- 20 Marks
Question
a) Below are items of transactions obtained from the financial records of Ganigani Municipal Assembly for the year ended 31 December 2022.
| Transaction Items | GH¢’000 |
|---|---|
| Share of District Assembly Common Fund received | 68,000 |
| Share of District Assembly Common Fund in arrears | 120,000 |
| District Development Facility | 60,000 |
| Clean Ghana grant (i) | 40,000 |
| Hawkers licenses | 5,000 |
| Dog licenses | 2,000 |
| Hotel and Restaurant licenses | 43,000 |
| Akpeteshie Distillers or sellers’ licenses | 9,000 |
| Non-established post salaries (Paid from Consolidated Fund) | 87,000 |
| Casual labour | 77,000 |
| Pensions contribution | 8,000 |
| Assembly members sitting allowances | 7,000 |
| Salary related allowances (ii) | 20,000 |
| Training, Seminar and Conferences (iii) | 45,000 |
| Travel and transport | 12,000 |
| Utility expenses (iv) | 1,000 |
| Consumables | 200 |
| Interest expense (v) | 500 |
| Consumption of fixed asset (Accumulated) | 44,000 |
| Consumption of fixed asset (charged for the year) | 4,800 |
| Purchase of motor vehicle (vi) | 30,000 |
| Premises (old premises revalued by experts) | 167,000 |
| Cash proceeds from auction of old furniture | 300 |
| Recoveries from loan and advances | 1,200 |
| Loans and advances granted during the year | 5,000 |
| Issue of Municipal Bonds | 100,000 |
| Redemption of Municipal Bonds | 28,000 |
| Bank loan borrowed during the year | 12,000 |
| Loan repayment | 3,400 |
| Investment income received | 100 |
| Property rates | 65,000 |
| Basic rate | 21,000 |
| Market tolls and fees | 12,400 |
| Fees and miscellaneous charges | 11,400 |
| Cash and cash equivalent at 31 December 2022 (Debit) | 70,000 |
| Accumulated Fund Balance (Debit) | 123,500 |
| Donation of Cement from Concerned Citizens | 3,500 |
Additional Information:
i) Clean Ghana grant of GH¢40,000 has a component of 40% in kind. ii) The Assembly paid 40% of the GH¢20,000 salary related allowances. iii) 60% of the GH¢45,000 representing Training, Seminar and Conferences expenses was funded by donors. iv) 25% of the GH¢1,000 representing utility expenses was in arrears. v) 90% of the GH¢500 representing interest expense has been paid. vi) 80% of the GH¢30,000 representing Motor Vehicle has been paid.
Required:
a) Prepare a Cash Flow Statement for the year ended 31 December, 2022 for Ganigani Municipal Assembly in compliance with the International Public Sector Accounting Standards 2: Cash Flow Statement and the current Chart of Accounts of Government of Ghana. (16 marks)
b) Explain FOUR (4) benefits of Cash Flow Information to the users of the financial statements of Ganigani Municipal Assembly. (4 marks)
Answer
a) Ganigani Municipal Assembly
Cash Flow Statement for the year ended 31st December 2022
| Cash Flow From Operating Activities | GH¢’000 | GH¢’000 |
|---|---|---|
| Receipts: | ||
| Decentralised Transfer | 152,000 | |
| Internally Generated Fund | 168,900 | |
| 320,900 | ||
| Payments | ||
| Compensation for employees | 93,000 | |
| Goods and Services | 37,950 | |
| Interest | 450 | |
| 131,400 | ||
| Net Cash Flow from Operating Activities | 189,500 | |
| Cash Flow from Investing Activities | ||
| Purchase of Motor vehicle | (24,000) | |
| Auction proceeds | 300 | |
| Recoveries of loan and advances | 1,200 | |
| Loan and advances granted | (5,000) | |
| Net Cash Flow from Investing Activities | (27,500) | |
| Cash Flow from Financing Activities | ||
| Issue of Municipal Bonds | 100,000 | |
| Bank loan | 12,000 | |
| Redemption of Municipal Bonds | (28,000) | |
| Loan repayment | (3,400) | |
| Net Cash Flow from Financing Activities | 80,600 | |
| Net increase in cash and cash equivalent | 242,600 | |
| Cash and Cash equivalent as Dec 31, 2021 | (172,600) | |
| Cash and Cash equivalent as Dec 31, 2022 | 70,000 |
Notes:
- Decentralised Transfer GH¢’000
- District Assembly Common Fund received: 68,000
- District Development Facility: 60,000
- Clean Ghana Grant (60% in cash): 24,000
- Total: 152,000
- Internally Generated Fund
- Hawkers licenses: 5,000
- Dog licenses: 2,000
- Hotel and Restaurant: 43,000
- Akpeteshi distillers and sellers: 9,000
- Investment income: 100
- Property rate: 65,000
- Basic rate: 21,000
- Market tolls and fees: 12,400
- Fees and charges: 11,400
- Total: 168,900
- Compensation for employees
- Casual labour: 77,000
- Pension contribution: 8,000
- Salary related allowances: 8,000
- Total: 93,000
- Goods and Services
- Assembly members allowances: 7,000
- Training, seminar and conferences: 18,000
- Travel and transport: 12,000
- Utility expenses: 750
- Consumable: 200
- Total: 37,950
(Marks are evenly spread using ticks = 16 marks)
b)
Cash Flow Information about a reporting entity is beneficial to the users in the following ways:
- Information about the cash flows of an entity is useful in assisting users to predict the future cash requirements of the entity, its ability to generate cash flows in the future, and its ability to fund changes in the scope and nature of its activities.
- A cash flow statement also provides a means by which an entity can discharge its accountability for cash inflows and cash outflows during the reporting period.
- A cash flow statement, when used in conjunction with other financial statements, provides information that enables users to evaluate the changes in net assets/equity of an entity, its financial structure (including its liquidity and solvency), and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities.
- It also enhances the comparability of the reporting of operating performance by different entities because it eliminates the effects of using different accounting treatments for the same transactions and other events.
- Historical cash flow information is often used as an indicator of the amount, timing, and certainty of future cash flows. It is also useful in checking the accuracy of past assessments of future cash flows.
(Any 4 points @ 1 mark each = 4 marks)
Total: 20 marks
- Uploader: Sarah