Double entry bookkeeping – NBC Institute

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

Question

a) The Conceptual Framework for Financial Reporting is a set of principles which underpin the foundation of financial accounting. The Conceptual Framework sets out the going concern concept as one of the important underlying assumptions for the preparation of financial statements.

Required:
Explain what is meant by ‘the assumption that an entity is operating under the going concern concept’. Support your answer with a suitable example. (3 marks)

b) A trader who trades in Machines commences business on 1 Jan 2021 and buys 200 machines, each costing GH¢50,000. During the year, he sells 150 machines at GH¢60,000 each.

Required:
How should the remaining machines be valued at the end of the year if:
i) He is forced to close down his business at the end of the year and the remaining machines will realise only GH¢30,000 each in a forced sale. (2 marks)
ii) He intends to continue the business into the next year. (2 marks)

c) One of the fundamental qualitative characteristics of useful financial information in the Conceptual Framework for Financial Reporting is ‘faithful representation’.

Required:
Explain what is meant by ‘faithful representation’. (3 marks)

d) Davidco is a trader who commenced business on January 1, 2021. He introduced capital of GH¢50,000. He bought Vehicle worth GH¢30,000 out of the capital introduced. The following transaction took place in the month of January (Jan) 2021:

Jan 5: Davidco bought goods on credit from the following:
- Tradco: GH¢2,500, Trade Discount 10%
- Vamco: GH¢8,000, Trade Discount 10%
Jan 8: Davidco Sold goods on credit to the following:
- Markcom: GH¢5,000, Trade Discount 20%
- Kathrine: GH¢2,000, Trade Discount 5%
Jan 12: Davidco returned defective goods worth GH¢200 to Tradco.
Jan 15: Davidco paid all amounts outstanding to Tradco and Vamco less cash discount of 5%.
Jan 22: Kathrine returned spoiled goods worth GH¢300.
Jan 24: Davidco received payment from Markcom and Kathrine of all outstanding debt less cash discount of 5%.

Required:
Prepare the following:
i) Sales day book
ii) Purchase day book
iii) Cash book
iv) Purchase returns
v) Sales returns

(10 marks)

Answer

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Tags: Day Books, Faithful Representation, Going Concern, Inventory Valuation
Level: Level 1

Topic: Double entry bookkeeping, Inventory, The IASB’s Conceptual Framework
Series: MAR 2023

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.

Question

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)

Answer

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Tags: Financial Accounting, Ledger Accounts, Management Accounting, Prudence Concept
Level: Level 1

Topic: Bad and doubtful debt, Double entry bookkeeping, The IASB’s Conceptual Framework
Series: DEC 2023

FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader

This question requires preparing ledger accounts related to depreciation, disposal, and asset balances for Tansah Ltd.

Question

a) Write a short note to a client explaining the following issues:

i) Outline the differences between Cost and Management Accounting and Financial Accounting. (3 marks)

ii) Explain FOUR (4) roles of an Accountant in an organization. (4 marks)

iii) Outline SIX (6) key information provided by a Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position. (3 marks)

b) At 1 July 2017, the following information was extracted from the books of Tansah Ltd:
Non-current assets at cost:

Reference	Description	Amount (GH¢)
M1	Machinery	25,000
E1 & E2	Equipment	15,400
MV1	Motor Vehicle	18,500

Provision for depreciation:

Reference	Description	Amount (GH¢)
M1	Machinery	18,500
E1 & E2	Equipment	8,600
MV1	Motor Vehicle	6,500

During the financial year ended 30 June 2018, the following transactions took place:
Purchases:

Date	Description	Reference	Amount (GH¢)
1 April 2018	Machinery M2	M2	10,800
1 January 2018	Equipment E3	E3	6,800

Disposals:

Reference	Description	Purchase Date	Disposal Date	Original Cost (GH¢)	Sale Proceeds (GH¢)
E2	Equipment	1 January 2015	31 March 2018	7,200	6,400

All transactions took place through the bank account.

Depreciation rates per annum:

Machinery: 10% straight line on cost
Equipment: 12.5% straight line on cost
Motor Vehicle: 15% reducing balance

Depreciation for new assets commences in the month in which the asset is acquired.

Required:
For Tansah Ltd, prepare the following ledger accounts for the year ended 30 June 2018:

i) Provision for Depreciation of Machinery (2 marks)
ii) Provision for Depreciation of Equipment (4 marks)
iii) Disposal of Equipment (3 marks)
iv) Motor vehicle (1 mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Disposal of assets, Financial Statements, Ledger Accounts
Level: Level 1

Topic: Double entry bookkeeping, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: MAY 2020

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

Question

Required:
Explain what is meant by ‘the assumption that an entity is operating under the going concern concept’. Support your answer with a suitable example. (3 marks)

b) A trader who trades in Machines commences business on 1 Jan 2021 and buys 200 machines, each costing GH¢50,000. During the year, he sells 150 machines at GH¢60,000 each.

c) One of the fundamental qualitative characteristics of useful financial information in the Conceptual Framework for Financial Reporting is ‘faithful representation’.

Required:
Explain what is meant by ‘faithful representation’. (3 marks)

Jan 5: Davidco bought goods on credit from the following:
- Tradco: GH¢2,500, Trade Discount 10%
- Vamco: GH¢8,000, Trade Discount 10%
Jan 8: Davidco Sold goods on credit to the following:
- Markcom: GH¢5,000, Trade Discount 20%
- Kathrine: GH¢2,000, Trade Discount 5%
Jan 12: Davidco returned defective goods worth GH¢200 to Tradco.
Jan 15: Davidco paid all amounts outstanding to Tradco and Vamco less cash discount of 5%.
Jan 22: Kathrine returned spoiled goods worth GH¢300.
Jan 24: Davidco received payment from Markcom and Kathrine of all outstanding debt less cash discount of 5%.

Required:
Prepare the following:
i) Sales day book
ii) Purchase day book
iii) Cash book
iv) Purchase returns
v) Sales returns

(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Day Books, Faithful Representation, Going Concern, Inventory Valuation
Level: Level 1

Topic: Double entry bookkeeping, Inventory, The IASB’s Conceptual Framework
Series: MAR 2023

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.

Question

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.

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

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Accounting, Ledger Accounts, Management Accounting, Prudence Concept
Level: Level 1

Topic: Bad and doubtful debt, Double entry bookkeeping, The IASB’s Conceptual Framework
Series: DEC 2023

FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader

This question requires preparing ledger accounts related to depreciation, disposal, and asset balances for Tansah Ltd.

Question

a) Write a short note to a client explaining the following issues:

i) Outline the differences between Cost and Management Accounting and Financial Accounting. (3 marks)

ii) Explain FOUR (4) roles of an Accountant in an organization. (4 marks)

iii) Outline SIX (6) key information provided by a Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position. (3 marks)

b) At 1 July 2017, the following information was extracted from the books of Tansah Ltd:
Non-current assets at cost:

Reference	Description	Amount (GH¢)
M1	Machinery	25,000
E1 & E2	Equipment	15,400
MV1	Motor Vehicle	18,500

Provision for depreciation:

Reference	Description	Amount (GH¢)
M1	Machinery	18,500
E1 & E2	Equipment	8,600
MV1	Motor Vehicle	6,500

During the financial year ended 30 June 2018, the following transactions took place:
Purchases:

Date	Description	Reference	Amount (GH¢)
1 April 2018	Machinery M2	M2	10,800
1 January 2018	Equipment E3	E3	6,800

Disposals:

Reference	Description	Purchase Date	Disposal Date	Original Cost (GH¢)	Sale Proceeds (GH¢)
E2	Equipment	1 January 2015	31 March 2018	7,200	6,400

All transactions took place through the bank account.

Depreciation rates per annum:

Machinery: 10% straight line on cost
Equipment: 12.5% straight line on cost
Motor Vehicle: 15% reducing balance

Depreciation for new assets commences in the month in which the asset is acquired.

Required:
For Tansah Ltd, prepare the following ledger accounts for the year ended 30 June 2018:

i) Provision for Depreciation of Machinery (2 marks)
ii) Provision for Depreciation of Equipment (4 marks)
iii) Disposal of Equipment (3 marks)
iv) Motor vehicle (1 mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Disposal of assets, Financial Statements, Ledger Accounts
Level: Level 1

Topic: Double entry bookkeeping, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: MAY 2020

Topic: Double entry bookkeeping

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FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

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.

FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader

This question requires preparing ledger accounts related to depreciation, disposal, and asset balances for Tansah Ltd.

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

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.

FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader

This question requires preparing ledger accounts related to depreciation, disposal, and asset balances for Tansah Ltd.

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Topic: Double entry bookkeeping

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FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

You're reporting an error for "FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework"

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.

You're reporting an error for "FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework"

FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader

This question requires preparing ledger accounts related to depreciation, disposal, and asset balances for Tansah Ltd.

You're reporting an error for "FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

You're reporting an error for "FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework"

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.

You're reporting an error for "FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework"

FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader

This question requires preparing ledger accounts related to depreciation, disposal, and asset balances for Tansah Ltd.

You're reporting an error for "FA – May 2020 – L1 – Q1 – Double entry bookkeeping | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

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Customer

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