Topic: Preparation of financial statements of a sole trader

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FA – Mar 2024 – L1 – Q4 – Non-current assets and depreciation | Preparation of financial statements of a sole trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for Kontiba Enterprise, including necessary adjustments.

Question

Kontiba Enterprise

Statement of Profit or Loss for the year ended 30 September 2023

The following information is also available:
1) Only 10 months’ salaries are shown in the Trial Balance. An equal amount is paid for
salaries for each month of the year.
2) As at 30 September 2023, GH¢2,560 had been prepaid for insurance, whilst GH¢328 was
owing for general expenses.
3) GH¢3,680 had been charged to general expenses for the owner’s private holiday.
4) As at 30 September 2023, inventory was valued at GH¢18,000.
5) A customer, owing GH¢4,032 has been declared bankrupt. This amount is to be written
off in full.
6) An allowance for receivables is to be maintained at 3% of the receivables balance.
7) As at 30 September 2023, the business’s land was valued at GH¢80,000. Land is not
depreciated.
8) Depreciation is to be provided as follows:
Buildings: 4% per annum using the straight line method.
Equipment: 25% per annum using the straight line method.
Page 7 of 20

Motor vehicles: 40% per annum using the reducing balance method.
9) There were no additions or disposals of non-current assets during the financial year.

Required:
i) Prepare the statement of profit or loss for the year ended 30 September 2023. (10 marks)
ii) Prepare the statement of financial position as at 30 September 2023. (10 marks)

Answer

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Tags: Adjustments, Balance Sheet, Depreciation, Financial Position, Income Statement, Net Profit
Level: Level 1

Topic: Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: MAR 2024

FA – Mar 2024 – L1 – Q4 – Non-current assets and depreciation | Preparation of financial statements of a sole trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for Kontiba Enterprise, including necessary adjustments.

Question

Kontiba Enterprise

Statement of Profit or Loss for the year ended 30 September 2023

Motor vehicles: 40% per annum using the reducing balance method.
9) There were no additions or disposals of non-current assets during the financial year.

Required:
i) Prepare the statement of profit or loss for the year ended 30 September 2023. (10 marks)
ii) Prepare the statement of financial position as at 30 September 2023. (10 marks)

Answer

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Tags: Adjustments, Balance Sheet, Depreciation, Financial Position, Income Statement, Net Profit
Level: Level 1

Topic: Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: MAR 2024

FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, doubtful debts, and prepayments.

Question

The following trial balance was extracted from the books of Nsaa Zolko, a sole trader, on 31 December 2020:

Account	Debit (GHȼ)	Credit (GHȼ)
Land	251,200
Equipment	202,220
Accumulated depreciation on equipment		62,830
Inventory	49,620
Receivable and Payable	124,200	104,350
Value Added Tax (refund due)	10,320
Deposit on rented premises (security deposit)	17,900
Bank and Cash balances	15,640
Allowance for doubtful debt		11,250
Tax Liability		7,420
Business Rent	30,000
Sales		804,500
Purchases	390,200
Returns	8,300	7,500
Discount	4,300	6,240
Distribution and Advertising	8,900
Power	4,200
Communication	1,540
Insurance	22,500
Wages and Salaries	164,380
Employers Social Security contribution	16,560
4% Long term loan		182,500
Long term loan interest	3,520
Bad debt	2,240
Drawings	10,580
Retained Earnings		44,820
Capital		103,710
Suspense		3,200
Total	1,338,320	1,338,320

Additional Information: i) The inventory count as at 31 December 2020 showed closing inventory value at GHȼ42,390. ii) Nsaa Zolko has agreed an annual rent of GHȼ40,000 with his landlord. iii) Included in insurance above is an amount of GHȼ18,000 paid to insure the equipment. The policy year ends 28 February 2021. iv) Nsaa Zolko has specific concerns over GHȼ5,120 of receivables balance and wishes to set up a specific provision with respect to these balances. The general provision on the remaining receivable balance should be at 5%. v) Depreciation is to be charged as follows:

Land: No Provision
Equipment: 15% reducing balance method (Depreciation should be calculated to the nearest whole number). vi) The suspense account balance above relates to sales of GHȼ1,600 which was recorded as purchases in error. The receivables and payables balances are correct.

Required:
a) Prepare a Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)

b) Prepare a Statement of Financial Position as at 31 December 2020.
(10 marks)

Answer

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Tags: Accruals, Depreciation, Doubtful Debts, Prepayments, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, doubtful debts, and prepayments.

Question

The following trial balance was extracted from the books of Nsaa Zolko, a sole trader, on 31 December 2020:

Account	Debit (GHȼ)	Credit (GHȼ)
Land	251,200
Equipment	202,220
Accumulated depreciation on equipment		62,830
Inventory	49,620
Receivable and Payable	124,200	104,350
Value Added Tax (refund due)	10,320
Deposit on rented premises (security deposit)	17,900
Bank and Cash balances	15,640
Allowance for doubtful debt		11,250
Tax Liability		7,420
Business Rent	30,000
Sales		804,500
Purchases	390,200
Returns	8,300	7,500
Discount	4,300	6,240
Distribution and Advertising	8,900
Power	4,200
Communication	1,540
Insurance	22,500
Wages and Salaries	164,380
Employers Social Security contribution	16,560
4% Long term loan		182,500
Long term loan interest	3,520
Bad debt	2,240
Drawings	10,580
Retained Earnings		44,820
Capital		103,710
Suspense		3,200
Total	1,338,320	1,338,320

Land: No Provision
Equipment: 15% reducing balance method (Depreciation should be calculated to the nearest whole number). vi) The suspense account balance above relates to sales of GHȼ1,600 which was recorded as purchases in error. The receivables and payables balances are correct.

Required:
a) Prepare a Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)

b) Prepare a Statement of Financial Position as at 31 December 2020.
(10 marks)

Answer

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Tags: Accruals, Depreciation, Doubtful Debts, Prepayments, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Question

Additional Information:
i) The inventory count on 30 June 2019 showed closing inventory valued at GHȼ34,380.
ii) A review of receivables as at 30 June 2019 showed that a further GHȼ2,300 was to be written off as an irrecoverable debt. Therefore, it was decided that the closing allowance for receivables was 10% of the outstanding receivables balance as at 30 June 2019.
iii) On 30 June 2019, Sintim received a cheque of GHȼ1,680 in relation to an irrecoverable debt previously written off.
iv) A supplier of Sintim has charged an interest of GHȼ1,490 on a payable balance that has been outstanding for over 200 days.
v) GHȼ16,000 of insurance in the trial balance above relates to 1 January 2019 to 31 December 2019.
vi) Allowance to be made for depreciation is as follows:

Land: Not depreciated.
Delivery van: 10% straight line basis.
vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

Answer

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Tags: Allowance for Receivables, Depreciation, Inventory, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Bad and doubtful debt, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2021

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Question

Land: Not depreciated.
Delivery van: 10% straight line basis.
vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

Answer

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Tags: Allowance for Receivables, Depreciation, Inventory, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Bad and doubtful debt, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2021

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

Question

Kofi Badu, a sole trader, extracted the following Trial Balance from the business books as of 30 April 2019:

The following information is also relevant:
i) The closing inventory as at 30 April 2019 was valued at GH¢8,010.
ii) As at 30 April 2019, accrued rent income for the year amounted to GH¢420; heat and light accrued was GH¢260; whilst salaries of GH¢720 was paid in advance.
iii) During the year, Kofi Badu had withdrawn goods costing GH¢720 for his personal use. This had not been recorded in the accounts.
iv) New equipment costing GH¢2,650 was purchased during the year but had been mistakenly included in purchases. This is yet to be corrected.
v) A cheque for GH¢440 received from a customer in full settlement of a debt of GH¢450 has not yet been entered in the accounts.
vi) Allowance for doubtful debt is to be maintained at 2% of receivables.
vii) Depreciation is to be provided for as follows:

Equipment- 20% per annum using the straight-line method. A full year’s depreciation is provided on all equipment held at 30 April 2019, regardless of the date of purchase.
Motor vehicles- 40% per annum using the reducing balance method.

Required:
a) Prepare a statement of profit or loss for Kofi Badu for the year ended 30 April 2019.
(12 marks)

b) Prepare a statement of financial position for Kofi Badu as at 30 April 2019.

Answer

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Tags: Accruals, Allowance for Doubtful Debts, Depreciation, Drawings, Income Statement, Prepayments, Statement of Financial Position
Level: Level 1

Topic: Accruals and prepayments, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2020

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

Question

Kofi Badu, a sole trader, extracted the following Trial Balance from the business books as of 30 April 2019:

Equipment- 20% per annum using the straight-line method. A full year’s depreciation is provided on all equipment held at 30 April 2019, regardless of the date of purchase.
Motor vehicles- 40% per annum using the reducing balance method.

Required:
a) Prepare a statement of profit or loss for Kofi Badu for the year ended 30 April 2019.
(12 marks)

b) Prepare a statement of financial position for Kofi Badu as at 30 April 2019.

Answer

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Tags: Accruals, Allowance for Doubtful Debts, Depreciation, Drawings, Income Statement, Prepayments, Statement of Financial Position
Level: Level 1

Topic: Accruals and prepayments, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2020

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.

Question

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)

Answer

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

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.

Question

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)

Answer

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

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

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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 – 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

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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 – 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 – 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 2017 – L1 – Q6 – Preparation of financial statements of a sole trader

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for Sun City Social Club for the year ended December 31, 2015.

Question

The following details are available from the books of Sun City Social Club.

Summary of Bank Account for 31 December 2015

Additional Information:

i) Equipment is to be depreciated at 20%.
ii) One-tenth of life membership fees is to be credited to the Income and Expenditure Account each year.
iii) The bar keeper who had handled bar sales all for cash had disappeared, taking with him some monies. It was not known how much money he had stolen, but all bar sales were sold at a profit of 33 1/3 % on cost price.
iv) The cash stolen should be credited to the Bar Trading Account and debited to the Income and Expenditure Account.

Required:

a) Prepare a Bar Trading Account for the year ended 2015. (7 marks)
b) Prepare an Income and Expenditure Account for the year ended 31 December 2015. (7 marks)
c) Prepare a Statement of Financial Position as at 31 December 2015. (6 marks)

Answer

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Tags: Bar Trading, Financial Reporting, Income and Expenditure, Non-Profit Organizations
Level: Level 1

Topic: Preparation of financial statements of a sole trader
Series: NOV 2017

FA – Nov 2017 – L1 – Q6 – Preparation of financial statements of a sole trader

Prepare the Bar Trading Account, Income and Expenditure Account, and Statement of Financial Position for Sun City Social Club for the year ended December 31, 2015.

Question

The following details are available from the books of Sun City Social Club.

Summary of Bank Account for 31 December 2015

Additional Information:

Required:

Answer

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Tags: Bar Trading, Financial Reporting, Income and Expenditure, Non-Profit Organizations
Level: Level 1

Topic: Preparation of financial statements of a sole trader
Series: NOV 2017

FA – Nov 2017 – L1 – Q1 – Preparation of financial statements of a sole trader

Explain the objectives of financial statements, accrual and going concern concepts, duties of directors, and preparation of payables ledger control account.

Question

a) A businessman who wants to take advantage of the One District One Factory initiative has approached you to assist him with the following accounting issues raised from (i) to (iii):

i) State TWO objectives of financial statements. (2 marks)

ii) Explain the accrual and going concern concepts. (4 marks)

iii) State FOUR duties of directors of a company. (4 marks)

b) From the following information, draw up a Payables ledger control account for the month of October 2017.

Items	GH¢
Payable to Suppliers at 01/10/2017	2,127,721
Receivable from Suppliers at 01/10/2017	127,721
Credit Purchases excluding VAT	4,000,100
VAT on Purchases	123,714
Returns Outwards including VAT	25,100
Cash Purchases excluding VAT	2,150,150
Cheques paid to Suppliers	5,222,100
Discounts received from Suppliers	22,500
Contra entries to Receivables ledger	950

A reconciliation of the books of accounts with some of the suppliers revealed that some of the
products were overpriced leading to an over invoiced amount of GH¢52,330. Amount
receivable from suppliers at 31/10/2017 amounted to GH¢33,100

Answer

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Tags: Accruals, Control Accounts, Director Duties, Financial Statements, Going Concern
Level: Level 1

FA – Nov 2017 – L1 – Q1 – Preparation of financial statements of a sole trader

Explain the objectives of financial statements, accrual and going concern concepts, duties of directors, and preparation of payables ledger control account.

Question

a) A businessman who wants to take advantage of the One District One Factory initiative has approached you to assist him with the following accounting issues raised from (i) to (iii):

i) State TWO objectives of financial statements. (2 marks)

ii) Explain the accrual and going concern concepts. (4 marks)

iii) State FOUR duties of directors of a company. (4 marks)

b) From the following information, draw up a Payables ledger control account for the month of October 2017.

Items	GH¢
Payable to Suppliers at 01/10/2017	2,127,721
Receivable from Suppliers at 01/10/2017	127,721
Credit Purchases excluding VAT	4,000,100
VAT on Purchases	123,714
Returns Outwards including VAT	25,100
Cash Purchases excluding VAT	2,150,150
Cheques paid to Suppliers	5,222,100
Discounts received from Suppliers	22,500
Contra entries to Receivables ledger	950

Answer

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Tags: Accruals, Control Accounts, Director Duties, Financial Statements, Going Concern
Level: Level 1

FA – May 2017 – L1 – Q3 – Bank reconciliations | Preparation of financial statements of a sole trader

Preparation of adjusted cash book, bank reconciliation, and corrected net profit statement for Unity Trading Enterprise.

Question

The Income Statement of Unity Trading Enterprise (UTE) for the year ended 31 December 2016 as prepared by an Accounts Assistant indicated a net profit of GH¢49,360,000. However, the cash book on 31 December 2016 showed a balance at bank to be GH¢6,440,000. Your attention is however drawn to the following:

i) Cheques from customers totaling GH¢4,980,000 which were recorded in the cash book on 20 December 2016 were actually not credited by the bank until 2 January 2017.

ii) Cheques issued on 13 December 2016 totaling GH¢7,420,000 in favour of suppliers were actually not paid by the bank until after the end of the year (that is after 31 December 2016).

iii) On 22 November 2016, the bank paid an amount of GH¢3,600,000 with respect to a standing order from UTE for rent of business premises for the three months to 31 January 2017 but unfortunately, no entry for this payment had been made in the cash book. Additionally, no provision of this outstanding rent had been made in the income statement for the period.

iv) On 31 December 2016, a customer known as Mr. Abuusu had paid GH¢2,340,000 into UTE bank account through a standing order to his bankers in full settlement of a debit balance of GH¢2,400,000 in UTE sale ledger, but no entry had been made in the books.

v) On 30 December 2016, a cheque for GH¢480,000 was received from a customer in settlement of sales invoice for the same amount. The cheques were lodged into UTE bank account. Both sale of goods and the cheque were entered in UTE’s books. However, on 31 December 2016, the customer returned the goods and also instructed her bankers not to pay the cheque (This instruction was carried out the same day) but no entries in respect of these latter developments have been made in UTE’s books. The cost of these goods amounting to GH¢320,000 were not actually included in the closing inventories.

vi) A cheque for GH¢840,000 from an insurance company in settlement of claim for fire damage to inventory had been paid into the bank and credited by the bank on 21 December 2016, but an estimated amount of GH¢800,000 had been entered in UTE’s income statement.

Required:
a) Prepare a statement on 31 December 2016, indicating clearly the cash book balance. (5 marks)

b) Prepare the bank reconciliation statement for UTE. (5 marks)

c) Prepare a statement of corrected net profit of UTE on 31 December 2016. (5 marks)

d) Explain TWO reasons for carrying out bank reconciliation. (2 marks)

e) Explain why the bank statement is usually taken as being more accurate than the details that appear in the company’s own records. (2 marks)

f) Indicate how the bank balance will be reported in UTE’s final accounts. (1 mark)

Answer

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Tags: Bank Reconciliation, Cash Book, Financial Statements
Level: Level 1

Topic: Bank reconciliations, Preparation of financial statements of a sole trader
Series: MAY 2017