- 20 Marks
Question
a) Those charged with governance describe the role of persons entrusted with an entity’s supervision, control, and direction, thus ordinarily accountable for ensuring that the entity achieves its objectives.
Required:
Explain FOUR (4) duties and responsibilities of those charged with governance.
(10 marks)
b) On 1 January 2020, the following was extracted from the books of Gaga:
| Item | Amount (GH¢) |
|---|---|
| Motor vehicles at cost | 150,800 |
| Accumulated depreciation on vehicles | 95,700 |
During the year, the following occurred:
- On 1 February 2020, Motor Vehicle C was traded in against a motor vehicle D.
- Motor Vehicle C was purchased on 1 September 2016 for GHȼ 80,000.
- Gaga wrote a cheque of GHȼ 40,000 for Motor Vehicle D. On the date of purchase, the list price of Motor Vehicle D was GHȼ 71,400.
- Motor Vehicles are depreciated at 20% per annum on a straight-line basis from the month of purchase to the month of sale.
Required:
Prepare the following accounts for the year ended 31 December 2020.
i) Motor Vehicle at cost.
ii) Motor Vehicle accumulated depreciation.
iii) Disposal account for Motor Vehicle C.
(10 marks)
Answer
a)
Duties and Responsibilities of Those Charged with Governance:
- Compliance with Accounting Standards:
Ensuring that the financial statements adhere to the applicable accounting standards to fairly represent the activities of the entity. This compliance helps avoid misleading financial information, protecting investors from making decisions based on incorrect data. - Establishing a Code of Ethics:
Providing a framework for ethical behavior within the organization, including guidelines for employees facing ethical dilemmas. This could involve having a business code of ethics to guide employees on how they are expected to act and where to seek help in ethical conflicts. - Ensuring Accurate Financial Reporting:
Accountants responsible for preparing financial information must ensure technical accuracy, reflect the substance of transactions, and provide adequate disclosure. This duty involves resisting pressure to present figures that inflate profits or assets or understate liabilities. - Maintaining Integrity in Financial Information:
Those charged with governance must uphold the integrity of financial reporting by ensuring that the information prepared is accurate and ethical. In cases of pressure to manipulate information, accountants must decide whether to comply or speak out, potentially risking their position.
(4 points @ 2.5 marks each = 10 marks)
b)
i) Motor Vehicle at Cost Account
- Tags: Accumulated Depreciation, Depreciation, Disposal Account, Governance, Motor Vehicles
- Level: Level 1
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