- 20 Marks
Question
Vandee Oil Ltd. has been in business for the past ten (10) years. The following Trial Balance was extracted from the books of Vandee Oil Ltd. for the year ended 2023.
| Item | GH¢’000 (Debit) | GH¢’000 (Credit) |
|---|---|---|
| Bank | 46,200 | |
| Petty Cash | 4,000 | |
| Computer and Accessories | 8,370 | |
| Furniture and Fittings | 10,255 | |
| Land and Building | 214,000 | |
| Office Equipment | 12,250 | |
| Plant and Machinery | 239,400 | |
| Inventory | 1,900 | |
| Staff Loan | 5,088 | |
| Purchases | 355,000 | |
| Bank Service Charges | 1,300 | |
| Business Promotion | 1,500 | |
| Communication | 1,900 | |
| Insurance | 1,660 | |
| Licenses and Permits | 6,650 | |
| Medical Expenses | 155 | |
| Printing and Stationery | 300 | |
| Professional Fees: Legal Fees | 500 | |
| Repairs: Equipment Repairs | 2,600 | |
| Salaries | 23,050 | |
| Electricity | 780 | |
| Water | 280 | |
| Vehicle Running Expense | 4,560 | |
| Trade Payable | 25,000 | |
| Directors Current Account | 320,000 | |
| Computer and Accessories: Accumulated Depreciation | 3,348 | |
| Furniture and Fittings: Accumulated Depreciation | 2,050 | |
| Land and Building: Accumulated Depreciation | 8,560 | |
| Office Equipment: Accumulated Depreciation | 2,450 | |
| Plant and Machinery: Accumulated Depreciation | 47,880 | |
| Payroll Liabilities | 550 | |
| Retained Earnings | 49,282 | |
| Taxation | 3,003 | |
| Share Capital | 10,000 | |
| Sales | 574,145 | |
| TOTALS | 993,983 | 993,983 |
Additional Information: i) Closing Inventory as at December 2023 amounts to GH¢48,500,000 ii) The following assets were bought during the year 2023. However, these transactions were not recorded in the above Trial Balance:
- Computers and Accessories GH¢8,000,000
- Fixtures and Fittings GH¢5,000,000
- Plant and Machinery GH¢25,000,000 The following are the rates of Depreciation being used by the company, however Depreciation for 2023 is yet to be charged:
- Land and Building 1%
- Computers and Accessories 20%
- Furniture and Fittings 10%
- Plant and Machinery 20%
- Office Equipment 20% iii) Electricity stated in the Trial Balance include January 2024 Electricity Bill while that of Water represents six (6) months’ payment for the year 2023. iv) Staff bonuses amounting to GH¢15,000,000 was agreed on 31 December 2023 for staff. However, it was paid after the year end.
Answer
To prepare the financial statements, adjust the trial balance for the additional information as follows:
- Closing inventory is GH¢48,500 (‘000).
- Unrecorded asset purchases total GH¢38,000 (‘000), assumed financed by directors, increasing Directors Current Account.
- Depreciation calculated on adjusted costs using straight-line method (full year on additions):
- Land and Building: 214,000 × 1% = 2,140
- Computers and Accessories: (8,370 + 8,000) = 16,370 × 20% = 3,274
- Furniture and Fittings: (10,255 + 5,000) = 15,255 × 10% = 1,526 (rounded)
- Office Equipment: 12,250 × 20% = 2,450
- Plant and Machinery: (239,400 + 25,000) = 264,400 × 20% = 52,880
- Total depreciation: 62,270
- Electricity (780) includes January 2024 bill; assume uniform monthly bills over 13 months, monthly = 780 / 13 ≈ 60; 2023 expense = 720, prepaid = 60.
- Water (280) for 6 months; full year expense = 560, accrue 280.
- Staff bonuses 15,000 accrued as expense and liability.
- Cost of sales = Opening inventory (1,900) + Purchases (355,000) – Closing inventory (48,500) = 308,400.
a) Statement of Profit or Loss for the year ended 31 December 2023
| Item | GH¢’000 |
|---|---|
| Sales | 574,145 |
| Cost of sales | (308,400) |
| Gross profit | 265,745 |
| Expenses: | |
| Bank service charges | (1,300) |
| Business promotion | (1,500) |
| Communication | (1,900) |
| Insurance | (1,660) |
| Licenses and permits | (6,650) |
| Medical expenses | (155) |
| Printing and stationery | (300) |
| Professional fees: Legal fees | (500) |
| Repairs: Equipment repairs | (2,600) |
| Salaries and bonuses (23,050 + 15,000) | (38,050) |
| Electricity (adjusted) | (720) |
| Water (adjusted) | (560) |
| Vehicle running expense | (4,560) |
| Depreciation | (62,270) |
| Profit for the year | 143,020 |
b) Statement of Financial Position as at 31 December 2023
| Item | GH¢’000 |
|---|---|
| Non-current assets | |
| Land and building (Cost 214,000; Acc. dep. 8,560 + 2,140 = 10,700; NBV) | 203,300 |
| Computers and accessories (Cost 16,370; Acc. dep. 3,348 + 3,274 = 6,622; NBV) | 9,748 |
| Furniture and fittings (Cost 15,255; Acc. dep. 2,050 + 1,526 = 3,576; NBV) | 11,679 |
| Office equipment (Cost 12,250; Acc. dep. 2,450 + 2,450 = 4,900; NBV) | 7,350 |
| Plant and machinery (Cost 264,400; Acc. dep. 47,880 + 52,880 = 100,760; NBV) | 163,640 |
| 395,717 | |
| Current assets | |
| Inventory | 48,500 |
| Staff loan | 5,088 |
| Taxation | 3,003 |
| Prepayments (electricity) | 60 |
| Bank | 46,200 |
| Petty cash | 4,000 |
| 106,851 | |
| Total assets | 502,568 |
| Equity and liabilities | |
| Share capital | 10,000 |
| Retained earnings (49,282 loss b/f + 143,020) | 93,738 |
| Total equity | 103,738 |
| Current liabilities | |
| Trade payable | 25,000 |
| Directors current account (320,000 + 38,000) | 358,000 |
| Payroll liabilities (550 + 15,000) | 15,550 |
| Accruals (water) | 280 |
| 398,830 | |
| Total equity and liabilities | 502,568 |
In practice, such statements ensure compliance with IAS 1 Presentation of Financial Statements, providing true and fair view for stakeholders like Bank of Ghana regulators or shareholders in Ghanaian oil sector firms, similar to how Tullow Oil Ghana reports adjusted for provisions and depreciations.
- Topic: Financial Statements -Form and Content
- Series: APR 2024
- Uploader: Samuel Duah