Question Tag: Incomplete Records

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  • 20 Marks

FA – May 2016 – L1 – SB – Q5 – Accounting from Incomplete Records

Calculate profit or loss and prepare the statement of financial position for Mr. Mala's bookshop using incomplete records.

Mr. Mala, the proprietor of a small bookshop, has requested you to prepare his accounts. He did not keep complete records of account. From his passbook, notebook, bank statements, and oral information obtained during a meeting with him, you put together the following figures for the year ended December 31, 2015:

Item January 1, 2015 (N’000) December 31, 2015 (N’000)
Cash in hand 400 890
Bank overdraft 18,000 14,000
Furniture & Fittings 2,000 2,000
Delivery van 3,600 3,600
Inventories 20,400 22,400
Trade receivables 12,400 9,800
Trade payables 9,120 8,400
Bills payables 2,210 2,200
Bills receivables 3,100 3,200

During the year, Mr. Mala used part of the inventories for domestic affairs which was agreed at N1,200,000. He drew cash for private expenses at frequent intervals. He estimated his drawing in cash at N2,800,000 for the year.

He also agreed with the following suggestions:

  1. To write off irrecoverable debts of N300,000 owed by a customer who died in May 2015.
  2. To charge a notional rent of N1,000,000 per annum for the shop premises owned by him.
  3. To allow 15 percent per annum depreciation on furniture and fittings and 20 percent per annum on the delivery van.

Required:

a. Ascertain Mr. Mala’s bookshop’s profit or loss for the year ended December 31, 2015. (8 Marks)

b. Prepare the statement of financial position of the bookshop at December 31, 2015. (12 Marks)

(a) Estimate of Mala’s profit for the year ended 31 December 2015

(b) Statement of financial position as at December 31, 2015

WORKING NOTES

W1 Calc. of Net Worth/Capital as at

 

  • 20 Marks

FA – May 2020 – L1 – Q4 – Preparations of accounts from Incomplete Records | Preparation of financial statements of a sole trader

This question involves preparing a statement of profit or loss and a statement of financial position for a sole trader from incomplete records.

On 30 June 2019, the accounting records of Kofi, a sole trader, were partly destroyed by fire. The following list of assets, liabilities, and equity as at 30 June 2018 is available:

Assets, Liabilities, and Equity Amount (GH¢)
Plant and equipment – cost 200,000
– Accumulated depreciation 72,000
Office fixtures– cost 50,000
– Accumulated depreciation 5,000
Inventory 30,500
Trade receivables and prepayments – Note (iv) 35,000
Trade payables and accrued expenses – Note (iv) 17,600
Bank overdraft 8,850
Loan (10% interest per annum) 95,000
Capital 117,050

The following summary of receipts and payments for the year to 30 June 2019 has been extracted from the bank statements:

Receipts Amount (GH¢)
Capital introduced 22,000
From credit customers 427,500
Payments Amount (GH¢)
Cash drawings – Note (v) 22,450
Loan repayments – Note (vii) 20,000
To credit suppliers 175,600
Rent 22,000
Wages 90,000
Office expenses 12,500

In preparing the statement of profit or loss and statement of financial position at 30 June 2019, the following further information is relevant:

Notes
i) Inventory at 30 June 2019 was GH¢27,850.
ii) Depreciation is to be provided as follows:

  • Plant and equipment 20% per annum, reducing balance basis
  • Office equipment 10% per annum on cost
    iii) During the year, Kofi introduced a motor vehicle valued at GH¢5,000 into the business. It is to be depreciated over 4 years on the straight-line basis with a full year’s depreciation charge in the year of acquisition.
    iv) Prepayments and accrued expenses as at 30 June 2018 were:
  • Rent paid in advance GH¢2,500
  • Accrued wages GH¢4,300
    v) Cash drawings during the year included GH¢6,750 for wages, GH¢4,200 for cash payments to suppliers, and GH¢2,600 for advertising leaflets (of which half are yet to be distributed). The remainder was Kofi’s personal expenditure.
    vi) The bank balance per the bank statement as at 30 June 2019 after adjusting for unpresented cheques was GH¢106,700. Any difference is assumed to be cash takings (i.e., in respect of cash sales).
    vii) Loan repayments include interest amounting to GH¢9,500.
    viii) At 30 June 2019 the following assets and liabilities existed:
  • Rent paid in advance GH¢2,700
  • Accrued wages GH¢5,250
  • Amounts due to suppliers GH¢12,200
  • Amounts due from customers GH¢22,300
    ix) On 3 July 2019, Kofi’s major customer, Yaw, went into liquidation owing GH¢16,000. A statement from the customer’s liquidator indicates that Kofi should expect to recover 20 pesewas for every GH¢1 owing.

Required:
Prepare Kofi’s statement of profit or loss for the year ended 30 June 2019 and a statement of financial position as at that date. Ignore taxation. (20 marks)

a) Statement of Profit or Loss for the year ended 30 June 2019

 

  • 20 Marks

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.

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)

a) STL – Statement of Profit or Loss for the year ended 30 April 2017

Item GH¢’000 GH¢’000
Sales (W5) 16,678
Less: Cost of Sales
Opening Inventory 956
Purchases (W2) 5,685
Drawings (96)
6,545
Less: Closing Stock (1,324) 5,221
Gross Profit 11,457
Less Expenses
Telephone (135+25) 160
Rent (1,800 – 667) 1,133
Motor Expenses 1,545
Sundry Expenses 763
Bad Debts 575
Depreciation (W5) 4,889
Net Profit 713 6,568

b) STL – Statement of Financial Position as at 30 April 2017

GH¢’000 GH¢’000
Non-Current Assets
Motor Van 4,037
Current Assets
Inventory 1,324
Trade Receivables 2,072
Prepayment 667
Bank 1,144
Cash 50 5,257
Total Assets 9,294
Capital and Liabilities
Capital 4,950
Add: Profit 6,568
11,518
Less: Drawings (W6) (3,216) 8,302
Current Liabilities
Trade Payables 967
Accrual 25 992
Total Capital and Liabilities 9,294

Workings:

W5
Depreciation
Motor Van 4,750 * .15
= 713

W6
Drawings
Cash Takings 3,120 + Goods 96 = 3,216

  • 20 Marks

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.

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)

i. Income Statement for the year ending 31st December 2014

ii. Statement of Affairs as at 1st January 2014

iii. Statement of Financial Position as at 31st December 2014

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