- 20 Marks
FA – L1 – Q95 – Preparation of accounts from incomplete records
Question
Kofi Mensah retired from his employment abroad and returned to this country, where he purchased a small kiosk.
He took over the business on 1 July 20X8, acquiring the existing inventory at a valuation of GH¢1,142,000. The rest of the purchase price was apportioned as to GH¢1,500,000 for fixtures and fittings and the balance for goodwill.
The following day he acquired a second-hand computer and accounts package at a price of GH¢80,000. Unfortunately, Kofi Mensah made an error when printing his year-end accounts causing him to lose all data except for printed a summary listing of payments from the till. Other than this, the only records available were his bank statements and a number of vouchers. Surplus cash was banked during the year.
A summary of his bank account for the year ended 30 June 20X9 shows the following.
| Receipts | GH¢000 | Payments | GH¢000 |
|---|---|---|---|
| Cash introduced | 5,000 | Purchase of business | 3,192 |
| Bankings from shop | 16,427 | Purchase of accounts computer | 80 |
| Loan from mother (long-term) (interest at 5% pa) | 1,000 | Rent (15 months to 30 September 20X9) | 500 |
| Rates (9 months to 31 March 20X9) | 84 | ||
| Electricity | 92 | ||
| Purchases for resale | 14,700 | ||
| Private cheques | 1,122 | ||
| Balance 30 June 20X9 | 2,657 | ||
| 22,427 | 22,427 |
The computer print-out was as follows.
| GH¢000 | |
|---|---|
| Cash purchases for resale | 1,606 |
| Staff wages | 742 |
| Sundry shop expenses | 156 |
| Cash drawings | 520 |
On 30 June 20X9 inventory, measured at cost, amounted to GH¢1,542,000, amounts due from customers GH¢74,000, and cash in hand amounted to GH¢54,000. Depreciation is to be recognised on fixtures and fittings at a rate of 10%.
Accounts outstanding on 30 June 20X9 were purchases of GH¢470,000 and rates of GH¢120,000 for the year ended 31 March 20Y0.
Required:
Prepare Kofi Mensah’s statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position at that date.
Answer
Statement of profit or loss for the year ended 30 June 20X9
| GH¢000 | GH¢000 | |
|---|---|---|
| Revenue (74 + 16,427 + 3,024 + 54) | 19,579 | |
| Opening inventory | 1,142 | |
| Purchases (14,700 + 1,606 + 470) | 16,776 | |
| 17,918 | ||
| Closing inventory | (1,542) | |
| (16,376) | ||
| Gross profit | 3,203 | |
| Less Expenses | ||
| Rent (500 – 100) | 400 | |
| Rates (84 + 30) | 114 | |
| Electricity | 92 | |
| Wages | 742 | |
| Sundry expenses | 156 | |
| Depreciation (10% × GH¢1,580,000) | 158 | |
| Loan interest (5% × GH¢1,000,000) | 50 | |
| (1,712) | ||
| Net profit | 1,491 |
Statement of financial position at 30 June 20X9
| GH¢000 | GH¢000 | |
|---|---|---|
| Non-current assets | ||
| Intangible – Goodwill (3,192 – 1,500 – 1,142) | 550 | |
| Tangible – Fixtures and fittings (1,500 + 80 – 158) | 1,422 | |
| 1,972 | ||
| Current assets | ||
| Inventory | 1,542 | |
| Receivables | 74 | |
| Prepaid rent | 100 | |
| Bank | 2,657 | |
| Cash in hand | 54 | |
| 4,427 | ||
| 6,399 | ||
| Capital account | ||
| Capital introduced | 5,000 | |
| Profit for the year | 1,491 | |
| 6,491 | ||
| Drawings (1,122 + 520) | (1,642) | |
| 4,849 | ||
| Non-current liability | ||
| Loan | 1,000 | |
| Current liabilities | ||
| Trade payables | 470 | |
| Accrued expenses (30 + 50) | 80 | |
| 550 | ||
| Total capital and liabilities | 6,399 |
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