PROFESSIONAL PROGRAM – Page 86

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

Question

The trial balance of Western Medical Supplies showed a short credit of ZM₵6,264 as at June 30, 20X9. A suspense account was opened for the difference and the profit for the year was then calculated at ZM₵956,180.
The following errors and adjustments were discovered subsequently:
(i) An invoice of ZM₵3,700 was debited to purchases but the goods were received after year-end and were not included in the closing inventory.
(ii) Store equipment costing ZM₵8,100 and having a book value of ZM₵3,600 was sold for ZM₵2,500. Cash was debited and store equipment was credited. No other entries were made.
(iii) A cheque of ZM₵1,850 received from a customer was dishonoured on June 25, 20X9 but no entry was made in the books. Cash there against was received after year-end.
(iv) Purchase of office equipment costing ZM₵15,200 was entered in the purchases account. Depreciation on office equipment is provided at the rate of 10%.
(v) A purchase invoice of ZM₵197 was debited to the supplier account as ZM₵917.
(vi) Purchase returns book was under-casted by ZM₵650.
(vii) The opening balance of furniture account was brought forward as ZM₵18,300 instead of ZM₵13,800. Depreciation on furniture is provided at the rate of 10%.
(viii) A balance of ZM₵730 in the sales ledger is to be offset against a balance of ZM₵880 in the purchase ledger.

Required:
(a) Prepare journal entries to adjust the above items.

(b) Recalculate the net profit for the year.

Answer

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Tags: Depreciation, Error Correction, Inventory, Net profit, Non-current Assets, Payables, Profit Adjustment, Receivables, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q61 – Control accounts and account reconciliations

Reconcile accounts receivable ledger control account with ledger balances for Nelson Ltd. Clear suspense account for Nelson Ltd by posting corrections for trial balance errors.

Question

The trial balance of Nelson Ltd includes the following items:

	GH₵
Accounts receivable ledger control account	115,440
Accounts payable ledger control account	80,901
Suspense account (debit balance)	3,310

The following information is available:
(1) The total of debit balances in the accounts receivable ledger is GH₵116,374 and the total of credit balances is GH₵1,234.
(3) The accounts receivable ledger includes a debit balance of GH₵700 for Entity D, and the accounts payable ledger includes a credit balance of GH₵800 relating to Entity D. Only the net amount will eventually be paid.
(4) Included in the credit balances in the accounts receivable ledger is a balance of GH₵600 in the name of P. Smith. This arose because a sales invoice for GH₵600 had earlier been posted in error from the sales day book to the debit of the account of M. Smith in the accounts payable ledger.
(5) An allowance of GH₵300 granted to a customer for some damaged goods had been omitted from the appropriate account in the accounts receivable ledger. This allowance had been included in the accounts receivable control account.
(7) A cash receipt from a credit customer for GH₵345 had been entered in the cash book as GH₵245.

Required:
(a) Prepare a reconciliation of the accounts receivable ledger control account and the accounts receivable ledger balances.

(b) Open a suspense account and post the entries required to clear this account.

Answer

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Tags: Contra entries, Control Accounts, Ledger errors, Receivables ledger, Reconciliation
Level: Level 1

Topic: Control accounts and account reconciliations

FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

Question

The accountant of Apex Chemical Solutions has prepared a trial balance, but has found that the total of debit balances is GH₵864,600 and the total of credit balances is GH₵862,150.

On investigation, he discovers the following errors in the book-keeping:

(1) Total purchases in the period were recorded at GH₵100 below their correct value, although the total value of trade payables was correctly recorded.

(2) Total telephone expenses were recorded at GH₵1,000 above their correct amount, although the total value of the amounts payable was correctly recorded.

(3) Purchase returns of GH₵550 were recorded as a debit entry in the sales returns account, but the correct entry had been made in the trade payables control account.

(4) Equipment costing GH₵2,000 had been recorded as a debit entry in the repairs and maintenance account.

(5) Rental expenses of GH₵5,490 were entered incorrectly as GH₵5,940 in the expense account but were entered correctly in bank account in the ledger.

(6) Bank charges of GH₵200 have been omitted entirely from the ledger.

Required

Prepare journal entries for the correction of the errors.

Open a suspense account. Record the appropriate corrections in the suspense account, so that the balance on this account is eliminated.

Answer

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Tags: Correction of Errors, Double Entry Bookkeeping, Journal entries, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q59 – Bank reconciliations

Prepare a bank reconciliation statement for Kofi & Associates as of 31 December 20X9, addressing discrepancies between cash book and bank statement.

Question

Kofi & Associates
Mr. Kofi is a sole trader and carries on business under the name “Kofi & Associates”. The balance on his cash book at 31 December 20X9 did not agree with the balance as per the bank statement which shows a credit balance of GH¢367,500.
An examination of the cash book and bank statement disclosed the following:
(i) A deposit of GH¢49,200 made on 29 December 20X9 had been credited by the bank on 1 January 20Y0.
(ii) Bank charges of GH¢1,700 have not been entered in the cash book.
(iii) A debit of GH¢4,200 appeared on the bank statement for an unpaid cheque which has been returned marked “out of date”. The cheque was re-dated by his customer and paid into the bank again on 3 January 20Y0.
(iv) A standing order for payment of an annual subscription amounting to GH¢1,000 has not been entered in the cash book.
(v) On 26 December 20X9, Mr. Kofi had given the cashier a cheque for GH¢10,000 tos to pay into his personal account at the bank. The cashier deposited it into the business account by mistake.
(vi) On 27 December 20X9, a customer had made an online transfer of GH¢49,900 in payment against goods supplied. The advice was received and recorded in the cash book on 2 January 20Y0.
(vii) On 30 September 20X9, Mr. Kofi entered into a hire purchase agreement and issued a standing order to the bank to pay a sum of GH¢2,600 on the 10th day of each month, commencing from October 20X9. No entries have been made in the cash book for these payments.
(viii) A cheque for GH¢36,400 received from Mr. Kwame had been entered twice in the cash book.
(ix) Cheques issued amounting to GH¢467,200 had not been presented to the bank for payment until after 31 December 20X9.
(x) Dividend collected by the bank amounting to GH¢12,000 has not been recorded in the cash book.
(xi) A cheque of GH¢243,000 received from Mr. Asante was deposited in the bank but entered in the cash book as GH¢234,000.

Required
(a) Prepare a bank reconciliation statement as on 31 December 20X9.

(b) Prepare necessary journal entries in the books of Kofi & Associates and determine the correct cash balance that should be reported in the statement of financial position. Also specify the situations in which no adjustment/entry is required.

Answer

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Tags: Bank reconciliation, Cash book, Financial Statements, Journal entries, Overdraft
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q58 – Bank reconciliations

Prepare a bank reconciliation statement for Accra & Sons as at 31 Dec 20X9, identifying the cash at bank balance.

Question

While reconciling the bank statement with the cash/bank book of Accra & Sons for the year ended December 31, 20X9, you noted the following:

(i) Balance as per bank statement at December 31, 20X9, overdrawn: GH¢806,436
(ii) Cheques drawn but not presented till December 31, 20X9: GH¢377,784
(iii) Mark-up on overdraft charged by the bank on January 2, 20Y0 was recorded in the cash/bank book on December 31, 20X9: GH¢118,686
(iv) Collections made on December 30 and 31, 20X9 were not lodged with the bank till January 3, 20Y0: GH¢250,600
(v) A bill which was due on December 29, 20X9 was sent to the bank for collection on December 28, 20X9, and entered in the cash/bank book. However, the proceeds were credited by the bank on January 1, 20Y0: GH¢196,500
(vi) Subscription for a magazine was paid by the bank, as per the auto-debit instructions, on December 1, 20X9. This transaction has not been recorded in the cash/bank book so far: GH¢3,144
(vii) A time-barred cheque was replaced with a new cheque on December 30, 20X9 and entered in the cash/bank book without the previous cheque being cancelled / reversed. Both the cheques are included in (ii) above: GH¢5,000
(viii) A cheque received on December 21 was erroneously recorded on the credit side of the cash/bank book: GH¢7,500
(ix) A cheque issued to a supplier was time-barred as of January 2, 20Y0: GH¢13,200
(x) A cheque issued by the company has been entered in the credit column of the bank statement: GH¢13,200

Required:
Prepare a bank reconciliation statement as at December 31, 20X9 and identify the amount to be carried to the statement of financial position as “cash at bank”.

Answer

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Tags: Bank reconciliation, Cash book, Cheques, Errors, Financial Statements, Overdraft
Level: Level 1

Topic: Bank reconciliations

MA – L2 – Q41 – Cost-volume-profit (CVP) analysis

Calculate breakeven point in units and sales value for Nartey Enterprises based on budgeted profit statement.

Question

Nartey Enterprises, a manufacturing organisation, has a budgeted profit statement for its next financial year, when it is expected to be operating at 75% level of capacity. The budget is given below:

	GH₵	GH₵
Sales 9,000 units at GH₵32		288,000
Less:
Direct materials	54,000
Direct wages	72,000
Production overhead:
fixed	36,000
variable	18,000
Administration and distribution costs:
fixed	42,000
variable	27,000	249,000
Profit		39,000

Required:
(a) Calculate the breakeven point in units and in sales value.

(b) Calculate the contribution/sales ratio. (c) Calculate the number of units to be sold to earn a profit of GH₵52,000.

(d) Calculate the profit that would be expected if the company operated at full capacity.

Answer

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Tags: Breakeven analysis, contribution margin, fixed costs, Sales value, variable costs
Level: Level 2

Topic: Cost-volume-profit (CVP) analysis

FA – L1 – Q57 – Bank reconciliations

Prepare a bank reconciliation for Newman & Co as at 31 August 20X9, correcting errors in the cash book and bank statement.

Question

Following information has been collected from the books of Newman & Co, as at August 31, 20X9:
(a) Balance as per bank book
(b) Cash balance on bank statement
(c) Cheques outstanding on August 31 were as follows:

Cheque No.	GH¢
670	13,353
679	14,152
690	17,108
996	3,535
997	14,430
999	23,629

(d) The company made the following payments into the bank in the last week in August but these had not yet appeared on the bank statement.

GH¢
83,250
144,641

(e) The following matters have been discovered.
(i) Receipt of GH¢15,000 was erroneously recorded on the credit side of the bank book.
(ii) A payment of GH¢12,480 was erroneously recorded on the debit side of the bank book.
(iii) The credit side of the bank book has been overcasted by GH¢4,800.
(iv) The bank statement showed an amount collected by the bank but not shown in the cash book in the amount of GH¢87,188.

Required
Prepare the bank reconciliation as at 31 August.

Answer

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Tags: Adjustments, Bank reconciliation, Bank statement, Cash book, Cheques, Errors, Financial accounting, Overdraft
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q56 – Bank reconciliations

Reconcile cash book with bank statement for Sandwell Ltd, adjust ledger for unrecorded items.

Question

A company, Sandwell Ltd, receives a bank statement. The balance on its cash book (= bank account in the main ledger) is a debit balance of GH₵1,600,000. In reconciling the cash book balance with the bank statement balance, the accountant discovers that the bank statement does not show cheques received from customers for GH₵8,200,000 and banked, or cheque payments to suppliers for GH₵4,700,000. The bank statement also shows bank charges of GH₵150,000, a direct debit payment of GH₵400,000, and a dishonoured cheque for GH₵300,000. None of these three items have yet been recorded in the ledger.

Required:

What is the balance on the bank statement?
What entries should be made in the company’s ledger accounts when the cash book and the bank statement balances have been reconciled?

Answer

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Tags: Adjustments, Bank charges, Bank reconciliation, Bank statement, Cash book, Direct Debit, Dishonoured Cheque, Errors, Financial accounting, Ledger Entries
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q55 – Bank reconciliations

Calculate the cash book balance given bank statement details, unrecorded transactions, and ledger discrepancies.

Question

A company, Connelly Enterprises, receives a bank statement showing a credit balance of GH₵7,400,000. On investigation, its accountant discovers that the bank statement does not show cheques received from customers for GH₵16,200,000 and banked, or cheque payments to suppliers for GH₵18,500,000. The bank statement also shows bank charges of GH₵250,000, which have not yet been recorded in the ledger.

Required
What is the current balance on the cash book? (This is the balance on the bank account in the main ledger.)

Answer

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Tags: Bank charges, Bank reconciliation, Bank statement, Cash book, Ledger adjustments, Unpresented cheques
Level: Level 1

Topic: Bank reconciliations

MA – L2 – Q40 – Cost-volume-profit (CVP) analysis

Compute break-even point in GH¢ and units for AquaPure Limited at GH¢16 per bottle using budgeted cost data.

Question

AquaPure Limited is planning to produce mineral water. It is contemplating to purchase a plant with a capacity of 100,000 bottles a month. For the first year of operation the company expects to sell between 60,000 to 80,000 bottles. The budgeted costs at each of the two levels are as follows:

Particulars	60,000 bottles	80,000 bottles
Material	360,000	480,000
Labour	200,000	260,000
Factory overheads	120,000	150,000
Administration expenses	100,000	110,000

The production would be sold through retailers who will receive a commission of 8% of sale price.

Required:
(a) Compute the break-even point in GH¢ and units if the company decides to fix the sale price at GH¢16 per bottle.

(b) Compute the break-even point in units if the company offers a discount of 10% on purchase of 20 bottles or more, assuming that 20% of the sales will be to buyers who will avail the discount.

Answer

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Tags: break-even analysis, contribution margin, CVP analysis, fixed costs, High/low analysis, variable costs
Level: Level 2

Topic: Cost-volume-profit (CVP) analysis

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FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

FA – L1 – Q61 – Control accounts and account reconciliations

Reconcile accounts receivable ledger control account with ledger balances for Nelson Ltd. Clear suspense account for Nelson Ltd by posting corrections for trial balance errors.

FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

FA – L1 – Q59 – Bank reconciliations

Prepare a bank reconciliation statement for Kofi & Associates as of 31 December 20X9, addressing discrepancies between cash book and bank statement.

FA – L1 – Q58 – Bank reconciliations

Prepare a bank reconciliation statement for Accra & Sons as at 31 Dec 20X9, identifying the cash at bank balance.

MA – L2 – Q41 – Cost-volume-profit (CVP) analysis

Calculate breakeven point in units and sales value for Nartey Enterprises based on budgeted profit statement.

FA – L1 – Q57 – Bank reconciliations

Prepare a bank reconciliation for Newman & Co as at 31 August 20X9, correcting errors in the cash book and bank statement.

FA – L1 – Q56 – Bank reconciliations

Reconcile cash book with bank statement for Sandwell Ltd, adjust ledger for unrecorded items.

FA – L1 – Q55 – Bank reconciliations

Calculate the cash book balance given bank statement details, unrecorded transactions, and ledger discrepancies.

MA – L2 – Q40 – Cost-volume-profit (CVP) analysis

Compute break-even point in GH¢ and units for AquaPure Limited at GH¢16 per bottle using budgeted cost data.

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Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

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Reconcile accounts receivable ledger control account with ledger balances for Nelson Ltd. Clear suspense account for Nelson Ltd by posting corrections for trial balance errors.

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Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

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Prepare a bank reconciliation statement for Kofi & Associates as of 31 December 20X9, addressing discrepancies between cash book and bank statement.

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Prepare a bank reconciliation statement for Accra & Sons as at 31 Dec 20X9, identifying the cash at bank balance.

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Calculate breakeven point in units and sales value for Nartey Enterprises based on budgeted profit statement.

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Prepare a bank reconciliation for Newman & Co as at 31 August 20X9, correcting errors in the cash book and bank statement.

You're reporting an error for "FA – L1 – Q57 – Bank reconciliations"

Reconcile cash book with bank statement for Sandwell Ltd, adjust ledger for unrecorded items.

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Calculate the cash book balance given bank statement details, unrecorded transactions, and ledger discrepancies.

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Compute break-even point in GH¢ and units for AquaPure Limited at GH¢16 per bottle using budgeted cost data.

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