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Yaa Baby acquired shares in Adom Ltd as follows:
| Date | Transaction | No. of shares | Share price | Value (GH¢) |
|---|---|---|---|---|
| 01/02/19 | Bought 1,000 shares | 1,000 | 2.00 | 2,000 |
| 01/03/19 | Bought 1,500 shares | 1,500 | 2.50 | 3,750 |
| 01/06/20 | Bought 2,000 shares | 2,000 | 3.00 | 6,000 |
| 01/04/21 | Bought 1,750 shares | 1,750 | 4.00 | 7,000 |
| 01/12/21 | Received rights issue (1 share for every 10 shares) | 625 | 1.50 | 937.50 |
| 31/12/21 | Sold 3,800 shares | 6.00 | 22,800 |
Required:
Compute the capital gain on the realization and the tax payable. (5 marks)
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The provisions of the Income Tax Act, 2015 (Act 896) require a resident person who pays an amount for works or the supply of goods and services to another resident or non-resident person with a source in Ghana to withhold tax from the payment at the rate specified under Paragraph 8 of the First Schedule of the Act and pay same to the Commissioner-General.
Required:
Explain with examples the following:
i) Final withholding tax. (2.5 marks)
ii) Withholding tax on account. (2.5 marks)
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A Nigerian investor (Niger Ltd) in Ghana has the following information relating to its business:
| Year | Revaluation Reserves (GH¢) | Share Capital (GH¢) | Retained Earnings (GH¢) |
|---|---|---|---|
| 2021 | 250,000 | 1,000,000 | 1,200,000 |
| 2020 | 100,000 | 600,000 | 1,350,000 |
Required:
With relevant computations, comment on the tax implication of the transfer from Retained Earnings to Share Capital. (8 marks)
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Abotsi has been in employment at Asempa Ltd since 1 August 2019 as Finance Manager on a salary scale of GH¢32,000 by GH¢8,000 to GH¢48,000.
His service conditions include the following:
i) Responsibility allowance of 18% of basic salary
ii) Utilities allowance per annum of 10% of basic salary
iii) Risk allowance of 20% on basic salary and car maintenance allowance of 5% of basic salary
iv) Leave allowance of GH¢1,900 per annum
v) Medical allowance per annum of GH¢3,500
vi) Meals allowance of GH¢700 per month
vii) Two house helps on GH¢500 wages per month each. The amount is paid to Abotsi in cash directly by the company
viii) Bonus of 25% of annual basic salary
ix) Annual Overtime allowance of GH¢18,000
x) Unaccountable entertainment allowance of GH¢2,000 a year
xi) Provision of a well-furnished bungalow in respect of which he pays GH¢400 per month as rent by way of deduction at source
xii) Provision of a vehicle with driver and fuel for both official and private purposes
xiii) Special retirement package by way of a provident fund of which he contributes 9% of his basic salary, while the company contributes 11%. (The scheme is approved by the regulatory body)
xiv) Social Security and National Insurance Trust contribution of 5.5% and the employer contributes 13% of basic salary
xv) On 1 January 2021, he was given a car loan of GH¢20,000 to purchase a car for his mother at a simple interest rate of 15% per annum. The institution gives similar facilities to other customers at the rate of 28% but the statutory rate (Bank of Ghana rate) is 25%. The loan is to be paid within the period of 24 months
xvi) He is married to Abotsiwaa and Abotsimaa who are unemployed and contribute little or no financial support to their husband. Their responsibilities are limited to the management of the house
xvii) He has six (6) children, four (4) of whom are in Silicon Valley International School, Accra-Ghana, while the rest are working
xviii) He is also responsible for the upkeep of four (4) aged relatives of his
xix) He is currently pursuing MPHIL in Finance at UPSA where he incurred GH¢25,000 by way of educational expenses in 2021
xx) He is a director of Adwoa Mansa Ltd and receives a director’s emolument of GH¢24,450 (net of taxes)
xxi) He received a dividend of GH¢20,000 (net of taxes) from the Afia Manu Bank. The dividend was taxed at 8%.
Required:
Calculate his chargeable income for the 2021 Year of Assessment. (20 marks)
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Mr. John Romeski worked for Aligidon Company Ltd for 25 years and retired at the age of 60. In the last 3 years of his working life, he earned annual salary as follows:
| Year | Annual Salary (GH¢) |
|---|---|
| 58th | 93,000 |
| 59th | 96,000 |
| 60th | 99,000 |
He has 300 months’ contribution to his credit.
Required:
Assuming he retired under the National Pension Act, 2008 (Act 766), compute his pension benefit and his monthly pension pay. (5 marks)
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Section (33) of the Value Added Tax Act, 2013 (Act 870) states that; “Except as otherwise provided in this Act or Regulations, a taxable supply is a supply of goods or services made by a taxable person for consideration, other than an exempt supply, in the course of, or as part of taxable activity carried on by that taxable person”.
Required:
State THREE (3) activities that do not constitute supply of goods or services under the Value Added Tax Act, 2013 (Act 870). (5 marks)
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An effective internal control system is a prerequisite for addressing risks and providing reasonable assurance that the assets of an organization are safeguarded. It also contributes to the achievement of an organization’s control objectives. In line with this, the Committee of Sponsoring Organizations (COSO) of the Treadway Commission recommended five integrated internal control components to appraise internal control systems.
Required:
Explain the FIVE (5) components of the Integrated Framework of Internal Control System recommended by COSO. (10 marks)
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The following Trial Balance relates to Danke State University, a public tertiary educational institution in Ghana, as at 31 December 2021:
Additional Information:
| Non-Current Assets | Useful Life |
|---|---|
| Property, Plant, and Machinery | 20 years |
| Investment Property | 10 years |
| Software | 10 years |
Required: a) Prepare a Statement of Financial Performance for Danke State University for the year ended 31 December 2021. (8 marks)
b) Prepare a Statement of Financial Position for Danke State University as at 31 December 2021. (8 marks)
c) State FOUR (4) accounting policies applied in preparing the financial statement. (4 marks)
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The Financial Statements and budget information presented below were submitted to the Finance and Administration Committee of Ghana Library Authority (GLA) on 30 April 2022 for consideration. The Committee was concerned about the delay in submitting the financial information. They reasoned that it might not be useful for decision-making.
GLA
Statement of Financial Performance for the year ended 31 December 2020
| Item | Actual (GH¢’000) | Budget (GH¢’000) |
|---|---|---|
| Revenues | ||
| GoG Subvention | 170,500 | 152,050 |
| Internally Generated Fund | 58,500 | 93,650 |
| Donations and grants | 17,000 | 12,500 |
| Total Revenues | 246,000 | 258,200 |
| Expenses | ||
| Compensation for employees | 159,200 | 150,000 |
| Use of goods and services | 57,000 | 72,500 |
| Consumption of fixed assets | 6,500 | – |
| Interest | 4,500 | 4,700 |
| Other expenses | – | 3,700 |
| Total Expenses | 227,200 | 230,900 |
| Net operating result | 18,800 | 27,300 |
GLA
Statement of Financial Position as at 31 December 2020
| Item | GH¢’000 |
|---|---|
| Non-Current Assets | |
| Property, plant and equipment | 600,000 |
| Investment | 150,000 |
| Total Non-Current Assets | 750,000 |
| Current Assets | |
| Receivables | 11,500 |
| Cash and Bank | 105,000 |
| Total Current Assets | 116,500 |
| Total Assets | 866,500 |
| Liabilities and Funds | |
| Loans | 450,000 |
| Payables | 53,000 |
| Accumulated fund | 363,500 |
| Total Liabilities and Funds | 866,500 |
Required:
With reference to IPSAS Conceptual Framework, explain FIVE (5) Qualitative Characteristics that the above Financial Statements should have satisfied before it can be considered useful for decision-making and for exercising accountability. (10 marks)
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You are the Assistant Accountant of a fast-growing public university, which is moving from cash basis to accrual basis of accounting. You have been put in charge of developing a draft accrual-based accounting policy for the university.
Required: Discuss FIVE (5) areas that your draft accounting policy will cover, indicating why these areas are important. (10 marks)
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Below is the formatting of Question 5 from the uploaded document as per your request:
==========
Level:
Level 1
Professional Bodies:
ICAG
Programs:
Professional Program
Subjects:
Financial Accounting (Paper 1.1)
Topics:
Series:
Dec 2023
Total Marks:
20
Question Tags:
Financial Ratios, Performance Analysis, Profitability, Liquidity, Efficiency
Question Short Summary:
Calculates and interprets financial ratios to assess the performance of a company over two years.
Question:
a) The following summarised information has been extracted from the accounts of Kotoku Ltd for the years ended 31 December 2021 and 31 December 2020:
| Statements of Profit and Loss | 2021 (GHȼ’000) | 2020 (GHȼ’000) |
|---|---|---|
| Revenue | 1,150 | 1,766 |
| Cost of sales | (684) | (1,141) |
| Gross profit | 466 | 625 |
| Expenses | (338) | (472) |
| Interest on loans | (26) | (33) |
| Profit before tax | 102 | 120 |
| Tax | 30 | 36 |
| Profit after tax | 72 | 84 |
Calculate the following ratios for Kotoku Ltd for both years (2020 and 2021):
i) Return On Capital Employed (ROCE) (2 marks)
ii) Asset turnover (2 marks)
iii) Gross profit margin (2 marks)
iv) Acid test ratio (2 marks)
v) Receivables collection period (2 marks)
b) Using the additional information given and the ratios you calculated in part (a), comment on the financial performance of Kotoku Ltd. (10 marks)
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The trial balance for Odum Ltd. as at 31 December 2021 is as follows:
| Account | Dr (GHȼ) | Cr (GHȼ) |
|---|---|---|
| Sales revenue | 377,615 | |
| Purchases | 130,006 | |
| Inventory as at 1 January 2021 | 60,890 | |
| Insurances | 5,678 | |
| Salaries | 61,600 | |
| Electricity | 4,250 | |
| General expenses | 8,663 | |
| Allowance for receivables | 540 | |
| Land and Buildings at cost | 80,000 | |
| Buildings accumulated depreciation | 21,500 | |
| Machinery at cost | 65,000 | |
| Machinery accumulated depreciation | 12,400 | |
| Fixtures and fittings at cost | 24,000 | |
| Fixtures and fittings accumulated depreciation | 9,600 | |
| Trade receivables | 64,500 | |
| Trade payables | 14,062 | |
| Bank | 20,110 | |
| Ordinary shares | 50,000 | |
| Retained earnings as at 1 January 2021 | 15,480 | |
| 10% Loan | 25,000 | |
| Loan interest | 1,500 |
(Dr Total: 526,197 GH¢ / Cr Total: 526,197 GH¢)
Additional Information:
(Note: Revenue and expenses are deemed to accrue evenly throughout the year)
Required:
Prepare, for Odum Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS).
a) The Statement of Profit and Loss for the year ended 31 December 2021. (10 marks)
b) The Statement of Financial Position as at 31 December 2021. (10 marks)
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a) Odaw Ltd operates a manual set of accounts. A trial balance was extracted for the year ended 31 March 2021. The trial balance did not agree. Odaw Ltd does not operate a system of control accounts. The following errors have now been discovered:
Required:
i) Prepare journal entries with narratives to correct the above errors. (7 marks)
ii) Prepare the Suspense Account. (3 marks)
iii) Explain the use of a Suspense Account. (4 marks)
b) Odaw Ltd is considering introducing a system of control accounts.
Required:
Evaluate how control accounts would assist in each of the following;
i) Detection of errors; (3 marks)
ii) Prevention of fraud. (3 marks)
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a) Emma Ltd purchased an item of Property, Plant, and Equipment to be used in its new factory site. The following costs were incurred:
| Item | GH¢’000 |
|---|---|
| Machine cost | 12,800 |
| Delivery cost | 1,280 |
| Installation cost | 1,600 |
| Trade discount granted | 640 |
| Cost of site preparation | 2,560 |
| Architect’s fees | 192 |
| Administration expenses | 1,920 |
| Test run cost | 960 |
Additional information:
i) The test run was to ensure that the asset was installed and working correctly without causing any air pollution. Items of inventories valued at GH¢128,000 were produced during the test run.
ii) The appropriate government agency has granted the company a license to operate the asset on the condition that the company will remove the asset at the end of the project and return the site to its former condition. This will cost the company GH¢3,200,000.
Required:
Calculate the cost of the asset in accordance with the provisions of IAS 16: Property, Plant, and Equipment. (5 marks)
b) Kojo and Owusu have been in partnership for some years as estate agents. The partnership agreement states that they share profits and losses in the ratio 3:2. Interest on capital is payable at the rate of 4% per annum; whilst interest on drawings is charged at the rate of 5% per annum. A salary of GHȼ15,000 is paid to Kojo and a salary of GHȼ10,000 is paid to Owusu.
The following Trial Balance has been extracted from the books at 31 July 2021:
| Account | Dr (GH¢) | Cr (GH¢) |
|---|---|---|
| Sales commission received | 139,100 | |
| Electricity | 7,000 | |
| Wages and salaries | 16,500 | |
| Repairs | 9,800 | |
| General expenses | 20,000 | |
| Capital accounts: Kojo | 60,000 | |
| Capital accounts: Owusu | 50,000 | |
| Current accounts: Kojo | 2,500 | |
| Current accounts: Owusu | 5,000 | |
| Office Premises | 60,000 | |
| Provision for depreciation of premises | 15,200 | |
| Office equipment | 44,000 | |
| Provision for depreciation of office equipment | 13,500 | |
| Receivables | 45,000 | |
| Payables | 32,000 | |
| Bank | 65,000 | |
| Drawings: Kojo | 20,000 | |
| Drawings: Owusu | 25,000 |
(Dr Total: 314,800 GH¢ / Cr Total: 314,800 GH¢)
Additional information:
Required:
i) Prepare the Statement of Profit and Loss (Profit and Loss and Appropriation Account) for the year ended 31 July 2021. (6 marks)
ii) Prepare the Current Accounts for the year ended 31 July 2021. (4 marks)
iii) Prepare the Statement of Financial Position as at 31 July 2021. (5 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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