- 30 Marks
Question
a. The following information relates to one of the ten Local Council Development Authority of Wazobia State.
Trial balance Ogogo Local Council Development Authority for the year ended December 31, 2023
| Description | N’000 | N’000 |
|---|---|---|
| Consultancy cost | 85,500 | – |
| Interest on loan notes | 103,320 | – |
| Interest on financial assets | – | 18,900 |
| Repairs and maintenance | 174,960 | – |
| Conferences | 262,440 | – |
| Commission to revenue collectors | 284,220 | – |
| Office stationaries (1/1/2023) | 329,220 | – |
| Court fines | – | 1,969,200 |
| Donations | – | 1,453,860 |
| Accumulated fund | – | 1,275,660 |
| Gift from Philanthropist | – | 1,054,800 |
| Hawker’s license | – | 668,700 |
| Car Park rates | – | 454,860 |
| Motor vehicles | 1,101,240 | 327,960 |
| Contract retention fee – payables | – | 251,460 |
| Advertisement and promotions for immunisation | – | 207,000 |
| Furniture and fittings | 450,000 | 180,000 |
| Buildings | 2,145,600 | 134,100 |
| Councillors’ allowances | 1,422,000 | – |
| Loans and advances to staff | 372,600 | – |
| Lock-up shops rents | – | 1,540,800 |
| Long-term loan notes | – | 1,355,940 |
| Market tolls | – | 459,900 |
| Marriage and divorce registration | – | 789,120 |
| Warehouse rent | – | 373,500 |
| Special emergency grant from Wazobia | – | 544,680 |
| Open shop licenses | – | 568,620 |
| Withholding tax | – | 817,200 |
| Telecommunication cost | 338,940 | – |
| Other expenses | 461,160 | – |
| Special audit fees | 488,340 | – |
| Purchase of office stationaries | 856,440 | – |
| Printing and publication | 1,189,980 | – |
| Revenue receivable | 3,754,260 | – |
| Salary for non-established post | 4,793,040 | – |
| Salary for established post | 5,671,620 | – |
| Property rate | – | 1,318,140 |
| Payables | – | 1,741,680 |
| Share from federation account | – | 10,574,100 |
| Town-hall meetings | 1,168,020 | – |
| Transport | 984,060 | – |
| Utility bills | 360,720 | – |
| Work-in-progress | 369,360 | – |
| Cash and cash equivalents | 913,140 | – |
| Total | 28,080,180 | 28,080,180 |
Additional information:
(i) Included in the work-in-progress is an amount of N36 million relating to a Building which was completed and commissioned by the state Governor on June 1, 2023. After an additional amount of N14.4 million was spent on tiling, the building was put to use for half of the accounting year. This expenditure has not yet been paid.
(ii) Interest on loans to staff is at the rate of 7% per annum.
(iii) Interest on long-term loans is at the rate of 10% per annum.
(iv) Office stationaries and other items bought for N32.4 million remained unused during the year. The fair value of the inventories is now N27.9 million.
(v) Property rates received in respect of 2024 financial year amounted to N36.9 million.
(vi) Salaries outstanding during the year amounted to N13.5 million.
(vii) Other expenses amounting to N19.89 million was paid in respect of 2024 financial year.
(viii) Depreciation of non-current assets is charged on straight line basis for the year as follows:
| Assets | Useful life |
|---|---|
| Building | 50 years |
| Furniture and fittings | 5 years |
| Motor vehicles | 10 years |
The State Government and all Local Council Development Authority have adopted a policy of preparing financial statements in compliance with International Public Sector Accounting Standards (IPSAS) using Accrual Basis.
Required:
i. Prepare a statement of financial performance for Ogogo LCDA for the year ended December 31, 2023. (13 Marks)
ii. Prepare a statement of financial position for Ogogo LCDA as at December 31, 2023. (14 Marks)
b. IPSAS – 3 Accounting policies, changes in accounting estimates and errors requires the development of accounting policies to ensure that financial statements provide information that meets a number of qualitative characteristics.
You are required to briefly explain the following: i. Materiality (1½ Marks) ii. Substance over form (1½ Marks)
Answer
i. Statement of Financial Performance for Ogogo LCDA for the year ended December 31, 2023
| Description | N’000 |
|---|---|
| Revenue | |
| Court fines | 1,969,200 |
| Donations | 1,453,860 |
| Gift from Philanthropist | 1,054,800 |
| Hawker‟s license | 668,700 |
| Car Park rates | 454,860 |
| Lock-up shops rents | 1,540,800 |
| Market tolls | 459,900 |
| Marriage and divorce registration | 789,120 |
| Warehouse rent | 373,500 |
| Special emergency grant from Wazobia | 544,680 |
| Open shop licenses | 568,620 |
| Property rate | 1,281,240 |
| Share from federation account | 10,574,100 |
| Interest on financial assets | 18,900 |
| Advertisement and promotions for immunisation | 207,000 |
| Interest on staff loans | 26,082 |
| Total Revenue | 21,985,362 |
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Description N’000 Expenses Consultancy cost 85,500 Interest on loan notes 135,594 Repairs and maintenance 174,960 Conferences 262,440 Commission to revenue collectors 284,220 Councillors‟ allowances 1,422,000 Telecommunication cost 338,940 Other expenses 441,270 Special audit fees 488,340 Printing and publication 1,189,980 Salary for non-established post 4,793,040 Salary for established post 5,685,120 Town-hall meetings 1,168,020 Transport 984,060 Utility bills 360,720 Office stationaries expense 1,157,760 Depreciation 243,540 Total Expenses 19,215,504 Surplus for the year 2,769,858 - ii. Statement of Financial Position for Ogogo LCDA as at December 31, 2023
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Description N’000 Assets Non-current assets Property, plant and equipment Buildings 2,018,484 Furniture and fittings 180,000 Motor vehicles 663,156 Work-in-progress 333,360 3,195,000 Current assets Inventory 27,900 Prepayments 19,890 Loans and advances to staff 398,682 Revenue receivable 3,754,260 Cash and cash equivalents 913,140 5,113,872 Total assets 8,308,872 -
Description N’000 Equity and liabilities Equity Accumulated fund 1,275,660 Surplus for the year 2,769,858 4,045,518 Non-current liabilities Long-term loan notes 1,355,940 Current liabilities Payables 1,801,854 Contract retention fee – payables 251,460 Withholding tax 817,200 Deferred income 36,900 2,907,414 Total liabilities 4,263,354 Total equity and liabilities 8,308,872 b. Explanations
- i. Materiality: Information is material if its omission or misstatement could influence the decisions of users made on the basis of the financial statements. Materiality depends on the nature or size of the item or error judged in the particular circumstances.
- ii. Substance over form: Transactions and events should be accounted for and presented in accordance with their substance and economic reality, not merely their legal form.
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