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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
The following transactions relate to Mahmud’s electricity expense ledger account for the year ended 30 June 2012:
What amount should be charged to the Statement of Profit or Loss in the year ended 30 June 2012 for electricity?
A. N5,400
B. N5,500
C. N5,800
D. N6,600
E. N7,500
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The following balances remained in the books of Lagbaja Plc at December 31, 2014 after determining the gross profit:
| Item | N’000 |
|---|---|
| Share capital, authorised and issued | 200,000 |
| Cash at bank and in hand | 500 |
| Inventory at December 31, 2014 | 61,200 |
| Trade receivables | 18,005 |
| Trade payables | 15,009 |
| Gross profit at December 31, 2014 | 128,942 |
| Retained earnings | 25,000 |
| Salaries & Wages | 28,430 |
| Prepayments | 600 |
| Bad debts | 500 |
| Accrued expenses | 526 |
| Director’s account (credit) | 2,500 |
| Finance cost on loan note | 600 |
| Sundry expenses | 4,100 |
| Rates & insurance | 1,520 |
| 6% Loan notes | 20,000 |
| Lighting & cooling | 1,310 |
| Postage, telephone and telegrams | 800 |
| Motor vehicle (cost N25 million) | 15,000 |
| Office fittings and equipment | 42,350 |
| Profit at January 1, 2014 | 22,300 |
| Land and buildings at cost | 239,362 |
The following additional information is relevant:
Required: a. Prepare the Statement of profit or loss for the year ended December 31, 2014; (10 Marks)
b. Prepare the Statement of financial position as at December 31, 2014. (10 Marks)
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The information below relates to the accounting period ended December 31, 2013.
N
Prepaid rent brought forward: 22,000
Rent paid during the period: 216,000
Accrued rent carried forward: 26,000
In line with the accrual concept, what should be the amount of rent to be charged to the statement of profit or loss in the year ended December 31, 2013?
A. N264,000
B. N242,000
C. N238,000
D. N216,000
E. N48,000
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At the end of the year, Chukwu makes a charge against the profit for electricity consumed but not yet paid, this adjustment is in accordance with the:
A. Consistency concept
B. Objectivity concept
C. Materiality concept
D. Accruals concept
E. Prudence concept
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a. Accounting concepts are the broad principles and general assumptions underlying the preparation of financial statements.
Required:
i. Explain cash, accrual, and break-up bases of accounting. (6 Marks)
ii. State FOUR limitations associated with the cash basis of accounting. (8 Marks)
b. Mallam Isa is considering setting up a petty cash book from which to pay small expenses, however, he is not sure of how a petty cash book operates.
Required:
Explain to Mallam Isa the operation of a petty cash book. (6 Marks)
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In the process of drawing up financial statements, adjustments are made for prepaid and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Entity
E. Consistency
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Rent received in advance is:
i. Credit balance in rent account
ii. Current asset in the statement of financial position
iii. Liability in the statement of financial position
iv. Debit balance in the rent account
A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV
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In the process of drawing up financial statements, adjustments are made for prepaid expenses and accrued expenses in order to comply with which of the following fundamental accounting concepts?
A. Matching
B. Prudency
C. Aggregation
D. Duality
E. Consistency
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Abode Limited has an insurance policy covering April 1 to March 31 of the following year, but its accounting period ends on December 31 each year. The insurance is paid on April 1 each year, and the record of payments for the two years, 2015 and 2016, were as follows:
2015: ₦64,000
2016: ₦84,000
Required:
Show the insurance account for 2016 and state the amount to be charged in the statement of profit or loss and the disclosure in the statement of financial position as at December 31, 2016.
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Which of the following correctly describes the accruals concept in accounting?
A. Expenses are recognised in the statement of profit or loss in the same period as the related sales
B. Income is recognised in the statement of profit or loss when cash is paid
C. Sales are recognised in the statement of profit or loss when the related expenses are paid
D. Expenses are recognised in the statement of profit or loss as they are paid
E. Income and expenses are recognised in the statement of profit or loss as they arise
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a) IASB Conceptual Framework underpins what IFRS say and why they identify a particular accounting treatment. Another important aspect of the conceptual framework is an attempt to define “high quality” information or in other words, what makes financial information useful.
Required:
Explain in accordance with the IASB’s Conceptual Framework the enhancing qualitative characteristics of useful financial accounting information.
(10 marks)
b) On 1 January 2021, Koo Nimo, a trader, had the following entries in his ledger:
| Account | Amount (GHȼ) |
|---|---|
| Commission received (owing) | 900 |
| Stationery (owing) | 400 |
| Rates (prepaid) | 600 |
The following information relates to the financial year ended 31 December 2021. All transactions were by cheque.
i) Commission received was as follows:
| Date | Amount (GHȼ) |
|---|---|
| 14 January | 850 |
| 16 November | 3,200 |
On 31 December 2021 GHȼ800 was still owing in commission to Koo Nimo for the 2021 financial year.
ii) Stationery was paid as follows:
| Date | Amount (GHȼ) |
|---|---|
| 19 January | 800 |
| 13 November | 4,200 |
On 1 January 2021 there was no stock of stationery, while at 31 December 2021 stock of stationery was GHȼ200. There were no outstanding invoices for stationery at 31 December 2021.
iii) Rates were paid as follows:
| Date | Amount (GHȼ) |
|---|---|
| 9 April | 2,600 |
| 24 November | 2,800 |
A refund for rates of GHȼ800 was received on 15 December 2021. At 31 December 2021 rates were overpaid by GHȼ250.
Required:
Prepare the commission received, stationery and rates ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
(6 marks)
c) Explain TWO (2) reasons why a business entity will make adjustments for accruals and prepayments in the final accounts.
(4 marks)
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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:
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)
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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:
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.
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a) Accounting principles and concepts are of fundamental importance in the preparation of financial statements.
Required:
With the aid of relevant examples, outline your understanding on any FOUR (4) of the following concepts/principles: i) Accruals
ii) Going Concern
iii) Historical Cost
iv) Materiality
v) Break up basis
(10 marks)
b) Patricia Ltd prepares accounts to 31 December each year. The following transactions relate to Rent and Rates: i) 31 December 2018 three months’ rent owing amounted to GH¢6,000.
ii) 31 December 2018 two months rates prepaid amounted to GH¢5,250.
iii) During the year 2019, cash paid for rent and rates amounted to GH¢90,000
iv) Rent owing as at 31 December 2019 amounts to GH¢9,000
v) Rates prepaid as at 31 December 2019 amounts to GH¢2,250
Required:
Prepare a combined rent and rates account to disclose the amount that is chargeable to the profit or loss account for the year ended 31 December, 2019.
(4 marks)
c) The following information was extracted from the books of Maanaa and Co.:
| Year | Bad debts written off (GH¢) | Trade Receivables (GH¢) | Allowance for doubtful debt (%) |
|---|---|---|---|
| 1 | 200,000 | 1,200,000 | 10 |
| 2 | 300,000 | 1,800,000 | 5 |
| 3 | 100,000 | 3,000,000 | 5 |
Required:
Prepare the following accounts for the 3 years to determine the amount chargeable to the Profit or Loss account:
i) Bad debts written off account (2 marks)
ii) Allowance for doubtful debt account (4 marks)
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a) Identify, and briefly explain, the basic accounting principle which requires prepayments to be included in final accounts. (3 marks)
b) Briefly explain the purpose of depreciation charge in the statement of profit or loss. (2 marks)
c) A newly qualified accountant has prepared draft accounts for a client for the year ended September 2018, but has not dealt with the adjustments for accrued expenses, prepaid expenses, irrecoverable debts, allowance for receivables, and depreciation.
Below is the statement of financial position prepared by the newly qualified accountant.
The newly qualified accountant has given the following information about the remaining adjustments:
Required:
i) Calculate the accrued electricity expense and the prepayment for rent, and update the financial statements. (4 marks)
ii) Calculate the new allowance for receivables and update the financial statements. (3 marks)
iii) Calculate the depreciation charge and update the financial statements. (2 marks)
iv) Prepare the updated Statement of Financial Position after accounting for the above adjustments. (6 marks)
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The trial balance below was extracted from the ledger of Nhyiraba Ltd as at 31 December 2018.
The following additional information is provided:
i) Allowance is to be made for depreciation on the non-current assets on a straight-line method at the following rates:
ii) The value of land included in Land and Building is GH¢20,000,000.
iii) The following payments were made in advance:
iv) One year interest is due on the loan notes.
v) Provision for doubtful debt is to be adjusted so that it is 3% of trade receivables.
vi) Allowance is to be made for audit fees of GH¢3,600,000.
vii) Directors’ fees of GH¢4,500,000 were due at the year-end.
viii) The cost of closing inventories at 31/12/2018 was GH¢43,740,000. However, due to a market recession, the net realizable value of the goods is GH¢37,430,000.
ix) The directors have recommended a transfer of GH¢20,000,000 to the general reserve.
x) The year’s preference dividend is to be provided for.
xi) Current year income tax charged was GH¢9,630,000.
xii) Authorised share capital comprises:
Required:
a) Prepare Nhyiraba Ltd’s Statement of Profit or Loss for the year end 31 December 2018. (10 marks)
b) Prepare Nhyiraba Ltd’s Statement of Financial Position as at 31 December 2018. (10 marks)
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Question:
Bob and Sons prepares its financial statements to 31 December every year. At 31 December 2017, the company’s trial balance was as follows:
The following additional information is relevant:
i) Depreciation is to be provided as follows:
Required:
Prepare the Statement of Comprehensive Income for Bob and Sons for the year ended 31 December 2017 and the Statement of Financial Position as at 31 December 2017 in compliance with the provisions of International Financial Reporting Standards (IFRS). (20 marks)
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