Topic: Preparation and presentation of financial statements for covered entities

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  • 20 Marks

PSAF – July 2023 – L2 – Q2 – Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance and Statement of Financial Position for Ayigya Central Hospital for the year ended December 31, 2022, based on the provided trial balance and additional information.

Ayigya Central Hospital is a Public Hospital established in the Ashanti Region, which serves several communities in the Municipalities. Its Trial Balance for the year ended 31 December 2022 is provided below:

Additional information:

  1. Inventory as at 31 December 2022 consists of Drugs and Stationery amounting to GH¢50 million and GH¢20 million respectively.
  2. Four patients who paid GH¢25 million to the Hospital intending to undertake heart surgery are scheduled to have their surgery done in February 2023. This amount is included in Surgical Fees.
  3. The fixed assets in the trial balance were acquired at the beginning of the year. It is the policy of the Hospital to provide for the consumption of fixed assets using the straight-line method:
    • Asset: Laboratory Equipment, Building, Motor Vehicles, Software
    • Useful life: 5 years, 50 years, 10 years, 5 years respectively
  4. Salaries and other emoluments outstanding relating to casual labor during the year amounted to GH¢8 million.
  5. Provision for Bad Debt relates to NHIS Claims Receivables in the Trial balance. The Provision for Bad Debt is 2%.

Required:

a) Prepare a Statement of Financial Performance for Ayigya Central Hospital for the year ended December 31, 2022. (10 marks)

b) Prepare a Statement of Financial Position for Ayigya Central Hospital as at December 31, 2022. (10 marks)

Statement of Financial Performance for Ayigya Central Hospital for the year ended December 31, 2022

  • 14 Marks

PSAF- Nov 2019 – L2 – Q2a -Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance and Statement of Financial Position for Bunsu Education College as of 31/12/2018.

a) The following Trial Balance relates to Bunsu Education College, a public tertiary educational institution in Ghana, as at 31/12/2018.

DR (GH¢’000) CR (GH¢’000)
Fees Income 4,575,622
Establish Post 5,312,430
Allowance 856,670
Consultancy Fees 655,600
Legal Cost 25,059
 1,540,000
Consultancy Cost 565,500
Non-Establish Post 1,253,600
Seminars cost 500,000
Sponsorship 8,100 9,066,828
Receivables 468,050
Payables 182,840
20% loan 8,600
Books and Research Allowance 150,765
Plant and Machinery 3,000,000 250,000
Motor Vehicle 2,505,000 352,000
Building 12,300,000 756,000
Software 995,500 150,000
Other Incomes 211,430
Project Work Supervisory Allowance 48,500
Cash and Bank 294,233
Training and Workshop cost 104,000
Bad debt provision (student fees) 4,940
Work In Progress 8,251,735
Other Expenses 71,000
Withholding Tax 90,500
Accumulated Fund 11,205,270
Utilities Bills 560,053
Proceeds from Sale of Admission Forms 9,196,270
Superannuation 278,500
End of Service Benefits 298,040
Stationery Stock 399,165
38,245,900 38,245,900

Additional Information: i) The college has adopted the accrual basis International Public Sector Accounting Standards (IPSAS) as the basis for the preparation of its financial statements. ii) Stationery stock as at 31/12/2018 was GH¢200,500,000 but had a Net Realisable Value of GH¢155,254,000. iii) Social benefits of GH¢1,720,000 yet to be paid during the year were included in the Work In Progress value. Consultancy cost amounting to GH¢234,500,000 was incurred but not yet paid. iv) Books and Research Allowance was received from Government during the period amounting to GH¢337,530,000 for disbursement to qualified Lecturers and Administrative staff. v) Provision is to be made for interest on loans. vi) 60% of the receivables represent an amount of students’ fees outstanding as at 31/12/2017. Provision for doubtful debt is estimated to be 5% of outstanding school fees. vii) The university uses a straight-line basis of depreciation for Capital Assets. Capital Assets and their useful lives are detailed out below:

Assets Useful Life
Plant and Machinery 8 years
Motor Vehicle 5 years
Building 50 years
Software 7 years

Required: i) Prepare a Statement of Financial Performance for Bunsu Educational College for the year ended 31/12/2018. (8 marks)

ii) Prepare a Statement of Financial Position as at 31/12/2018. (6 marks)

a)                                            BONSU EDUCATION COLLEGE

Statement of Financial Performance for the year ended 31 December 2018

Revenues Notes GH¢’000
GOG grant 1,540,000
Internally Generated Funds 2 14,427,492
Donations 9,066,828
Other incomes 211,430
25,245,750

Expenditures

Expenditure Notes GH¢’000
Compensation for employees 3 8,385,270
Goods and services 4 2,237,444
Social benefit 1,720
Interest 1,720
Consumption of fixed capital 7 1,264,214
Other expenses 6 79,100
11,969,468
Net Operating Result 13,276,282

Statement of Financial Position as at 31 December 2018

Assets Notes GH¢’000
Non-current Assets
Property, plant and equipment 7 16,028,286
Work in Progress 8,250,015
Total Non-Current Assets 24,278,301

Current Assets

Current Assets Notes GH¢’000
Cash and cash equivalent 294,233
Receivable (468,050 – 9361) 5 458,689
Inventory 155,254
Total current Assets 908,176
Total Assets 25,186,477

Liabilities and Fund

Liabilities and Fund Notes GH¢’000
Payable 8 696,325
20% Loan 8,600
704,925
Accumulated fund 9 24,481,552
25,186,477

Notes to the financial statement

  1. Accounting Policy was not required by the question so no need to spend time writing accounting policies.
  2. Internally Generated Fund | GH¢’000
    • Fees income | 4,575,622
    • Consultancy fees | 655,600
    • Admission forms | 9,196,270
                                     | 14,427,492
  3. Employees Compensation | GH¢’000
    • Allowance | 856,670
    • Establish post | 5,312,430
    • Non establish post | 1,253,600
    • Books and Research allowance | 337,530
    • Project work allowance | 48,500
    • Superannuation | 278,500
    • End of service benefits | 298,040
                                     | 8,385,270
  4. Use of Goods and Services | GH¢’000
    • Legal cost | 25,059
    • Consultancy cost | 800,000
    • Seminar cost | 500,000
    • Training and Workshop Cost | 104,000
    • Utilities | 560,053
    • Increase in Provision for doubtful debt (Note 5) | 4,421
    • Opening inventory | 399,165
    • Closing inventory | (155,254)
                                    | 2,237,444
  5. Provision for doubtful debt
    • Fees outstanding for 2018 (0.4 * 468,050) | 187,220
    • Provision for doubtful debt 2018 (@5%) | 9,361
    • Provision for doubtful debt 2017 | 4,940
    • Increase in provision | 4,421
6. Other expenses GH¢’000
Trial balance 71,000
Sponsorship 8,100
79,100

7. Non-current Asset Schedule

Plants & Machinery Motor Vehicle Building Software Total
Cost/valuation GH¢’000 GH¢’000 GH¢’000 GH¢’000 GH¢’000
3,000,000 2,505,000 12,300,000 995,500 18,800,500
Less: depreciation
Balance b/d 250,000 352,000 756,000 150,000 1,508,000
Charge for the year 375,000 501,000 246,000 142,214 1,264,214
Total Depreciation 625,000 853,000 1,002,000 292,214 2,772,214
Carrying Amount 2,375,000 1,652,000 11,298,000 703,286 16,028,286
8. Payables GH¢’000
Payables per trial balance 182,840
Consultancy cost 234,500
Book & Research All. (337,530 – 150,765) 186,765
Interest payable (8,600 x 0.2) 1,720
Tax withholding 90,500
696,325
NB: Social benefit was not included in the payable since its inclusion in work in progress was deemed to be paid for as no corresponding payable was separately created in the trial for it.
9. Accumulated Fund GH¢’000
Trial balance 11,205,270
Net Operating Result 13,276,282
24,481,552

 

  • 20 Marks

PSAF – Dec 2023 – L2 – Q2a – Preparation and presentation of financial statements for covered entities

Prepare a Statement of Financial Performance and a Statement of Financial Position for Danke State University as at 31 December 2021, along with the accounting policies.

The following Trial Balance relates to Danke State University, a public tertiary educational institution in Ghana, as at 31 December 2021:

Additional Information:

  1. It is the policy of the University to prepare Financial Statements on an accrual basis in compliance with Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 (L.I 2378), and the International Public Sector Accounting Standards (IPSAS).
  2. Utility Bills outstanding during the year amounted to GH¢15,500,000 whilst that of Established Post Salaries amounted to GH¢120,000,000. These have been omitted from the trial balance.
  3. Loans and Advances represent Salary Loans given to some Staff of the University. These loans were granted at a concessionary interest rate of 2%. Provision is to be made for interest on Loans and Advances.
  4. The Fees Receivables represent outstanding school fees for 870 students. Out of this, 90 students were expelled from the school for poor academic performance. As a result, it is very unlikely the University would recover the amount of School Fees owed by the expelled students. This amount constitutes 5% of Fees Receivables. The University from experience also considers that it is very unlikely to recover all the outstanding fees and they intend to set a provision of unrecoverable debt against the remaining school fees at the rate of 7%.
  5. Included in the Other Facility User Fees is hostel fees amounting to GH¢1,050,000 paid in respect of the 2022/2023 Academic year.
  6. Inventory of Textbooks as at 31 December 2021 amounted to GH¢ 142,500,000 at cost and having a Net Realisable Value of GH¢165,000,000, but its Replacement Cost is GH¢78,000,000. In addition, stationery inventory as at 31 December 2021 amounted to GH¢17,000,000 and having a Replacement Cost of GH¢18,000,000 with an estimated Net Realisable Value of GH¢25,000,000.
  7. The University uses the Straight Line method of depreciation for Non-Current Assets. Details of Non-Current Assets and their respective useful lives are stated below:
Non-Current Assets Useful Life
Property, Plant, and Machinery 20 years
Investment Property 10 years
Software 10 years

Required: a) Prepare a Statement of Financial Performance for Danke State University for the year ended 31 December 2021. (8 marks)
b) Prepare a Statement of Financial Position for Danke State University as at 31 December 2021. (8 marks)
c) State FOUR (4) accounting policies applied in preparing the financial statement. (4 marks)

a) DANKE STATE UNIVERSITY
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31/12/2021

b) DANKE STATE UNIVERSITY
STATEMENT OF FINANCIAL POSITION AS AT 31/12/2021

c) Accounting policies applied in preparing the financial statements:

  1. General Statement: The university prepares its financial statements in compliance with Public Financial Management Act 2016 (Act 921) and its Regulation 2019, LI2378, and International Public Sector Accounting Standards (IPSAS).
  2. Basis of Accounting: The University uses Accrual Accounting Basis in the preparation of its Financial Statements.
  3. Valuation of Receivables: The University fees recoverable are stated at those amounts only reflecting good receivables. Provision for unrecoverable fees income is made at the rate of 7%.
  4. Depreciation of Non-Current Assets: The University uses the Straight-Line basis in computing its consumption of Fixed Assets, where the cost of the Fixed Assets is spread against its useful life. The basic Capital Assets and their Useful Life are as follows:
Assets Useful Life
Property, Plant, and Machinery 20 years
Investment Property 10 years
Software 10 years
  1. Inventory Valuation: In line with IPSAS 12, the University values stationery at the lower of cost and its replacement amount because it is held for consumption, but values its inventory of Textbook at the lower of cost and net realisable value since it is held for sale.

WORKINGS:

  1. Internally Generated Fund
    | Item | GH¢’000 |
    |—————————-|———–| | Proceeds from Sale of Textbooks | 98,290 | | Mature Entrance Exams Fee | 190,280 | | Graduation Fees | 450,000 | | Fees Income | 3,600,000 | | Resit Examination Fees | 67,950 | | Sales of Admission Vouchers| 450,110 | | Transcript Fees | 24,700 | | Academic Facility User Fees| 2,040,580 | | Other Facility User Fees | 816,010 | | Less Prepayment | 1,050 | | Other Income | | | Interest on Staff Loan (2% of 187,200) | 3,744 | | Total Internally Generated Fund | 7,740,614 |
  2. Compensation of Employees
    | Item | GH¢’000
    Established Post Salaries | 4,452,150 |
    | Outstanding Salaries | 120,000 |
    | Employer’s Contribution to Provident Fund | 22,550 |
    | Non-Established Post Salaries | 1,128,240 |
    | Casual Labour | 250,650 |
    | 13% SSF (Employer’s contribution) | 32,550 |
    | Salary Related Allowance | 180,560 |
    | Book and Research Allowance | 135,600 |
    | Total Compensation of Employees | 6,322,300 |
  3. Goods and Services
    | Item | GH¢’000 | |——————————|———–|
    | Program Accreditation Cost | 508,950 |
    | Examination Invigilation Cost| 450,000 |
    | Cost of Textbooks | 45,790 |
    | Cost of Stationery | 342,290 |
    | Graduation Cost | 15,580 |
    | Meeting Sitting Allowance | 71,000 |
    | Exams Scripts Marking Cost | 78,050 |
    | Internet Broadband Cost | 5,338,270 |
    | Examination Moderation Cost | 226,670 |
    | Project Work Supervision Allowance | 43,650 |
    | Staff Training and Development | 2,093,600 |
    | Utility Bills | 504,040 |
    | Outstanding Utility Bills | 15,500 |
    | Applied Research Conference | 300,000 |
    | Bad Debt – Expelled students | 21,062 |
    | Provision for doubtful debt | 23,512 |
    | Sponsorship | 7,290 |
    | Total Goods and Services | 10,085,253 |
  4. Other Expenses
    | Item | GH¢’000 | |——————————|———–|
    | Per Trial Balance | 63,900 |
    | Bad Debt – Expelled students | 21,062 |
    | Provision for doubtful debt | 23,512 |
    | Total Other Expenses | 108,473 |
  5.  Non-Current Asset Schedule
  6. Inventory

  7. Receivables
  8. Provision for Bad Debt
    | Item | GH¢’000 |
    | Balance b/f | 4,500 |
    | Charge for the year | 23,512 |
    | Total Provision for Bad Debt | 28,012 |
  9. Payables
    | Item | GH¢’000 |
    | Balance Per TB | 164,550 |
    | Outstanding Utilities | 15,500 |
    | Outstanding Salaries | 120,000 |
    | Fees Prepayments | 1,050 |
    | Withholding Tax | 81,450 |
    | Total Payables | 382,550 |
  • 20 Marks

PSAF – Nov 2018 – L2 – Q4a – Preparation and presentation of financial statements for covered entities

Prepare the Statement of Income and Expenditure and Statement of Financial Position for DFG for the year ended 31 December 2016.

Destitute Foundation Ghana (DFG) is a Non-Governmental Organisation established in 1980 with the mission of protecting and securing the economic and social interest of the underprivileged and vulnerables. Below is the trial balance as at 31 December, 2016.

i) It is the policy of management to prepare financial statements on a modified accrual basis. ii) The current chart of accounts of DFG has seven items of expenditure: compensation of employees, administration and general expenses, finance cost, legal cost, capital assets, project cost, and other expenses. iii) Under the current chart of accounts, income is classified as fund-raising, grants/supports, and fees and charges.

Required: a) Prepare Statement of Income and Expenditure for the year ended 31 December 2016, suitable for publication. (8 marks)

b) Prepare Statement of Financial Position as at 31 December 2016. (8 marks)

c) Disclose relevant notes to the accounts. (4 marks)

a) Statement of Income and Expenditure for the year ended 31 December 2016

c) Notes to the accounts

  1. Accounting policies
    • Financial statements are prepared on a modified accrual basis.
    • Capital assets are written off in the year of acquisition.
  2. Grants and support (GH¢ ’000)
    • International agencies: 2,200
    • Government of Ghana: 1,800
    • Other grants: 200
    • Total Grants and Support: 4,200
  3. Administration and General Expenses (GH¢ ’000)
    • Administration and general expenses: 2,100
    • General expenses: 1,700
    • Office rent: 200
    • Total Administration and General Expenses: 4,000
  4. Capital assets (GH¢ ’000)
    • Office equipment: 500
    • Motor vehicle: 1,300
    • Total Capital Assets: 1,800
  5. Project cost (GH¢ ’000)
    • Scholarship: 3,000
    • Boreholes: 4,400
    • Classroom blocks: 3,600
    • Total Project Cost: 11,000
  6. Accumulated Fund (GH¢ ’000)
    • Balance b/f: 2,000
    • Deficit: (7,270)
    • Total Accumulated Fund: (5,270)
  • 20 Marks

PSAF – Nov 2021 – L2 – Q2 – Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance, Statement of Financial Position, and Notes to the Accounts for a Municipal Hospital based on the provided trial balance and additional information.

Kologo Municipal Hospital is a Public Hospital established in the Upper East Region, which serves several communities. Its Trial Balance for the year ended 31 December 2020 is provided below.

Trial Balance as at 31 December 2020

Additional Information

i) The hospital’s policy is to apply the Accrual Basis of Accounting in preparing its Financial Statements in compliance with the Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 L.I 2378, and the International Public Sector Accounting Standards (IPSAS).

ii) The hospital purchased equipment at the cost of GH¢200,000 on 1 April 2020.

iii) A new equipment valuing GH¢100,000 was donated to the hospital on 1 July 2020. The equipment was assessed to have a useful life of ten (10) years. This has not yet been accounted for in the Trial Balance.

iv) The Fixed Deposit attracts an interest of 15% per annum.

v) Inventory of drugs as at 31 December 2020 amounted to GH¢95,000,000 at cost and had a net realizable value of GH¢110,000,000 but its replacement cost is GH¢78,000,000. In addition, stationery stock as at 31 December 2020 cost GH¢28,000,000 and has a replacement cost of GH¢25,000,000 with an estimated net realizable value of GH¢35,000,000.

vi) Redundancy pay outstanding as at the end of the year amounted to GH¢25,950,000.

vii) Provision for undertaking is estimated at 10%.

viii) The hospital currently owes Healer Pharmaceuticals for Drugs amounting to GH¢1,950,000 supplied to the hospital during the years 2020 and 2021 in respect of the following months:

  • November 2020: GH¢820,000
  • December 2020: GH¢610,000
  • January 2021: GH¢520,000
  • Totals: GH¢1,950,000

ix) Consumption of Fixed Assets is charged on a straight-line basis with time apportionment in the year of acquisition.

  • Asset | Useful life
    • Laboratory Equipment | 20 years
    • Building | 50 years
    • Motor Vehicles | 10 years
    • Software | 5 years

Required:

Prepare in compliance with the IPSAS and relevant legislation:

a) Statement of Financial Performance for the year ended 31 December 2020.
(8 marks)

b) Statement of Financial Position as at 31 December 2020.
(8 marks)

c) Notes to the Accounts.
(4 marks)

Statement of Financial Performance for the year ended 31 December 2020

Statement of Financial Position as at 31 December 2020

b) Statement of Financial Position as at 31 December 2020.

Notes to the Financial Statements

  1. Significant accounting policies applied for the preparation of the financial statements include the following:
    • Compliance with IPSAS and PFM Act.
    • The financial statements have been prepared in conformity with the Financial Management Act, 2016(Act 921), Public Financial Management Regulation 2019 L.I 2378 and the International Public Sector Accounting Standards (IPSAS).
    • Basis of accounting.
      The financial statements have been prepared on an accrual basis where transactions and events are recognised as and when they occur.
    • Cost measurement.
      Assets are measured on a historical cost basis except for motor vehicle donated to the assembly, which was measured and recognised at fair value.
    • Consumption of fixed assets.
      Consumption of fixed assets are charges using a straight-line basis. The estimated useful life of the assets are as follows:
      Laboratory Equipment 20 years
      Building 50years
      Motor Vehicles 10 years
      Software 5years
    • Valuation of inventory.
      Inventory of office consumables was valued at lower of cost and current replacement cost in compliance with IPSAS 12: inventory

 

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