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FA – Nov 2024 – L1 – Q5c – Profitability vs Liquidity Ratios

Explain the difference between profitability and liquidity ratios and provide two examples of each.

Question

Accounting ratios cover a wide array of ratios that are used by accountants and act as different indicators that measure profitability, liquidity, and potential financial distress in a company’s financials.

Required:

Differentiate between profitability ratios and liquidity ratios and give TWO examples each.

Answer

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Tags: Business Analysis, Financial health, Financial Ratios, Liquidity Ratios, Profitability Ratios
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: Nov 2024

FA – Nov 2024 – L1 – Q5b – Subscription Account for a Non-Profit Organization

Prepare the subscription account for a football club considering arrears, advance payments, and new subscriptions received.

Question

At 31 March 2023, Kahuro Football Club had membership subscriptions in arrears amounting to GH¢144,000 and had received GH¢36,000 as subscriptions in advance.

During the year ended 31 March 2024, the club received GH¢1,872,000, which included 26 memberships for the year ending 31 March 2025, charged at GH¢1,200 per annum.

At 31 March 2024, 16 members owed a subscription fee of GH¢1,200 each.

Required:

Prepare the subscription account for Kahuro Football Club for the year to 31 March 2024

Answer

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Tags: Accruals and Prepayments, Club Accounts, Membership Fees, Non-Profit Accounting, Subscription Account
Level: Level 1

Topic: Preparation of not-for-profit accounts
Series: Nov 2024

FA – Nov 2024 – L1 – Q5a – Inventory Loss and Statement of Profit or Loss

Compute inventory loss due to fire and prepare a statement of profit or loss for a sole trader.

Question

Mawulolo Enterprise is a retail business that prepares its accounts on 31 March each year. The business maintains a standard gross profit margin of 30% on sales.

The following financial information was extracted from its records as at 31 March 2024:

Item	GH¢
Inventory at 1 April 2023	254,000
Operating Expenses	378,000
Finance Cost	58,000
Purchases	1,306,000
Sales	1,900,000
Inventory in good standing at 31 March 2024	192,000

On 31 March 2024, a fire outbreak in the warehouse destroyed some of the inventory records and goods.

The tax charge for the year is estimated at GH¢30,000.

Required:

i)Calculate the amount of inventory lost.

ii) Prepare the Statement of Profit or Loss for the year ended 31 March 2024

Answer

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Tags: Cost of Sales, Financial Adjustments, Fire Loss, Gross Profit, Inventory Valuation, Net Profit
Level: Level 1

Topic: Inventory
Series: Nov 2024

FA – Nov 2024 – L1 – Q4- Preparation of Financial Statements for a Sole Trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for a sole trader from given financial data and adjustments.

Question

The following list of assets, liabilities, and equity as at 30 June 2023 was extracted from the books of Akuorkor, a sole trader:

Trial Balance as at 30 June 2023

Item	GH¢
Plant and equipment – cost	100,000
Accumulated depreciation – Plant & Equipment	36,000
Office fixtures – cost	25,000
Accumulated depreciation – Office Fixtures	2,500
Inventory	15,250
Trade receivables and prepayments	17,500
Trade payables and accrued expenses	8,800
Bank overdraft	4,425
Loan (10% interest per annum)	47,500
Capital	58,525

Summary of Receipts and Payments for the Year Ended 30 June 2024

Receipts	GH¢
Capital introduced	11,000
Cash from customers	213,750
Total Receipts	224,750

Payments	GH¢
Cash drawings (Note 5)	11,225
Loan repayments (Note 7)	10,000
Payment to suppliers	87,800
Rent	11,000
Wages	45,000
Office expenses	6,250
Total Payments	171,275

Additional Information:

Closing inventory on 30 June 2024 was GH¢13,925.
Depreciation policies:
- Plant & Equipment: 20% per annum reducing balance.
- Office Equipment: 10% per annum on cost.
- Fixtures & Fittings: Straight-line method over 4 years with a full year’s charge in the year of acquisition.
GH¢2,500 worth of fixtures & fittings was introduced into the business.
Prepayments and accrued expenses as at 30 June 2023:
- Rent paid in advance: GH¢1,250
- Accrued wages: GH¢2,150
Cash drawings included:
- Wages: GH¢3,375
- Payments to suppliers: GH¢2,100
- Advertising leaflets: GH¢1,300 (Half not yet distributed).
Bank balance per statement: GH¢53,350 after adjusting for unpresented cheques.
Loan repayments include GH¢4,750 in interest payments.
Assets and liabilities as at 30 June 2024:
- Rent paid in advance: GH¢1,350
- Accrued wages: GH¢2,625
- Amounts due to suppliers: GH¢6,100
- Amounts due from customers: GH¢11,150
Major customer went into liquidation owing GH¢8,000; only 20% recoverable.

Required:

Prepare:
i) Statement of Profit or Loss for Akuorkor for the year ended 30 June 2024.
ii) Statement of Financial Position as at 30 June 2024.

Answer

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Tags: Accruals and Prepayments, Depreciation, Inventory, Loan Interest, Sole Trader, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Preparation of financial statements of a sole trader
Series: Nov 2024

FA – Nov 2024 – L1 – Q3b – Bank Reconciliation

Prepare an adjusted cash book and reconcile it with the bank statement balance.

Question

The cash book of Lawra Ltd as at 31 December 2023 shows a balance of GH¢36,900, which does not match the bank statement balance of GH¢41,100. Investigation revealed the following discrepancies:

Cheques received of GH¢104,000, GH¢10,000, and GH¢24,900 were still in the business drawer.
Standing orders for electricity charges (GH¢2,400) and insurance (GH¢3,600) were paid by the bank but not recorded in the cash book.
The bank charged GH¢300 for a cheque book issued to Lawra Ltd.
The bank incorrectly debited GH¢9,910 to Lawra Ltd’s account, which was intended for another customer.
A credit transfer of GH¢10,000 was received but not recorded in the cash book.
A cheque for GH¢140,000 drawn by Lawra Ltd was correctly recorded in the cash book but was debited as GH¢14,000 by the bank.
The following cheques, paid in November 2023, remained unpresented:

Cheque Number Amount (GH¢)

0000111 4,000

0000117 10,000

0000120 9,310

Cheque Number	Amount (GH¢)
0000111	4,000
0000117	10,000
0000120	9,310

Required:

i) Prepare the adjusted cash book for Lawra Ltd as at 31 December 2023.

ii) Prepare a bank reconciliation statement reconciling the adjusted cash book balance to the bank statement balance.

Answer

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Tags: Adjusted Cash Book, Bank Errors, Bank Reconciliation, Credit Transfers, Standing Orders, Unpresented Cheques
Level: Level 1

Topic: Bank reconciliations
Series: Nov 2024

FA – Nov 2024 – L1 – Q3a – Correction of Errors

Identify and correct accounting errors using journal entries, suspense account, and revised profit calculations.

Question

The trial balance for Aboadze Ltd for the year ended 31 December 2022 failed to agree, showing a difference of GH¢3,600, which was credited to the suspense account. The draft account reported a net profit of GH¢435,000.

During 2023, the following errors were identified:

GH¢30,000 received from the sale of old machinery was incorrectly recorded in the sales account.
The purchase day book was overstated by GH¢48,000.
A private purchase by the director worth GH¢36,000 was included in the company’s purchases.
Bank charges of GH¢14,400 were recorded in the cash book but not posted to the bank charges account.
A sale of GH¢207,000 to Kofi was correctly entered in the sales day book but posted as GH¢270,000 in the personal account.
Discount received of GH¢13,500 was incorrectly posted to the debit side of the discount allowed account.
Wages of GH¢120,000 paid were not posted from the cash book.

Required:

i) Show the journal entries to correct the errors.

ii) Write up the suspense account to eliminate the errors.

iii) Prepare a statement to show the revised profit.

Answer

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Tags: Accounting Adjustments, Error Correction, Financial Statements, Journal Entries, Suspense account, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: Nov 2024

FA – Nov 2024 – L1 – Q2b – Allowance for Receivables and Irrecoverable Debt

Prepare the allowance for receivables and irrecoverable debt expense accounts for a financial period.

Question

At 1 August 2023, the balance on the allowance for receivables account was GH¢12,600.

At 31 August 2023, the company’s management decided that the revised balance should be 10% of the month-end accounts receivable.

Required:

Prepare the Allowance for Receivables and Irrecoverable Debt Expense accounts, showing the necessary entries for the financial period ending 31 August 2023.

Answer

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Tags: Allowance for Receivables, Doubtful Debts, Financial Adjustments, Irrecoverable Debt, Provision for Bad Debts
Level: Level 1

Topic: Bad and doubtful debt
Series: Nov 2024

FA – Nov 2024 – L1 – Q2a – Preparation of Partnership Accounts

Prepare receivables and payables control accounts and identify books of prime entry for specific transactions.

Question

At the close of business on 31 July 2023, the following balances were extracted from the books of Akrowa, a limited liability company:

GH¢
Receivables Ledger Control Account
Payables Ledger Control Account

During August 2023, the following transactions occurred:

Transaction	GH¢
1) Cash received from customers	63,600
2) Cash paid to suppliers	65,000
3) Sales on credit	96,400
4) Purchases on credit	73,000
5) Sales returns	3,800
6) Purchase returns	1,400
7) Discounts received from suppliers	800
8) Settlement discount claimed by customer unexpectedly	600
9) Irrecoverable debts written off	5,400
10) Customer and supplier accounts settled by contra	4,200

Required:

i) Prepare the Receivables Ledger Control Account and Payables Ledger Control Account for August 2023 and determine the balances at 31 August 2023.

ii) Identify the book of prime entry from which each of the transactions (1) to (10) originated.

Answer

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Tags: Contra Entries, Control Accounts, Irrecoverable Debts, Payables Ledger, Prime Entry Books, Purchase Returns, Receivables Ledger, Sales Returns
Level: Level 1

Topic: Control accounts and account reconciliations
Series: Nov 2024

ICMA – Nov 2024 – L1 – Q5b – Budgeting Models and Systems

Explain the benefits of GIFMIS to the government of Ghana.

Question

Efforts to improve Public Financial Management (PFM) Systems in Ghana led to the Ghana Integrated Financial Management Information System (GIFMIS), which is an adaptation of the Integrated Financial Management Information System (IFMIS). The rationale of GIFMIS is to establish an integrated ICT-based PFM system in Ghana at national, regional, and district levels.

Required:

State FOUR benefits of GIFMIS to the government of Ghana.

Answer

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Tags: Budgeting, Financial Reporting, Fiscal Policy, GIFMIS, Government Accounting, Public Financial Management
Level: Level 1

Topic: Budgeting Models and Systems
Series: Nov 2024

ICMA – Nov 2024 – L1 – Q5a – Cost Segregation and Estimation

Determine fixed and variable cost components using regression analysis and estimate total cost for a given production level.

Question

Ebo LTD is planning to determine its variable and fixed cost elements for its planned activity level for the next year. The company has recorded the following costs and production units in the past six months:

Month	Units (X)	Cost (Y)
January	5.8	40.3
February	7.7	47.1
March	8.2	48.7
April	6.1	40.6
May	6.5	44.5
June	7.5	47.1

Required:

i) Construct the least square regression model.
ii) Determine the variable cost per unit of output using the model.
iii) Determine the fixed cost for the month using the model.
iv) Estimate the total cost if the company plans to produce 6,200 units.

Answer

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Tags: Cost Estimation, Fixed Cost, Least Squares Method, Regression Analysis, Variable Cost
Level: Level 1

Topic: Cost Segregation and Estimation
Series: Nov 2024

BL – Nov 2020 – L1 – SB – Q1d – Company Law

List powers exercised by the Annual General Meeting (AGM) of a company.

Question

One of the two organs of a company is the general meeting of members.

Required:
State FOUR powers of the Annual General Meeting.

Answer

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Tags: Annual General Meeting, Company Law, Corporate Powers, Shareholder Rights
Level: Level 1

Topic: Company Law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q6c – Partnership Law

Assess the legality of different partnership arrangements.

Question

Comment on the legality of the following relationships operating as partnerships:

i. A partnership of 16 persons established for charitable purposes
ii. Adex cooperative society consisting of 500 members
iii. Black and Blue law firm consisting of 31 lawyers
iv. Stone Partnership firm comprising Segun aged 28, Tunde aged 17
v. A partnership of volunteers for the purpose of helping persons displaced by flood.

Answer

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Tags: Charitable Purpose, Cooperative Society, Law Firm, Legal Entity, Minor Partnership, Partnership, Volunteers
Level: Level 1

Topic: Partnership Law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q6b – Law of Contract

Define express terms, implied terms, conditions, and warranties in a contract.

Question

Contractual agreements usually contain terms that are different in nature and importance.

Required:
Define the following terms:
i. Express terms
ii. Implied terms
iii. Conditions
iv. Warranties

Answer

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Tags: Conditions, Contract Terms, Express Terms, Implied Terms, Warranties
Level: Level 1

Topic: Law of Contract
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q6a – The Nigerian Legal System

List tests to determine intent to steal during taking or conversion.

Question

Taking or conversion with intent to defraud is an element of stealing.

Required:
State FIVE tests of determining whether or not an accused has an intention to steal at the time of taking or converting a thing.

Answer

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Tags: Conversion, Criminal Intent, Criminal Law, Fraud, Theft
Level: Level 1

Topic: The Nigerian Legal System
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5d – Negotiable Instruments

Explain different cheque crossing types and define negotiable instruments.

Question

Crossing of cheques has legal implications in banking transactions, and a cheque is a type of negotiable instrument.

Required:
i. A cheque instruction to “pay Ronke the sum of N50,000.00” without crossing the face of the cheque with two parallel lines.
ii. “Pay Andrew N100,000” with two parallel lines traversing the face of the cheque.
iii. “Pay Mary N150,000” with two parallel lines with Congo Bank written in between the two parallel lines on the face of the cheque.
iv. “Pay Ngozi N200,000” and by cheque with two parallel lines and the words “account payee only” written in between the two parallel lines.
v. Define negotiable instruments.

Answer

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Tags: Banking Transactions, Cheques, Crossing, Negotiable Instruments, Payment Instructions
Level: Level 1

Topic: Negotiable Instruments
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5c – Agency Law

List the duties of an agent in an agency contract.

Question

Parties under a contract of agency have certain rights and duties.

Required:
State FIVE duties of an agent under a contract of agency.

Answer

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Tags: Agency, Agent Duties, Contractual Obligations, Principal-Agent Relationship
Level: Level 1

Topic: Agency Law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5b – Employment Law

Define an employment contract and list grounds for dismissal by an employer.

Question

Contracts of employment may be created and brought to an end in different ways.

Required:
i. Explain contract of employment.
ii. State THREE reasons for which an employer could dismiss an employee.

Answer

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Tags: Employment Contract, Grounds for Dismissal, Labor Law, Termination
Level: Level 1

Topic: Employment law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5a – Alternative Dispute Resolution

Define arbitration and describe an arbitral award.

Question

Arbitration is a type of alternative dispute resolution mechanism.

Required:
Explain arbitration and arbitral award.

Answer

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Tags: Alternative Dispute Resolution, Arbitral Award, Arbitration, Dispute Settlement
Level: Level 1

Topic: Alternative Dispute Resolution
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q4d – Law of Tort

List exceptions to the rule that all persons of full age can sue and be sued in tort.

Question

As a general rule, all persons of full age may sue and be sued in tort.

Required:
State FIVE exceptions to this general rule.

Answer

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Tags: Legal Capacity, Legal Exceptions, Suing and Being Sued, Tort Law
Level: Level 1

Topic: Law of Tort
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q4c – Sale of Goods

List situations where a seller without title can pass good title to a buyer.

Question

In sale of goods law, a buyer could acquire ownership of goods only if the seller had title to such goods.

Required:
State FIVE instances where a seller who has no title could pass a good title to the buyer in a sale of goods transaction.

Answer

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Tags: Buyer’s Rights, Good Title, Ownership Transfer, Sale of Goods
Level: Level 1

Topic: Sale of Goods
Series: NOV 2020

Level: Level 1

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FA – Nov 2024 – L1 – Q5c – Profitability vs Liquidity Ratios

Explain the difference between profitability and liquidity ratios and provide two examples of each.

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FA – Nov 2024 – L1 – Q5b – Subscription Account for a Non-Profit Organization

Prepare the subscription account for a football club considering arrears, advance payments, and new subscriptions received.

Required:

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FA – Nov 2024 – L1 – Q5a – Inventory Loss and Statement of Profit or Loss

Compute inventory loss due to fire and prepare a statement of profit or loss for a sole trader.

Required:

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FA – Nov 2024 – L1 – Q4- Preparation of Financial Statements for a Sole Trader

Prepare the Statement of Profit or Loss and Statement of Financial Position for a sole trader from given financial data and adjustments.

Trial Balance as at 30 June 2023

Summary of Receipts and Payments for the Year Ended 30 June 2024

Additional Information:

Required:

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FA – Nov 2024 – L1 – Q3b – Bank Reconciliation

Prepare an adjusted cash book and reconcile it with the bank statement balance.

Required:

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FA – Nov 2024 – L1 – Q3a – Correction of Errors

Identify and correct accounting errors using journal entries, suspense account, and revised profit calculations.

Required:

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FA – Nov 2024 – L1 – Q2b – Allowance for Receivables and Irrecoverable Debt

Prepare the allowance for receivables and irrecoverable debt expense accounts for a financial period.

Required:

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FA – Nov 2024 – L1 – Q2a – Preparation of Partnership Accounts

Prepare receivables and payables control accounts and identify books of prime entry for specific transactions.

During August 2023, the following transactions occurred:

Required:

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ICMA – Nov 2024 – L1 – Q5b – Budgeting Models and Systems

Explain the benefits of GIFMIS to the government of Ghana.

Required:

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ICMA – Nov 2024 – L1 – Q5a – Cost Segregation and Estimation

Determine fixed and variable cost components using regression analysis and estimate total cost for a given production level.

Required:

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BL – Nov 2020 – L1 – SB – Q1d – Company Law

List powers exercised by the Annual General Meeting (AGM) of a company.

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BL – Nov 2020 – L1 – SB – Q6c – Partnership Law

Assess the legality of different partnership arrangements.

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BL – Nov 2020 – L1 – SB – Q6b – Law of Contract

Define express terms, implied terms, conditions, and warranties in a contract.

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BL – Nov 2020 – L1 – SB – Q6a – The Nigerian Legal System

List tests to determine intent to steal during taking or conversion.

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BL – Nov 2020 – L1 – SB – Q5d – Negotiable Instruments

Explain different cheque crossing types and define negotiable instruments.

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BL – Nov 2020 – L1 – SB – Q5c – Agency Law

List the duties of an agent in an agency contract.

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BL – Nov 2020 – L1 – SB – Q5b – Employment Law

Define an employment contract and list grounds for dismissal by an employer.

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BL – Nov 2020 – L1 – SB – Q5a – Alternative Dispute Resolution

Define arbitration and describe an arbitral award.

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BL – Nov 2020 – L1 – SB – Q4d – Law of Tort

List exceptions to the rule that all persons of full age can sue and be sued in tort.

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BL – Nov 2020 – L1 – SB – Q4c – Sale of Goods

List situations where a seller without title can pass good title to a buyer.

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