance

Answer

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Tags: Cash Book, sales account, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: NOV 2017

FA – May 2017 – L1 – Q2 – Preparation of limited liability company financial statements | The IASB’s Conceptual Framework

Preparation of financial statements for Adepa Ltd, including income statement and statement of financial position from trial balance and additional information.

Question

Adepa, a limited liability Company, has the following Trial balance as at 31 December 2016:

	Dr (GH¢’000)	Cr (GH¢’000)
Cash at bank	100
Inventory at January, 2016	2,400
Administrative expenses	2,206
Distribution costs	650
Non-current assets at cost:
– Buildings	10,000
– Plant and equipment	1,400
– Motor vehicles	320
Suspense		1,500
Accumulated depreciation:
– Buildings		4,000
– Plant and equipment		480
– Motor vehicles		120
Retained earnings		560
Trade receivables	876
Purchases	4,200
Dividend paid	200
Sales revenue		11,752
Sales tax payable		1,390
Trade payables		1,050
Capital surplus		500
GH¢ 1 ordinary shares		1,000
Totals	22,352	22,352

The following additional information is relevant:

Inventory at 31 December, 2016 was valued at GH¢1,600,000. While doing the inventory count, errors in the previous year’s inventory count were discovered. The inventory brought forward at the beginning of the year should have been GH¢2,200,000 not GH¢2,400,000 as stated above.
Depreciation is to be provided as follows:
- Buildings at 5% straight line, charged to administrative expenses
- Plant and equipment at 20% on the reducing balance basis, charged to cost of sales
- Motor vehicles at 25% on the reducing balance basis, charged to distribution costs.
No final dividend is being proposed.
A customer has gone bankrupt owing GH¢76,000. This debt is not expected to be recovered and an adjustment should be made. 5% provision for bad debt is to be made.
1 million new ordinary shares were issued at GH¢1.50 on 1 December 2016. The proceeds have been left in a suspense account.

Required: a) Prepare an Income Statement for Adepa Ltd for the year ended 31 December, 2016. (10 marks)

b) Prepare a Statement of Financial Position as at 31 December, 2016. (10 marks)

Answer

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Tags: Adjustments, Financial Statements, Limited Liability Company, Trial Balance
Level: Level 1

Topic: Preparation of limited liability company financial statements, The IASB’s Conceptual Framework
Series: MAY 2017

FA – Nov 2016 – L1 – Q4 – Correction of errors | Preparation of limited liability company financial statements

Correcting errors in the trial balance and preparing financial statements for Adom Providers Ltd.

Question

The accountant of Adom Providers Ltd has begun preparing financial statements for the year ended 31st December 2015, but the work is not yet complete. At this stage, the items included in the trial balance are as follows:

	GHȼ’000	GHȼ’000
Land	150
Buildings	160
Motor vehicles	130
Accumulated depreciation		220
Share capital		100
Retained earnings		80
Receivables	80
Payables		60
Inventories	50
Operating profit		40
Debentures (15%)		80
Allowance for receivables		5
Bank balance (asset)	12
Suspense	3
	585	585

The following additional information is relevant: i) Sales for the year ended 31st December 2015 had been overcast by GHȼ2,300. ii) A credit note for GHȼ3,500 for goods returned to Abu, a supplier, had not been posted to the supplier’s account. iii) Discounts received of GHȼ1,400 had been posted to the debit side of the discounts allowed account. iv) A credit purchase from Manu of GHȼ640 had not been entered in the books. v) A new motor vehicle purchased for GHȼ14,000 had been recorded as a motor expense. Depreciation has been correctly entered in the accounts. vi) The debentures were issued three months before the year end. No entries have been made as regards interest. vii) A dividend of 5 per cent of share capital was declared before the year end, but not paid until after the year end.

Required:

a) Prepare journal entries with narratives to correct each of the errors in notes (i) to (v) above. (7 marks)

b) Prepare a statement to show the revised operating profit. (4 marks)

c) Prepare for Adom Providers Ltd for the year ended 31st December 2015:

i) Statement of profit or loss for the year. (2 marks)
ii) Statement of Financial Position for the year end. (7 marks)

Answer

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Tags: Error Correction, Financial Statements, Journal Entries, Trial Balance
Level: Level 1

Topic: Correction of errors, Preparation of limited liability company financial statements
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

Find Related Questions by Tags, levels, etc.

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: Trial Balance

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