Debtors – Knowsia

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

Question

(a) You are a tax audit team leader responsible for the audit of Mina Macarthy Limited.

Mina Macarthy Limited owns a block of flats and earns its income through rentals and general dealing. On 1st January 2019, the ledger accounts of the company included the following balances.

Debtors’ account GH¢475,000

Provision for doubtful debts account GH¢ 42,235

The balance on the provision account consisted of the following: GH¢

Specific provision of 100% against the debt of Charles Sulemana, a tenant 31,500

General provision of 1% against remaining debts
12,235

During the year ended 31st December 2019, the following events occurred.

i. Charles Sulemana paid Mina Macarthy GH¢11,150 and then vanished without trace to new world, leaving no assets.

ii. Another tenant, Antonio Banderas, who owed GH¢3,900 fell into a river and was also found to have died penniless.

iii. Azuma Nickson returned from total obscurity and paid an amount of GH¢6,450 which Mina Macarthy Ltd had written off in 2017.

iv. Credit sales for the year amounted to GH¢8,167,400 and cash received from debtors (other than Sulemana and Azuma) totaled GH¢3,150,000

v. On 31st December 2019, Mina Macarthy Ltd decided to provide in full against a disputed debt of GH¢51,200 owed by Kwesi Otoo Pratt, and to maintain the 1% general provision on other debtors.

Additional notes

The company has submitted its returns for 2019 which showed a profit before tax of GH¢375,650.

Required: Comment on the matters to be considered. In addition to your comments, explain the audit evidence expected to be obtained during your review of Mina Macarthy Limited’s audit working papers prepared by the audit team member in respect of each of the issues described above. (bi)

In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

i. Explain how a bad debt may arise for VAT.

(bii) In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

ii. Explain the circumstances under which a bad debt relief can be claimed.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Audit Review, Bad Debts, Debtors, Financial Analysis, Provisions, Tax Audit, Tax Compliance, VAT
Level: Level 1

Topic: Audit Review and Reporting, Tax Audits and Investigations
Series: AUGUST 2020

ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment

Calculates cash collected from debtors and payments made to creditors.

Question

Cash Collected from Debtors and Payments to Creditors
The following balances have been extracted from the Statement of Financial Position of Zena LTD as at 31 December 2023:

Account	Amount (GH¢)
Debtors	55,000
Creditors	60,000

Additional information from the 2024 budget:

Sales are GH¢250,000 out of which 25% is cash. The sales are evenly distributed and the business gives one-month credit to its customers.
Total purchases of GH¢180,000, evenly distributed, are all on credit. Suppliers allow two months’ credit.

Required:
i) The cash to be collected from debtors during the year.
ii) The cash to be paid during the year.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Cash Collection, Creditors, Debtors
Level: Level 1

Topic: Cash Budgeting and Working Capital
Series: Nov 2024

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

Question

The following categories of debtors may be declared bankrupt (according to Bankruptcy Law in Nigeria) EXCEPT:

A. A debtor owing a liquidated sum of at least N2,000 (Two Thousand Naira only).
B. A debtor who has committed an act of bankruptcy within 3 months before presentation of bankruptcy petition.
C. Any debtor domiciled in Nigeria or who has carried on business in Nigeria by means of an agent or a manager.
D. A debtor that makes any conveyance or transfer of his property or any part thereof if he were adjudged bankrupt.
E. A debtor who transacts business in Nigeria and is able to meet his obligation as at when they fall due.

Answer

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Tags: Bankruptcy Law, Debtors, Insolvency, Legal Liability, Nigeria Law
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

Question

The Chairman of Okoko Local Government set up pond farming to fulfill a campaign promise. However, the Chairman is concerned about the project’s viability and its ability to finance itself due to increasing production costs. The expected cash-in-hand as of January 1, 2020, is N3,300,000.

The following information concerns the budgeted sales and purchases of the fish farm.

Month	Sales (N’000)	Purchases (N’000)
November 2019	55,000	35,000
December 2019	100,000	55,000
January 2020	114,000	75,000
February 2020	142,000	95,000
March 2020	145,000	80,000

Analysis of records shows that debtors settle according to the following pattern:

70% within the month of sale
30% in the following month

All purchases are on credit. Past experience shows that 80% of the purchase costs are settled in the month of the transaction, and the balance is settled in the subsequent month. Overhead costs amounting to 65% of the purchases of the month are to be paid monthly. Additionally, the Local Government will receive a monthly allocation of N15,000,000.

Required:

Prepare for the Chairman of Okoko Local Government a monthly cash budget for the fish pond for the first quarter (January to March) of 2020. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Cash Budget, Debtors, Fish Farm, Monthly Allocation, Purchases
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2020

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

Question

(a) You are a tax audit team leader responsible for the audit of Mina Macarthy Limited.

Mina Macarthy Limited owns a block of flats and earns its income through rentals and general dealing. On 1st January 2019, the ledger accounts of the company included the following balances.

Debtors’ account GH¢475,000

Provision for doubtful debts account GH¢ 42,235

The balance on the provision account consisted of the following: GH¢

Specific provision of 100% against the debt of Charles Sulemana, a tenant 31,500

General provision of 1% against remaining debts
12,235

During the year ended 31st December 2019, the following events occurred.

i. Charles Sulemana paid Mina Macarthy GH¢11,150 and then vanished without trace to new world, leaving no assets.

ii. Another tenant, Antonio Banderas, who owed GH¢3,900 fell into a river and was also found to have died penniless.

iii. Azuma Nickson returned from total obscurity and paid an amount of GH¢6,450 which Mina Macarthy Ltd had written off in 2017.

iv. Credit sales for the year amounted to GH¢8,167,400 and cash received from debtors (other than Sulemana and Azuma) totaled GH¢3,150,000

v. On 31st December 2019, Mina Macarthy Ltd decided to provide in full against a disputed debt of GH¢51,200 owed by Kwesi Otoo Pratt, and to maintain the 1% general provision on other debtors.

Additional notes

The company has submitted its returns for 2019 which showed a profit before tax of GH¢375,650.

In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

i. Explain how a bad debt may arise for VAT.

(bii) In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

ii. Explain the circumstances under which a bad debt relief can be claimed.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Audit Review, Bad Debts, Debtors, Financial Analysis, Provisions, Tax Audit, Tax Compliance, VAT
Level: Level 1

Topic: Audit Review and Reporting, Tax Audits and Investigations
Series: AUGUST 2020

ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment

Calculates cash collected from debtors and payments made to creditors.

Question

Cash Collected from Debtors and Payments to Creditors
The following balances have been extracted from the Statement of Financial Position of Zena LTD as at 31 December 2023:

Account	Amount (GH¢)
Debtors	55,000
Creditors	60,000

Additional information from the 2024 budget:

Sales are GH¢250,000 out of which 25% is cash. The sales are evenly distributed and the business gives one-month credit to its customers.
Total purchases of GH¢180,000, evenly distributed, are all on credit. Suppliers allow two months’ credit.

Required:
i) The cash to be collected from debtors during the year.
ii) The cash to be paid during the year.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Cash Collection, Creditors, Debtors
Level: Level 1

Topic: Cash Budgeting and Working Capital
Series: Nov 2024

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

Question

The following categories of debtors may be declared bankrupt (according to Bankruptcy Law in Nigeria) EXCEPT:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bankruptcy Law, Debtors, Insolvency, Legal Liability, Nigeria Law
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

Question

The following information concerns the budgeted sales and purchases of the fish farm.

Month	Sales (N’000)	Purchases (N’000)
November 2019	55,000	35,000
December 2019	100,000	55,000
January 2020	114,000	75,000
February 2020	142,000	95,000
March 2020	145,000	80,000

Analysis of records shows that debtors settle according to the following pattern:

70% within the month of sale
30% in the following month

Required:

Prepare for the Chairman of Okoko Local Government a monthly cash budget for the fish pond for the first quarter (January to March) of 2020. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budgeting, Cash Budget, Debtors, Fish Farm, Monthly Allocation, Purchases
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2020

Question Tag: Debtors

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TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment

Calculates cash collected from debtors and payments made to creditors.

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment

Calculates cash collected from debtors and payments made to creditors.

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

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TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

You're reporting an error for "TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting"

ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment

Calculates cash collected from debtors and payments made to creditors.

You're reporting an error for "ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment"

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

You're reporting an error for "AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability"

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

You're reporting an error for "PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector"

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

You're reporting an error for "TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting"

ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment

Calculates cash collected from debtors and payments made to creditors.

You're reporting an error for "ICMA – Nov 2024 – L1 – Q2a – Cash Collection and Payment"

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

You're reporting an error for "AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability"

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

You're reporting an error for "PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector"

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