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  • 8 Marks

PSAF – Nov 2024 – L2 – Q1a – Financial Statements Preparation

Prepare the Statement of Financial Performance for Paja Teaching Hospital following IPSAS guidelines.

Below is a Trial Balance of Paja Teaching Hospital (PTH) under the Ministry of Health for the year ended 31 December 2023.

Debit (GH¢000) Credit (GH¢000)
Cash and Bank – GoG 3,400
Cash and Bank – IGF 72,200
Cash and Bank – Donor Funds 210,400
Undeposited Cash – IGF 4,000
Petty Cash 100
Investments 2,000
Debtors 661,400
Other Receivables 17,700
Withholding Tax
Trust Funds
Trade Payables
GoG Subsidy – Employee Compensation
GoG Subsidy – Goods & Services
Development Partners Programmes Receipt
Other Non-Operating Income
Medicines & Pharmaceuticals 433,900
Surgical 50,800
Medical 111,400
Investigation 140,900
OPD 238,400
Obstetrics and Gynaecology 135,300
Dental 8,300
Pediatrics 40,300
Ear, Nose & Throat 5,300
Eye Care 7,300
Mortuary 30,000
Ambulance Fees 300
Ophthalmology 3,000
Physiotherapy 3,300
Examination Fees 200
Dialysis 400
Feeding 30,400
Employee Compensation – GoG 3,912,500
Goods & Services – GoG 20,800
Employee Compensation – IGF 148,000
Goods & Services – IGF 978,500
Capital Expenditure – IGF 27,500
Goods & Services – Partners Fund 472,400
Accumulated Fund
Total 6,530,900

Additional Information:

  1. The hospital previously used modified accrual accounting but switched to IPSAS accrual basis in 2023.
  2. The hospital revalued legacy assets as follows:
    • Motor Vehicles: GH¢50,250,000
    • Buildings: GH¢120,540,000
    • Medical Equipment & Other Equipment: GH¢31,500,000
    • Land: GH¢15,000,000
  3. Gavi supported the hospital with GH¢200,000,000 in 2023, but 20% was allocated for Q1 of 2024. The Global Fund committed GH¢250,000,000, but only GH¢200,000,000 was received.
  4. NHIA rejected 10% of the hospital’s total claims of GH¢100,300,000.
  5. Parliament approved a write-off of GH¢20,225,000 for unpaid hospital services.
  6. The capital expenditure consists of:
    • Medical Equipment: GH¢19,236,000
    • Furniture & Fittings: GH¢8,264,000
  7. Depreciation Policy (Straight-Line Basis):
    • Building: 5%
    • Motor Vehicle: 20%
    • Medical Equipment: 10%
    • Furniture & Fitting: 25%
  8. Year-end inventory values:
Inventory Type Cost (GH¢000) Replacement Cost (GH¢000) Net Realisable Value (GH¢000)
Medicines (for resale) 146,800 176,100 132,100
Medical Consumables (For use on clients) 29,400 33,800 30,800
Office Consumables 19,600 29,400 18,600

Required:

In compliance with IPSAS, the PFM Act, and the Government of Ghana Chart of Accounts, prepare:
a) A Statement of Financial Performance for Paja Teaching Hospital for the year ended 31 December 2023.

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  • 8 Marks

ATAX – May 2017 – L3 – Q6b – Corporate Tax Compliance and Reporting

Compute the Companies Income Tax liability for small businesses using the small business rate and explain the computations.

You have been provided with the following information in respect of THREE small businesses:

You are required to:
i. Compute the Companies Income Tax liability for each of the companies for the relevant assessment year, using the small business rate. (3 Marks)
ii. Give reasons for your computations. (5 Marks)

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  • 9 Marks

CR – May 2017 – L3 – Q7a – Revenue Recognition (IFRS 15)

Itemize and discuss the five-step model for revenue recognition under IFRS 15.

Megida hopes to obtain contracts from both the private and public sectors following the new government economic initiatives. The company’s revenue had always been accounted for in line with IAS 18, as the company had adopted IFRS. Some directors of Megida understand that with the introduction of IFRS 15: Revenue from Contracts, the way revenue from contracts is recognized may change. In particular, one of them who attended an IFRS training organized by the Institute of Chartered Accountants of Nigeria (ICAN) heard about IFRS 15 and its five-step model for revenue recognition but did not understand.

Required:
Itemize and briefly discuss the FIVE-step model approach to revenue recognition under IFRS 15. (9 Marks)

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  • 20 Marks

CR – May 2017 – L3 – Q4 – Revenue Recognition (IFRS 15)

Advise on the correct accounting treatment for transactions involving contracts, licences, and purchase of components.

Dango Plc is a conglomerate company operating in Nigeria with diverse interests across Africa. It prepares its financial statements in accordance with International Financial Reporting Standards with a year-end of September 30. The following transactions relate to Dango Plc.

(a) In February 2016, Dango Plc won a significant new contract to supply large quantities of rice to the government of Guyama, a small West African country, for the next two years. Under the terms of the arrangement, payment is made in cash on delivery once goods have been cleared by customs. The rice will be delivered in batches four (4) times every year, on April 1, July 1, October 1, and January 1. The batches for April 1, 2016, and July 1, 2016, amounting to N250 million and N380 million respectively, were delivered and paid. Dango incurred significant costs on customs duties for the first batch of delivery. The October 1 batch, valued at N520 million, was shipped prior to the year-end but delivered and paid for on October 1, 2016.

(b) On October 1, 2010, a 12-year licence was awarded to Dango Plc by the Federal Government to be the sole manufacturer of a chemical used in the Nigerian pharmaceutical industry. The licence was recognised on that date at its fair value of N196 million. The award of the licence motivated Dango Plc in 2011 to purchase a division of another Nigerian competitor company making similar products. Goodwill of N240 million was recognised on the purchase of the division. Dango Plc merged the activities of the newly acquired division with its own to create a specialist chemical sub-division, which it now classifies as a separate cash-generating unit. By 2016, the revenue of this cash-generating unit now amounts to 5% of the Group’s revenue.

(c) Dango Plc buys raw materials from overseas suppliers. It has recently taken delivery of 1,000 units of component X, used in the production of chemicals. The quoted price of component X was N1,200 per unit, but Dango Plc has negotiated a trade discount of 5% due to the size of the order. The supplier offers an early settlement discount of 2% for payment within 30 days, and Dango Plc intends to achieve this. Import duties of N60 per unit must be paid before the goods are released through customs. Once the goods are released, Dango Plc must pay a delivery cost of N5,000 to have the components taken to its warehouse.

Required:
Write a report to the directors advising them on the correct accounting treatment of the above transactions in the financial statements for the year ended September 30, 2016, in accordance with the provisions of the relevant standards.

Note: You may consider the relevance of the following standards to the transactions: IAS 20, IAS 2, IAS 38, IFRS 3, and IFRS 15.

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  • 13 Marks

CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)

valuate discontinuation conditions and prepare profit or loss statement for Bamgbose Plc with comparative figures.

Bamgbose Plc. is a long-established travel agent, operating through a network of retail outlets and online store. In recent years, the business has seen its revenue from the online store grow strongly, and that of retail outlets decline significantly. On July 1, 2017, the board decided to close the retail network at the financial year end of December 31, 2017, and put the buildings up for sale on that date. The directors are seeking advice regarding the treatment of the buildings in the statement of financial position as well as the treatment of the trading results of the retail division for the year. The following figures are available at December 31, 2017:

  • Carrying amount of buildings: ₦30.0 million
  • Fair value less costs to sell of buildings: ₦25.8 million
  • Other expected costs of closure: ₦5.85 million

Required:

(i) Outline the conditions which must be met in order to present the results of an operation as “discontinued” and the accounting treatment that applies when such a classification is deemed appropriate. (5 Marks)

(ii) Draft the statement of profit or loss for Bamgbose Plc. for year ended December 31, 2017, together with the comparative figures for 2016, taking the above information into account. (8 Marks)

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  • 15 Marks

AT – Nov 2017 – L3 – Q6 – Tax Administration and Dispute Resolution

Company on the total tax liabilities

Pategi and Abu are brothers based in Hackettstown, New Jersey, USA. In 2009, they, along with ten other African-Americans, incorporated a telecommunications company named Pategi Telecommunications Limited. The company, headquartered in the USA, has a representative office in Share, Kwara State, Nigeria. In the year ended December 31, 2014, the following transactions were extracted from the company’s records:

  1. Number of Minutes of Telecommunication Transactions:
    • U.S. to other parts of the World: 1,705,000 minutes
    • U.S. to Nigeria: 374,000 minutes
    • Nigeria to U.S.: 426,250 minutes
    • Nigeria to Canada: 550,000 minutes
    • U.S. to Canada through Nigeria: 794,750 minutes
      Total Minutes: 3,850,000 minutes
  2. Worldwide Expenses Incurred (Naira):
    • Refurbishment: N7,150,000
    • Rent: N1,100,000
    • Depreciation: N25,991,563
    • Salaries and Wages: N4,065,188
    • Other Disallowable Expenses: N9,658,000
    • Administrative Expenses: N4,820,750
      Total Expenses: N52,785,501
  3. Telecommunication Charges:
    • Average charge rate per minute: $0.50
    • Applicable exchange rate: N198 to $1.00

Required:
Advise the company on the total tax liabilities for the relevant year of assessment. (Total 15 Marks)

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  • 30 Marks

PSAF – May 2023 – L2 – SA – Q1 – Public Sector Financial Statements

Prepare statements for government performance and financial position, including adjustments and depreciation calculations.

a. The following information relates to the accounts of Dovet State Government for the year ended December 31, 2022:

Description DR (N’M) CR (N’M)
Land and buildings (cost) 387,500
Long-term investments 187,500
Equipment and furniture 67,500
Accumulated depreciation:
– Land and building 40,000
– Motor vehicles 30,000
– Equipment and furniture 21,250
Motor vehicles (cost) 145,000
Federation account allocation 287,500
VAT allocation 87,500
Grants from Federal Government 33,750
Internally generated fund 97,500
Grant from donor agency 25,000
Personnel emolument 125,000
Maintenance of premises 5,000
Consolidated Revenue Fund charges 32,500
Overhead expenses 25,000
Miscellaneous expenditure/income 37,500 61,250
Loan notes 250,000
Current assets/liabilities 38,750 36,250
Consolidated Revenue Fund (CRF) 81,250
Total 1,051,250 1,051,250

Additional Information:

  1. Loan interest outstanding at the end of the year was N12.5 billion.
  2. Depreciation on tangible assets is charged at the following rates on cost:
    • Building is 5% (cost of land is N250 billion)
    • Motor vehicles is 20%
    • Equipment and furniture is 15%
  3. A building costing N12.5 billion with accumulated depreciation of N5 billion was sold for N11.25 billion. This transaction has not been adjusted in the accounts.
  4. Interest on receivable amounted to N10 billion.

Required:

  1. Prepare the Statement of Financial Performance for the year ended December 31, 2022.
  2. Prepare the Statement of Financial Position as at December 31, 2022.

b. Financial statements provide information that meets a number of qualitative characteristics in financial reporting.

Required:
Discuss FOUR characteristics of financial reporting.

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  • 20 Marks

FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item N’000 N’000
Revenue 2,290,125
Administrative expenses 237,150
Selling and distribution expenses 175,200
Legal and professional expenses 81,150
Allowance for receivables 8,625
Inventories – finished goods – 31/12/18 276,750
Work-in-progress – 31/12/18 49,125
Inventories – raw materials at cost – 31/12/18 162,600
Purchases – raw materials 1,125,900
Carriage inwards – raw materials 15,750
Manufacturing wages 375,000
Manufacturing overheads 187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid 450,000
150,000 8.4% cumulative preference shares of N1 each fully paid 150,000
Revaluation surplus 65,000
Share premium 150,000
General reserve 85,000
Retained earnings – 31/12/18 425,250
Patents and trademarks 323,250
Motor vehicle at cost 112,500
Freehold property at cost 375,000
Leasehold property at cost 112,500
Plant and equipment at cost 225,000
Furniture and fittings at cost 75,000
Amortisation of leasehold property – 31/12/18 22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment 102,750
– Furniture and fittings 23,625
– Motor vehicles 37,500
10% loan notes 150,000
Trade payables 146,250
Trade receivables 266,445
Bank overdraft 76,875
Cash 7,680
4,183,500 4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

  • Raw materials: N168,900
  • Finished goods: N413,025
  • Work-in-progress: N56,700

(iii) Legal and professional expenses include solicitor’s fees for purchase of new freehold land during the year of N7,500.
(iv) Provision is to be made for full year’s interest on the loan notes.
(v) The leasehold land and buildings are held on a 50-year lease, with 40 years unexpired life left as at the end of December 31, 2018.
(vi) Depreciation for the year is to be charged as follows:

  • Plant and equipment 8% on cost – charged to production
  • Furniture and fittings 10% on cost – charged to administration
  • Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

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  • 1 Marks

FA – Nov 2012 – L1 – SB – Q34 – Accounting Concepts

Recognize the accounting concept for sales revenue recognition.

The accounting concept which states that sales revenue should be recognized when goods and services have been received is known as?

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  • 1 Marks

FA – Nov 2012 – L1 – SB – Q32 – Financial Statements Preparation

Calculate turnover based on the cost of goods sold and profit margin.

If the cost of goods sold is N315,060 and the profit margin is 25%, what is the turnover?

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  • 1 Marks

QTB – Nov 2015 – L1 – SA – Q3 – Data Collection Analysis

This question calculates the standard deviation of a company's revenue profile.

What is the standard deviation of the JAC Airlines’ revenue profile for four years if the revenues for those years are N20m, N25m, N18m, and N24m?

A. 2.86
B. 2.87
C. 2.88
D. 2.89
E. 2.99

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  • 7 Marks

FR – May 2020 – L2 – Q2a – Revenue Recognition under IFRS 15

Determine the appropriate accounting treatment for a sales transaction with a free two-year maintenance contract under IFRS 15.

Ejura Ltd (Ejura) is a manufacturing and retail company that prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 December each year.

In order to generate or improve sales on one of its older products, Ejura offered a promotion named ‘something for free.’ The promotion included free maintenance services for the first two years. On 1 October 2019, under the promotional offer, Ejura sold goods to a supermarket chain for GH¢4.4 million. A two-year maintenance contract would normally be sold for GH¢0.5 million, and the list price of the product would normally be GH¢5 million. The transaction has been included in revenue at GH¢4.4 million.

Required:
In accordance with IFRS 15: Revenue from Contracts with Customers, justify the appropriate accounting treatment for the above transaction in the financial statements of Ejura for the year ended 31 December 2019.

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  • 20 Marks

FR – Nov 2019 – L2 – Q3 – Preparation of Financial Statements

Preparation of statement of profit or loss and statement of financial position for Biggs Ltd as at 31 December 2018.

Biggs Ltd has a financial year ending 31 December. Its trial balance extracted as at 31 December 2018 is as follows:


Additional Information:
i) The carrying value of inventories at cost at 31 December 2018 was GH¢39.5 million.
The estimated useful life (at the date of purchase) of the PPE components is:

  • Land: infinite life
  • Buildings: 50 years
  • Plant and equipment: 5 years

On 30 June 2018, the directors decided to sell the property because more suitable leasehold property had become available at a very competitive cost. They advertised the property for sale at that date at what was considered to be a realistic asking price of GH¢68 million. They estimated that costs of GH¢3 million would be necessary in order to sell the property. On 1 December 2018, they reduced the asking price to GH¢64.5 million and sold the property at this price shortly after the year-end. Costs to sell totaled GH¢2.5 million.

Required:
Prepare for Biggs Ltd:
a) The Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018. (10 marks)
b) The Statement of Financial Position as at 31 December 2018. (10 marks)

ii) On 1 January 2018, Biggs Ltd sold some of its plant and equipment to a finance company. Biggs Ltd credited the sales proceeds of GH¢25.6 million to revenue. The plant and equipment were purchased by Biggs Ltd on 1 January 2017 at a total cost of GH¢32 million and were being depreciated over five years. The cost and accumulated depreciation of the disposed asset are still included in the PPE cost and accumulated depreciation accounts.

iii) On 1 January 2018, Biggs Ltd issued 200 million preference shares at 32.50 pesewas each. Costs of issue were GH¢1 million so the net proceeds of the issue were GH¢64 million. The preference shareholders will receive an annual dividend on 31 December each year of GH¢3.9 million. The shares will be redeemed at par on 31 December 2022. The effective annual finance cost attached to these shares is approximately 6.4%. The first annual dividend was paid on 31 December 2018 and is included in dividends paid.

iv) The estimated income tax on the profits for the year to 31 December 2018 is GH¢4.5 million. During the year GH¢4.2 million was paid in full and final settlement of income tax on the profits for the year ended 31 December 2017. The statement of financial position at 31 December 2017 had included GH¢4.4 million in respect of this liability. At 31 December 2018, the carrying amounts of the net assets of Biggs Ltd exceeded their tax base by GH¢35.8 million. Assume an income tax rate of 25%.

v) The details of property, plant, and equipment are as follows:

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  • 5 Marks

PT – Dec 2023 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy

Explanation of five economic roles that taxation plays in a country's development.

Taxation is a mechanism through which the government seeks to realize some of its economic objectives. It is one of the oldest means by which the government expenditure is funded. Taxation plays a central and significant role in developing countries over the world.

Required:
Explain FIVE (5) economic roles of taxation. (5 marks)

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  • 5 Marks

PT – Dec 2023 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Explanation of the differences between deepening and widening the tax system in Ghana and how the Ghana Revenue Authority can implement both.

In order to generate more revenue for national development in Ghana, tax experts often suggest the need to “deepen as well as widen” the tax system of Ghana.

Required:
Explain the difference between “Deepening the Tax System” and “Widening the Tax System” and suggest how the Ghana Revenue Authority can deepen and widen the tax system of Ghana. (5 marks)

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  • 20 Marks

FR – Nov 2015 – L2 – Q3 – Preparation of Financial Statements, Financial Statement Analysis

This question requires preparing a cash flow statement for CL Ltd using IAS 7 and calculating the gross profit margin based on changes in purchase and selling prices.

(a) CL Ltd is a wholesaler and retailer of office furniture. Extracts from the company’s financial statements are set out below:

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED:

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2015:

Description Stated Capital Capital Surplus Income Surplus Total
Balances b/f 8,500 2,500 15,800 26,800
Share issue 12,900 – – 12,900
Comprehensive income – 5,000 7,000 12,000
Dividends paid – – (4,000) (4,000)
Balances c/f 21,400 7,500 18,800 47,700

STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH:

Note:
Non-current assets
During the year, the company redesigned its display areas in all of its outlets. The previous displays had cost GHS10 million and had been written down by GHS9 million. There was an unexpected cost of GHS500,000 for the removal and disposal of the old display areas. Also, during the year, the company revalued the carrying amount of its property upwards by GHS5 million, and the accumulated depreciation on these properties of GHS2 million was reset to zero.
All depreciation is charged to operating expenses.

Required:
Prepare a statement of cash flows for CL Ltd for the year ended 31 March 2015 in accordance with IAS 7 – Statement of Cash Flows. (15 marks)

(b) The directors of CL Ltd are concerned at the deterioration in its bank balance and are surprised that the amount of gross profit has not increased for the year ended 31 March 2015. At the beginning of the current accounting period (i.e. on 1 April 2014), the company changed to importing its purchases from a foreign supplier because the trade prices quoted by the new supplier were consistently 10% below those of its previous supplier. However, the new supplier offered a shorter period of credit than the previous supplier (all purchases are on credit). In order to encourage higher sales, CL Ltd increased its credit period to its customers, and some of the cost savings (on trade purchases) were passed on to customers by reducing selling prices on both cash and credit sales by 5% across all products.

Required:
(i) Calculate the gross profit margin that you would have expected CL Ltd to achieve for the year ended 31 March 2015 based on the selling and purchase price changes described by the directors. (2 marks)

(ii) Comment on the directors’ surprise at the unchanged gross profit and suggest what other factors may have affected gross profit for the year ended 31 March 2015.

(3 marks)
(Total: 20 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q5c – Business Income – Corporate Income Tax

Evaluate the statement regarding offsetting losses from export of non-traditional products against profits from local sales.

A company engages in exports of non-traditional products and makes local sales of its products. It has as recently, as of 2018, recorded huge losses on the exports but makes gains on the local sales and intends to offset the loss against the profit from the local sales as both represent its business activities.

Required: Evaluate the above statement critically in light of the tax provisions and its effect, if any, on revenue.
(4 marks)

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  • 10 Marks

AAA – Nov 2017 – L3 – Q1a – Planning, Audit Evidence

Analyze the materiality of management's plans to discontinue sales of ladies wear and the provision for redundant employees.

The draft accounts of your client Good Days Ltd., a shopping mall for the year ended 31 December 2016 showed the following:

2016 (GH¢ million) 2015 (GH¢ million)
Revenue 84.40 83.60
Profit before tax 5.00 4.40
Total Assets 75.00 46.80

In December 2016, management announced plans to stop the sales of ladies wear from the end of the month. These sales amounted to GH¢1.4 million for the year ended 31 December 2016 (2015 GH¢1.6 million). A provision of GH¢0.6 million has been made at 31 December 2016 for the compensation of redundant employees who are mainly sales girls.

Required:
Comment on the materiality of these two plans.

Note: The following materiality levels are to be used as benchmarks:

Value %
Profit Before Tax 5
Gross Profit ½ – 1
Revenue ½ – 1
Total Assets 1 – 2
Net Assets 2 – 5
Profit After Tax 5 – 12

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