Topic: Preparation of limited liability company financial statements

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PSAF – Nov 2016 – L2 – Q5e – Public expenditure and financial accountability framework

Discuss how the Controller and Accountant-General ensures public accountability.

Question

“There shall be appointed in accordance with Article 195 of the 1992 Constitution, a Controller and Accountant-General who is responsible to the Minister of Finance.”Required:
Discuss how the Controller and Accountant-General ensures public accountability. (3 marks)

Answer

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Tags: Controller and Accountant General, ICAG, Public Accountability
Level: Level 2

FA – July 2023 – L1 – Q4 – Preparation of limited liability company financial statements

Prepare the statement of profit or loss and statement of financial position for a limited liability company using the provided trial balance and adjustments.

Question

The following trial balance relates to Pakro Ltd at 31 July 2022:

The following matters remain to be adjusted for in preparing the financial statements for the year ended 31 July 2022:

The cost of inventory of GHȼ 38,400 for the year ended 31 July 2022 was based on an inventory count on 4 August 2022. Between 31 July 2022 and 4 August 2022, the following transactions took place:

Item	GHȼ
Purchases of goods	8,000
Sales of goods (profit margin 20% on sales)	12,000
Goods returned by Pakro Ltd to a supplier	800

Trade receivables totaling GHȼ24,000 are to be written off and allowance for receivables is to be adjusted to GHȼ8,000. The irrecoverable debt expense is to be included in administrative expenses.
Pakro Ltd receives rent for subletting part of its building. The rent, which is receivable quarterly in advance, was received as follows:

Date of receipt	Period covered	GHȼ
1 July 2021	3 months to 30 September 2021	7,200
1 October 2021	3 months to 31 December 2021	7,200
30 December 2021	3 months to 31 March 2022	9,000
4 April 2022	3 months to 30 June 2022	9,000
1 July 2022	3 months to 30 September 2022	9,000

The loan of GHȼ60,000 was taken out on 1 January 2022 with annual interest of 12%. The interest is payable in equal instalments on the first day of April, July, October, and January in arrears. The loan is repayable in full during the financial year ended 31 July 2026.
Depreciation is to be provided for as follows:
- Buildings 2.5% per year on cost
- Plant and equipment 25% per year on cost
- 70% of the depreciation is to be charged in cost of sales, and 15% each in distribution costs and administrative expenses.
Current year income tax charged was GHȼ18,105.

Required:

a) Prepare the Statement of Profit and Loss for the year ended 31 July 2022. (10 marks)
b) Prepare the Statement of Financial Position as at 31 July 2022. (10 marks)

Answer

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Tags: Depreciation, Financial Statements, Income Statement, Inventory Adjustment, Loan Interest, Rent Income, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparation of limited liability company financial statements
Series: JULY 2023

FA – Mar 2023 – L1 – Q4 – Preparation of limited liability company financial statements

Prepares the Statement of Profit or Loss and Statement of Financial Position for a limited liability company, including depreciation and adjustments.

Question

Vemso Oil Ltd has been in business for the past ten years. The following trial balance was extracted from the books of Vemso Oil Ltd for the year ended 31 December 2021:

Account	GH¢’000	GH¢’000
Bank	46,200
Trade Payable		25,000
Petty Cash	4,000
Directors’ Current Account		320,000
Computer and Accessories	8,370
Computer and Accessories: Accumulated Depreciation		3,348
Furniture and Fittings	10,255
Furniture and Fittings: Accumulated Depreciation		2,050
Land and Building	214,000
Land and Building: Accumulated Depreciation		8,560
Office Equipment	12,250
Office Equipment: Accumulated Depreciation		2,450
Plant and Machinery	239,400
Plant and Machinery: Accumulated Depreciation		47,880
Inventory	1,900
Staff Loan	5,088
Payroll Liabilities		550
Taxation		3,003
Retained Earnings		49,282
Share Capital		10,000
Sales		574,145
Purchases	355,000
Bank Service Charges	1,300
Business Promotion	1,500
Communication	1,900
Insurance	1,660
Licenses and Permits	6,650
Medical expenses	155
Printing and Stationery	300
Professional Fees: Legal Fees	500
Repairs: Equipment Repairs	2,600
Salaries	23,050
Electricity	780
Water	280
Vehicle Running Expense	4,560
Totals	993,983	993,983

Additional information:
i) Closing inventory as at December 2021 amounts to GH¢48,500,000.
ii) The following assets were bought during the year 2021. However, this transaction was not recorded in the above trial balance:

Computer and Accessories: GH¢8,000,000
Fixtures and Fittings: GH¢5,000,000
Plant and Machinery: GH¢25,000,000
iii) The following are the rates of depreciation being used by the company, however, depreciation for 2021 is yet to be charged:
Land and Building: 1%
Computer and Accessories: 20%
Furniture and Fittings: 10%
Plant and Machinery: 20%
Office Equipment: 20%
iv) Electricity stated in the trial balance includes January 2022 electricity bill, while that of water represents six months’ payment for the year 2021.
v) Staff bonus amounting to GH¢15,000,000 was agreed on 31 December 2021 for staff. However, it was paid after the year-end.

Required:

a) Prepare the Statement of Profit or Loss for the year ended 31 December 2021. (10 marks)
b) Prepare the Statement of Financial Position as at 31 December 2021. (10 marks)

Answer

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Tags: Adjustments, Financial Statements, Profit and Loss, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparation of limited liability company financial statements
Series: MAR 2023

FA – Dec 2023 – L1 – Q4 – Inventory | Preparation of limited liability company financial statements

Prepares the Statement of Profit and Loss and the Statement of Financial Position for a limited liability company based on a trial balance and additional information.

Question

The trial balance for Odum Ltd. as at 31 December 2021 is as follows:

Account	Dr (GHȼ)	Cr (GHȼ)
Sales revenue		377,615
Purchases	130,006
Inventory as at 1 January 2021	60,890
Insurances	5,678
Salaries	61,600
Electricity	4,250
General expenses	8,663
Allowance for receivables		540
Land and Buildings at cost	80,000
Buildings accumulated depreciation		21,500
Machinery at cost	65,000
Machinery accumulated depreciation		12,400
Fixtures and fittings at cost	24,000
Fixtures and fittings accumulated depreciation		9,600
Trade receivables	64,500
Trade payables		14,062
Bank	20,110
Ordinary shares		50,000
Retained earnings as at 1 January 2021		15,480
10% Loan		25,000
Loan interest	1,500

(Dr Total: 526,197 GH¢ / Cr Total: 526,197 GH¢)

Additional Information:

Inventory at 31 December 2021 amounted to GHȼ80,000. Some goods sent out on a sale or return basis have been treated as credit sales. These goods cost GHȼ6,000 and had been invoiced to the customer for GHȼ7,500. The customer has informed the company that it now intends to return these goods.
The balance shown for salaries covers the 11 months to 30 November 2021. Salaries for December 2021 are due and unpaid. There have been no salary increases over the previous 12 months, and an equal amount is paid each month.
Insurances include GHȼ660 for the half-year ended on 31 March 2022.
Dividends paid during the year of GHȼ2,700 have been credited to bank and debited to General expenses.
The loan was obtained in August 2018 and is repayable in full during the financial year ended 31 December 2023.
Depreciation is to be provided on all machinery at 15% per annum using the reducing balance method. Machinery costing GHȼ15,000 was purchased on 1 July 2021, and this is included in the balance shown for machinery. Depreciation is calculated for each proportion of the year for which machinery is held. There were no disposals of machinery during the year.
All the fixtures and fittings were purchased for GHȼ24,000 on 1 January 2019. Depreciation is to be charged using the straight-line method.
Buildings are to be depreciated by GHȼ3,500 for the year. Land is not depreciated.
Allowance for receivables is to be provided as GHȼ2,400 for a specific debt, plus 4% on the remainder of receivables.
Taxation for the year is estimated as GHȼ42,012.

(Note: Revenue and expenses are deemed to accrue evenly throughout the year)

Required:
Prepare, for Odum Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS).

a) The Statement of Profit and Loss for the year ended 31 December 2021. (10 marks)
b) The Statement of Financial Position as at 31 December 2021. (10 marks)

Answer

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Tags: Adjustments, Financial Statements, Profit and Loss, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Inventory, Preparation of limited liability company financial statements
Series: DEC 2023

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

Question

The following is the trial balance of Poloo Ltd as at 31 December 2020:

Account	Debit (GH¢)	Credit (GH¢)
Authorised, issued, and called-up capital:
– 500,000 equity shares of GH¢1 each		500,000
– 60,000 7% redeemable preference shares of 50p each		30,000
Equipment: cost	350,000
Equipment: accumulated depreciation		75,000
Motor vehicle: cost	160,000
Motor vehicle: accumulated depreciation		25,650
Premises	220,000
Inventory as at 1 January 2020	51,980
Bank	10,050
Sales		508,420
Purchases	225,000
Trade receivables	130,010
Trade payables		10,200
Distribution costs	80,400
Administrative expenses	45,240
Irrecoverable debts	1,250
Allowance for receivables		14,360
Rent received		8,500
Income from investments		17,040
Interim dividend on equity shares	7,420
Retained earnings		51,760
General reserve		40,420
Total	1,281,350	1,281,350

Additional information:
i) Inventories as at 31 December 2020 are valued at GH¢85,420.
ii) Insurance includes GH¢840 for one and half years ending 30 June 2021. Insurance is included in administrative expenses.
iii) Rent received includes an amount of GH¢2,400 paid in advance as at 31 December 2020.
iv) Distribution costs of GH¢750 were prepaid, and administrative expenses of GH¢800 were owing as at 31 December 2020.
v) The total trade receivables balance of GH¢130,010 includes a balance of GH¢1,010 which has been outstanding for ten months. Poloo Ltd has decided to write off this balance.
vi) Poloo Ltd’s policy is to allow for receivables on the basis of the length of time the debt has been outstanding. The aged analysis of trade receivables at 31 December 2020 and the required allowance are shown below:

Age of Debt	Balance (GH¢)	Allowance Required
0 – 30 days	80,000	Nil
31 – 60 days	40,000	20% of balances
Over 60 days	10,010	85% of balances

vii) On 15 January 2020, Poloo Ltd purchased premises at a cost of GH¢105,000. This cost included GH¢3,500 relating to legal costs. The legal costs of GH¢3,500 had been included in administrative expenses and not in the cost of premises. Premises are not depreciated.
viii) On 1 April 2020, Poloo Ltd purchased equipment that cost GH¢50,000. This transaction was entered in the accounts on 1 April 2020.
ix) Depreciation is to be provided as follows:

Equipment: 20% per annum on cost
Motor vehicles: 20% per annum reducing balance basis
x) Depreciation on equipment is apportioned 20% to administrative expenses and 80% to distribution costs. Depreciation is charged for each month of use. Depreciation of motor vehicles is treated as a distribution cost.

Required:
Prepare, for Poloo Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS):
a) Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)
b) Statement of Financial Position as at 31 December 2020.
(10 marks)

Answer

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Tags: Allowance for Receivables, Depreciation, Income Statement, Inventory, Statement of Financial Position
Level: Level 1

Topic: Inventory, Non-current assets and depreciation, Preparation of limited liability company financial statements
Series: MAY 2021

FA – Nov 2019 – L1 – Q5 – Preparation of limited liability company financial statements

Calculate profitability, liquidity, and efficiency ratios, discuss the advantages and disadvantages of ratio analysis, and explain the responsibilities of directors and auditors.

Question

The following Profit or Loss Account and Statement of Financial Position relate to Dombo Ltd for the year ended 31 December 2018 (with comparative figures for the year ended 31 December 2017 where relevant).

Summarised Profit or Loss Account for the Year Ended 31 December 2018

Required:

a) Calculate TWO (2) ratios each for the year ended 31 December 2018 and 2017 respectively in the following categories:

i) Profitability

ii) Liquidity

iii) Efficiency

(9 marks)

b) State FOUR (4) advantages and TWO (2) disadvantages of ratio analysis. (6 marks)

c) Explain the responsibilities of the directors and the external auditors towards the financial statements of a company. (5 marks)

Answer

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Tags: Efficiency Ratios, Financial Responsibilities, Liquidity Ratios, Profitability Ratios, Ratio Analysis
Level: Level 1

Topic: Preparation of limited liability company financial statements
Series: NOV 2019

FA – Nov 2019 – L1 – Q4 – Non-current assets and depreciation | Preparation of limited liability company financial statements

Prepare the statement of profit or loss and financial position for Tudu Ltd with adjustments for depreciation, allowances, and accruals.

Question

The following balances were extracted from the books of Tudu Ltd on 31 December 2018.

Additional information:

Inventories at 31 December 2018 was valued at GH¢18,226.
Directors’ bonuses for the year ended 31 December 2018 calculated at GH¢1,160 have not been accounted for.
Distribution costs include a payment of GH¢3,750 for rent for the three months to 28 February 2019.
The company’s depreciation policies are as follows:
- Fixtures and Fittings – Straight line over 5 years.
- Motor vehicles – Reducing balance method at 20% per annum.
- All non-current asset residual values are estimated at zero.
The company reviewed the trade receivables at 31 December 2018, and the following adjustments are required:
- Irrecoverable debts of GH¢450 in addition to those already written off.
- Specific allowance for receivables of GH¢650.
- General allowance of 3% against the remaining receivables.

Required:

a) Prepare the Statement of Profit or Loss for Tudu Ltd for the year ended 31 December 2018. (10 marks)

b) Prepare the Statement of Financial Position for Tudu Ltd as at 31 December 2018. (10 marks)

Answer

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Tags: Depreciation, Financial Adjustments, Statement of Financial Position
Level: Level 1

Topic: Non-current assets and depreciation, Preparation of limited liability company financial statements
Series: NOV 2019

FA – May 2019 – L1 – Q1 – Accruals and prepayments | Non-current assets and depreciation | Preparation of limited liability company financial statements

Prepare the Statement of Profit or Loss and the Statement of Financial Position for Nhyiraba Ltd, incorporating adjustments for depreciation, accruals, and provisions.

Question

The trial balance below was extracted from the ledger of Nhyiraba Ltd as at 31 December 2018.

The following additional information is provided:
i) Allowance is to be made for depreciation on the non-current assets on a straight-line method at the following rates:

Building: 3%
Plant & Machinery: 20%
Motor Vehicle: 20%
Furniture & Fittings: 10%

ii) The value of land included in Land and Building is GH¢20,000,000.

iii) The following payments were made in advance:

Rent: GH¢4,320,000
Insurance: GH¢1,740,000

iv) One year interest is due on the loan notes.

v) Provision for doubtful debt is to be adjusted so that it is 3% of trade receivables.

vi) Allowance is to be made for audit fees of GH¢3,600,000.

vii) Directors’ fees of GH¢4,500,000 were due at the year-end.

viii) The cost of closing inventories at 31/12/2018 was GH¢43,740,000. However, due to a market recession, the net realizable value of the goods is GH¢37,430,000.

ix) The directors have recommended a transfer of GH¢20,000,000 to the general reserve.

x) The year’s preference dividend is to be provided for.

xi) Current year income tax charged was GH¢9,630,000.

xii) Authorised share capital comprises:

50,000,000 10% preference shares at GH¢1 each GH¢50,000,000.
250,000,000 ordinary shares at GH¢0.5 each GH¢100,000,000.

Required:
a) Prepare Nhyiraba Ltd’s Statement of Profit or Loss for the year end 31 December 2018. (10 marks)
b) Prepare Nhyiraba Ltd’s Statement of Financial Position as at 31 December 2018. (10 marks)

Answer

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Tags: Accruals, Depreciation, Financial Statements, Profit or Loss Account, Statement of Financial Position
Level: Level 1

FA – Nov 2018 – L1 – Q7 – Preparation of financial statements of a sole trader | Preparation of limited liability company financial statements

Explain the advantages of a limited liability company over a sole proprietorship and describe different types of shares and debentures.

Question

a) State FOUR (4) advantages a Limited Liability Company has over a Sole Proprietorship.
(6 marks)

b) Explain the following:
i) Issued Shares
ii) Preference Shares
iii) Ordinary Shares
iv) Debentures
(14 marks)

Answer

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Tags: Company Structures, Debentures, Shares, Sole Proprietorship
Level: Level 1

FA – Nov 2018 – L1 – Q3 – Preparation of limited liability company financial statements

Prepare the Statement of Comprehensive Income and Statement of Financial Position for Bob and Sons using IFRS.

Question

Question:
Bob and Sons prepares its financial statements to 31 December every year. At 31 December 2017, the company’s trial balance was as follows:

The following additional information is relevant:
i) Depreciation is to be provided as follows:

Building – 3% per year on cost
Motor Vehicle – 20% per year on cost
Equipment & Furniture – 10% per year on cost
ii) It is the policy of the company not to charge depreciation in the year of disposal.
iii) Land was revalued later in the year for GH¢15,000,000. No change was required to the value of the building.
iv) Inventory value at 31 December 2017 amounted to GH¢1,840,000.
v) Rent recorded in the trial balance represents 15 months rent paid to 31 March 2018.
vi) A provision of 10% of trade receivables is to be made.
vii) During the year, a motor vehicle costing GH¢1,200,000 was disposed of. The vehicle had been in existence for 3 years. Proceeds from the sale of the vehicle were GH¢500,000. This has not been accounted for in the books of Bob and Sons.

Required:
Prepare the Statement of Comprehensive Income for Bob and Sons for the year ended 31 December 2017 and the Statement of Financial Position as at 31 December 2017 in compliance with the provisions of International Financial Reporting Standards (IFRS). (20 marks)

Answer

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Tags: Accruals, Depreciation, Financial Statements, Profit or Loss Account, Statement of Financial Position
Level: Level 1

Topic: Preparation of limited liability company financial statements
Series: NOV 2018

FA – May 2018 – L1 – Q5 – Preparation of limited liability company financial statements

Prepare a Statement of Profit or Loss and a Statement of Financial Position from a provided trial balance and additional information.

Question

Sawaba Limited is a company involved in the construction and fitting of kitchens and wardrobes. The following trial balance was extracted from its books as at 31 October 2017:

The following information, based on your investigations, has also come to your attention:
i) Inventory as at 31 October 2017 was GH¢387,100.
ii) Depreciation is to be charged as follows:

Buildings 4% Straight Line on Cost
Plant & Equipment 15% of Reducing Balance
Land is not being depreciated.
iii) The land and buildings were revalued in total at GH¢1,300,000, of which land amounted to GH¢200,000, as at 31 October 2017. This has not been recorded in the books.
iv) Rent relates to a display unit rented, and its rental period is yearly starting on 1 April each year. The yearly amount of GH¢12,000 is paid in full on this date.
v) There are outstanding balances for Marketing Costs, Salaries, and Telephone Expenses amounting to GH¢2,420, GH¢3,610, and GH¢280, respectively, which have not yet been included in the above trial balance.
vi) A customer owing GH¢6,000 went into liquidation. The liquidator has assured Sawaba Limited that it will receive 10% of the amount. Sawaba Limited has decided that the Allowance for Doubtful Debts should be set at 5%.
vii) Provide for any Loan interest due.
viii) All Expenses are to be allocated evenly between Distribution Costs and Administrative Expenses.

Required:
Prepare a Statement of Profit or Loss Account and Statement of Financial Position for Sawaba Limited for the financial year-ending 31 October 2017. (20 marks)

Answer

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Tags: Accruals and Prepayments, Bad Debt, Depreciation, Financial Statements, Profit or Loss Account, Statement of Financial Position
Level: Level 1

Topic: Preparation of limited liability company financial statements
Series: MAY 2018

FA – Nov 2017 – L1 – Q5 – Preparation of limited liability company financial statements | Non-current assets and depreciation

Prepare the Statement of Profit or Loss and Statement of Financial Position for Bob & Sons as of December 31, 2016, including necessary adjustments.

Question

The following trial balance was extracted from the ledger account of Bob & Sons, a sole proprietor, as at 31 December 2016:

Trial Balance as at 31 December 2016

Account	Debit (GH¢)	Credit (GH¢)
Building, at cost	650,000
Office equipment at cost	135,000
Plant and Machinery	263,500
Accumulated depreciation
– Building		39,000
– Office equipment		27,000
– Plant and Machinery		65,875
Purchases	248,000
Sales		500,000
Inventory 1 January 2016	27,500
Discount allowed	4,800
Returns inwards	3,200
Wages and Salaries	64,885
Rent	5,580
Insurance	6,000
Trade receivables	145,000
Trade payables		132,750
Provision for bad debt		24,840
Bank overdraft		58,956
Cash in hand	5,400
Long-term loan		350,000
Capital 1 January 2016	1,558,865	360,444 1,558,865

Additional Information:

i) Inventory as at December 2016 was valued at GH¢24,000.
ii) Insurance was paid for 15 months ending 31 March 2018.
iii) 3 months rent is outstanding. The agreed amount per month is GH¢620.
iv) Included in wages and salaries is an amount of GH¢2,500 withdrawn by the owner. Secondly, the cleaner has not been paid his salary for December 2016 as at the end of the year. His monthly salary is GH¢500.
v) Interest on capital per annum is 15% and is yet to be recorded.
vi) Depreciation for the year ended 31 December 2016 has not been charged as follows:

Building 3% per annum using the straight-line method.
Office equipment 20% using the reducing balance method.
Plant and machinery 25% using the reducing balance method.

Required:

a) Prepare Bob & Sons’ Statement of Profit or Loss account for the year ended 31 December 2016. (8 marks)
b) Prepare the Statement of Financial Position as at that date. (12 marks)

Answer

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Tags: Depreciation, Financial Statements, Sole Proprietorship
Level: Level 1

Topic: Non-current assets and depreciation, Preparation of limited liability company financial statements
Series: NOV 2017

FA – May 2017 – L1 – Q7 – Preparations of accounts from Incomplete Records | Preparation of limited liability company financial statements

Preparation of the statement of profit or loss and statement of financial position for STL, including adjustments for drawings, depreciation, and closing inventory.

Question

STL has been in business for a number of years. In the past year, she has been busy training for the Olympics and has not kept proper records for her business. She has given you some information.

The balances as at 1 May 2016 are as follows:

The balance on the bank statement at 30 April 2017 was GH¢1,144. There were no timing differences.

You are given the following additional information:
i) Closing inventory is valued at GH¢1,324.
ii) STL took goods which had a cost of GH¢96 and would have been sold for GH¢124 for her own personal use.
iii) A telephone bill was received on 7 July 2017 for GH¢75, this related to the quarter ended 30 June 2017.
iv) Rent includes GH¢1,000 paid on 1 January 2017 for the year to 31 December 2017.
v) STL takes GH¢60 every week out of the takings before banking them. She also spends GH¢20 every week on petrol for the company van.
vi) Depreciation is to be charged at 15% reducing balance.
vii) Closing trade receivables and payables were GH¢2,072 and GH¢967 respectively. However, one customer, Caroline, has vanished and her debt of GH¢575 is not likely to be paid.
viii) STL always keeps a cash float of GH¢50.
ix) STL makes sales to cash and credit customers. Customers taking credit always pay by cheque or bank transfer.

Required:
a) Prepare the statement of profit or loss for STL for the year ended 30 April 2017. (12 marks)
b) Prepare the statement of financial position for STL as at 30 April 2017. (8 marks)

Answer

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Tags: Depreciation, Drawings, Incomplete Records, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

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 2015 – L1 – Q6 -Preparation of limited liability company financial statements

Prepare an income statement and financial statements for a vehicle spare parts dealer, Agyakoo, from incomplete records.

Question

Agyakoo is a vehicle spare parts dealer in Aboisokai. He deposits his cash takings into his bank account after retaining GH¢2,000 per week for personal use and paying wages and other expenses. For the accounting period ending 31st December 2014, the following expenses were noted:

Description	GH¢
Staff wages	1,440
Cleaning	1,200
Sundry	5,000
Telephone	600
Rent	10,000
Electricity	500
Accountancy fees	750

The following are his bank transactions:

Description	GH¢
Income Tax	3,000
Telephone	600
Bank Lodgments:
Cash Sales	30,100
Bulk Sales (Cheques)	95,000
Treasury bill Interest	5,000
Payments to Suppliers	110,000
Rent	10,000
Electricity	500
Balance as at 1st January 2014	6,000

Additional Information:

	01/01/2014	31/12/2014
Furniture & Fittings	1,200	1,100
Stocks in Trade	10,500	7,650
Payables – Goods Purchased	1,670	2,750
Payables – Rent	5,000	6,000
Payables – Electricity	500	650
Payables – Telephone	150	200
Accountancy Fee	–	750
Treasury Bills	10,000	10,000
Receivables – Bulk Sales	8,000	15,000

You are required to:
i. Prepare an Income Statement for the year ending 31st December 2014. (10 marks)
ii. Prepare a Statement of Affairs as at 1st January 2014. (2 marks)
iii. Prepare a Statement of Financial Position as at 31st December 2014. (8 marks)

Answer

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Tags: Accounting Adjustments, Income Statement, Incomplete Records, Statement of Financial Position
Level: Level 1