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Tap, Sea, Air, and River are in partnership business sharing profits and losses in the ratio 8:5:4:3, respectively. Their Statement of Financial Position was as follows as at 1 January 2009:
On the date of the statement, the business was brought to an end, and the assets realized as follows:
| Assets Realized | N’000 |
|---|---|
| Motor Vehicles | 60,000 |
| Plant and Machinery | 60,000 |
| Furniture and Fittings | 52,500 |
| Inventories | 15,300 |
| Accounts Receivable | 9,450 |
Dissolution expenses amounted to N22,500,000. Air became bankrupt and could only pay 40k for every N100 owed. The other partners were solvent, and the amount was collected from Air’s administrator. Cash was returned to or received from partners as appropriate.
You are required to:
(a) State the ways in which the amount owed by Air will be absorbed by the other partners. (3 Marks)
(b) Show the necessary ledger accounts to close the partnership’s books.
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Taiwo and Kehinde entered into a joint venture to acquire packaging materials for table water production and to sell them to table water producers. They agreed to share joint venture profits or losses in the ratio 3:2, respectively.
At the outset, Taiwo sent Kehinde a cheque of N200,000 for his participation in the venture. They sold all the goods and recorded the following cash transactions:
| Taiwo (N) | Kehinde (N) | |
|---|---|---|
| Revenue | 320,000 | 210,000 |
| Traveling expenses | 32,700 | 46,300 |
| Advertising | 10,300 | 9,100 |
| Stall rent | 8,500 | 7,000 |
| Wages of casual helper | 4,800 | – |
| Sundry expenses | 5,900 | 2,900 |
| Purchases | 160,000 | 110,000 |
Settlement between the co-venturers took place by cheque.
Required:
a. Prepare the Joint Venture with Kehinde Account in the ledger of Taiwo. (5 Marks)
b. Prepare the Joint Venture with Taiwo Account in the ledger of Kehinde. (5 Marks)
c. Prepare the Memorandum Joint Venture Accounts. (5 Marks)
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The following balances were extracted from the ledger of YOHAFI College of Technology in respect of Senator Momeed Memorial Loan Fund (MMLF) as at31 December 2017
The following transactions took place in 2018:
(i.) Investment costing N30,800,000 were sold for N31,900,000; (ii.) N30,700,000 cash was received as the repayment of loans; (iii.) N2,500,000 was received from the family of a former student in full payment of a loan which had earlier been written off; (iv) N41,800,000 was given out as loan during the year; (v.) A loan of N750,000 was written-off as uncollectible; and (vi.) A sum of N3,000,000 cash was received as a gift from a former borrower.
You are required to:
a. Open necessary ledger accounts to record above transactions. (13 Marks)
b. Extract a trial balance as at the end of the period. (4 Marks)
c. Prepare a statement of changes in the fund balance. (3 Marks)
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Fina and Funke, who are in partnership sharing profits and losses in a ratio of 2:1, decided to dissolve the partnership on 31 December 2012. At that date, their statement of financial position is as follows:
Statement of Financial Position as at 31 December 2012
The partners were unable to dispose of the business as a going concern but sold the non-current assets and inventory for N483,750. Trade receivables were collected in full, and the outstanding suppliers gave discounts totaling N1,250, while the dissolution expenses amounted to N10,000.
You are required to:
Prepare necessary ledger accounts to close the books of Fina and Funke.
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a. On January 1, 2013, Ajanaku Enterprises bought a motor vehicle for N1,850,000 with an estimated life span of four years and a residual value of N50,000.
i. Determine the depreciation rate, using the reducing balance method. (2 Marks)
ii. Using the rate of depreciation derived in (i) above, calculate the amount of depreciation for the years 2013 and 2014 respectively. Also, disclose the carrying amount of the asset at the end of December 31, 2014. (3 Marks)
b. The following transactions were recorded in the books of Lexus Enterprises for the three months ended March 31, 2014.
| Date | Description |
|---|---|
| Jan. 1 | Commenced business by introducing N250,000 into a bank. |
| Jan. 5 | Bought N50,000 furniture from Adam Enterprises on credit. |
| Jan. 15 | Bought office stationery for N1,000 paying by cheque. |
| Jan. 28 | Bought goods for resale worth N25,000 paying by cheque. |
| Feb. 2 | Paid Adam Enterprises a cheque of N35,000. |
| Feb. 3 | Rent of N30,000 for business premises was paid by cheque. |
| Mar. 5 | Bought goods on credit from Jay Enterprises for N35,000. |
| Mar. 8 | Bought office stationery for N500 paying by cheque. |
Required:
i. Post the above transactions in the relevant ledger accounts and balance the accounts. (15 Marks)
(Total 20 Marks)
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On January 1, 2016, Mr. Wale commenced business as a sole trader with N10,000,000, which he paid into the business bank account. He purchased a van for N6,000,000 from Mallam Tanko and paid half of the amount due by cheque on January 2, 2016. The following transactions took place in the month of January 2016:
Required:
a. Prepare a three-column cash book. (6 Marks)
b. Prepare the ledger accounts for the transactions. (8 Marks)
c. Prepare a trial balance as at January 31, 2016. (6 Marks)
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Propati Limited has a fleet of motor vehicles that are used to distribute goods to the market. As at July 2020, the cost of the vehicles was ₦750,000,000 and their accumulated depreciation was ₦30,500,000. On January 1, 2021, the company bought a new vehicle for ₦2,800,000. One of the old vehicles, which was acquired 3 years ago at a cost of ₦1,000,000 with accumulated depreciation of ₦600,000, was accepted by the seller in part-exchange at a value of ₦480,000.
Required:
i. Calculate the gain or loss on disposal of the old car. (2 Marks)
ii. Prepare the following ledger accounts in respect of the transactions:
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Propati Limited has a fleet of cars that are used to distribute goods to the market. As at July 1, 2020, the cost of the cars was ₦750,000,000, and their accumulated depreciation was ₦30,500,000. On January 1, 2021, the company bought a new car for ₦2,800,000. One of the old cars, which was acquired 3 years ago at a cost of ₦1,000,000 with accumulated depreciation of ₦600,000, was accepted by the seller in part exchange at a value of ₦480,000. The reporting date of Propati Limited is December 31, and the entity charges depreciation using the straight-line method.
Required:
i. Calculate the gain or loss on disposal of the old car. (2 Marks)
ii. Prepare the following ledger accounts in respect of the transactions:
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Which of the following would NOT be posted to the credit of payables control account?
A. Total credit purchases
B. Transfer of credit balances from receivables’ ledger
C. Transfer of debit balances to receivables’ ledger
D. Set-off contra
E. Interest charged by suppliers
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Funke Limited’s management, based on the prudence principle, evaluated its trade receivables accounts over a period of three years ending on December 31 each year. The following were the extracts from the records of the outcome of the evaluation:
| Year | Trade Receivables (₦) | Bad Debts (₦) | Allowance for Doubtful Receivables (%) |
|---|---|---|---|
| 2014 | 654,000 | 24,000 | 2% |
| 2015 | 745,000 | 18,000 | 2% |
| 2016 | 585,000 | 22,000 | 2% |
The value stated for trade receivables was net of the bad debts but before the allowance for bad debts. There was no allowance for bad debt before 2014.
Required: Prepare the ledger accounts for Bad Debts and Allowance for Doubtful Receivables.
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The trial balance of Prudent Limited included the following balances as at October 1, 2015:
| Account | Amount (₦) |
|---|---|
| Trade receivables | 1,564,000 |
| Allowance for doubtful receivables | 78,200 |
During the year to September 30, 2016, Prudent Limited’s credit sales were ₦8,142,000, cash received from customers was ₦7,820,000, and bad debts written off were ₦46,000. Based on experience, Prudent Limited decided to recognize additional allowance of 5% on its receivables as doubtful.
Required:
Prepare the ledgers for:
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a) A company owns a number of properties which are rented to tenants. The following information is available for the year ended 30 June 2021:
| Date | Rent in advance (GHȼ) | Rent in arrears (GHȼ) |
|---|---|---|
| 30 June 2020 | 140,500 | 5,200 |
| 30 June 2021 | 148,200 | 9,200 |
Cash received from tenants for the year ended 30 June 2021 was GHȼ820,400. All rent in arrears was subsequently received.
Required:
Prepare the ledger account for rental income showing the transfer to the Statement of Profit and Loss, for the year ended 30 June 2021. (5 marks)
b) Awuni, Adjetey, and Kwame are in partnership, running an evening school, and sharing residual profits and losses in the ratio 4:3:3 respectively. At 1 October 2021 their capital and current account balances were:
By formal agreement, the partners are entitled to receive interest at 5% on capital. In addition, Adjetey is paid an annual salary of GHȼ5,455 for his part in running the business.
On 1 April 2022, by mutual agreement, Kwame increased his capital by paying a further GHȼ4,000 into the partnership bank account. Awuni reduced his capital by GHȼ5,000, but kept this in the partnership as a loan bearing interest at 10% per annum. Interest on the loans, by agreement, is credited to Awuni’s current account.
The partners are allowed to take out drawings at any time during the year, but they have agreed to charge interest on such drawings. The date of taking out the drawings, the amount drawn out by each partner, and the interest payable, were as follows during the year to 30 September 2022:
Required:
i) Prepare the profit and loss appropriation account for the year ended 30 September 2022. (8 marks)
ii) Prepare the partners’ current accounts for the year ended 30 September 2022. (7 marks)
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a) Financial Accounting and Management Accounting are similar with regard to the determination of costs, their assignment to different accounting periods, and allocation of costs to different departments and segments. This implies that the concepts and principles that are used in Financial Accounting may be suitable for Management Accounting.
Required:
i) Explain the purpose and scope of financial accounting. (4 marks)
ii) Explain THREE (3) differences between Financial Accounting and Management Accounting. (6 marks)
b) On 1 January 2021, Mankessim Traders had the following entries in its ledger accounts:
The following information is available for the financial year ended 31 December 2021:
Required:
Prepare the following 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.
i) Insurance. (2 marks)
ii) Commission receivable. (2 marks)
iii) Allowance for receivables. (2 marks)
c) Explain why maintaining an allowance for receivables is an application of the prudence concept. (4 marks)
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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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a) Write a short note to a client explaining the following issues:
i) Outline the differences between Cost and Management Accounting and Financial Accounting. (3 marks)
ii) Explain FOUR (4) roles of an Accountant in an organization. (4 marks)
iii) Outline SIX (6) key information provided by a Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position. (3 marks)
b) At 1 July 2017, the following information was extracted from the books of Tansah Ltd:
Non-current assets at cost:
| Reference | Description | Amount (GH¢) |
|---|---|---|
| M1 | Machinery | 25,000 |
| E1 & E2 | Equipment | 15,400 |
| MV1 | Motor Vehicle | 18,500 |
Provision for depreciation:
| Reference | Description | Amount (GH¢) |
|---|---|---|
| M1 | Machinery | 18,500 |
| E1 & E2 | Equipment | 8,600 |
| MV1 | Motor Vehicle | 6,500 |
During the financial year ended 30 June 2018, the following transactions took place:
Purchases:
| Date | Description | Reference | Amount (GH¢) |
|---|---|---|---|
| 1 April 2018 | Machinery M2 | M2 | 10,800 |
| 1 January 2018 | Equipment E3 | E3 | 6,800 |
Disposals:
| Reference | Description | Purchase Date | Disposal Date | Original Cost (GH¢) | Sale Proceeds (GH¢) |
|---|---|---|---|---|---|
| E2 | Equipment | 1 January 2015 | 31 March 2018 | 7,200 | 6,400 |
All transactions took place through the bank account.
Depreciation rates per annum:
Depreciation for new assets commences in the month in which the asset is acquired.
Required:
For Tansah Ltd, prepare the following ledger accounts for the year ended 30 June 2018:
i) Provision for Depreciation of Machinery (2 marks)
ii) Provision for Depreciation of Equipment (4 marks)
iii) Disposal of Equipment (3 marks)
iv) Motor vehicle (1 mark)
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a) The IASB Conceptual Framework describes the fundamental qualitative characteristics of useful financial information.
Required:
State and explain the TWO (2) fundamental qualitative characteristics. (10 marks)
b) Kofi Mensah started a furniture business on January 1, 2018, and undertook the following transactions during the year:
Note: All monies paid and received were through the bank account.
Required:
Post the above transactions to the following ledgers in the books of Kofi Mensah:
i) Bank account (3 marks)
ii) Inventory account (2 marks)
iii) Capital account (1 mark)
iv) Kwame account (2 marks)
v) AA Ltd account (2 marks)
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Asasepa Ltd prepares its financial statements to 31 December each year until 31 December 2016, when the business changed its accounting date. The company prepared its next financial statements for 15 months to 31 March 2018.
At 1 January 2017, the following balances existed in the business’s accounting records:
Depreciation policy
The business’ policy on depreciation is to charge proportionate depreciation in the periods of purchase and sale of its non-current assets, charging depreciation as from the first day of the month in which assets are acquired, and up to the last day of the month before any disposal.
Annual rates of depreciation taken are:
Transactions during the year
During the 15 months ended 31 March 2018, the following transactions took place:
Required:
a) Prepare the ledger accounts to show the balances at 1 January 2017.
b) Record the non-current asset transactions for the 15 months period ending 31 March 2018.
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