- 10 Marks
FA – L1 – Q42 – Accruals and prepayments
Question
A hotel makes up its accounts to 30 April annually. The proprietor, Mrs Amponsah, informs you that she has paid the following amounts during the year to 30 April 20X9:
| Item | GH₵(000) |
|---|---|
| Wholesaler | 3,945 |
| Butcher | 4,261 |
| Building supplies (repairs) | 814 |
| Electricity | 935 |
| Gas | 566 |
| Wages | 1,150 |
She also informs you that she has received GH₵37,550,000 in cash from guests, of which GH₵4,300,000 relates to deposits paid in advance for holidays to be taken after 1 May 20X9.
You discover on further investigation that invoices for April 20X9 from the butcher and wholesaler, amounting to GH₵431,000 and GH₵292,000, were received on 15 May. The electricity bill for the quarter ended 31 May 20X9 totals GH₵220,000, and the chambermaids are paid a week in arrears at GH₵42,000 per week. Gas cylinders are purchased in advance at GH₵17,000 each, and two remain unused at 30 April.
Required
(a) Calculate the amounts to be included in the statement of profit or loss for each of the above items for the year ended 30 April 20X9.
(b) Calculate the relevant statement of financial position amounts at 30 April 20X9.
Answer
(A) Statement of profit or loss
| Item | GH₵(000) | GH₵(000) |
|---|---|---|
| Revenue | 33,250 | |
| Expenses | ||
| Wholesaler | 4,237 | |
| Butcher | 4,692 | |
| Building supplies | 814 | |
| Electricity | 861 | |
| Gas | 532 | |
| Wages | 1,192 | |
| Total expenses | 12,328 | |
| Profit | 20,922 |
Workings
- Revenue: GH₵37,550 – GH₵4,300 (deposits for future holidays) = GH₵33,250
- Wholesaler: GH₵3,945 + GH₵292 (accrued invoice) = GH₵4,237
- Butcher: GH₵4,261 + GH₵431 (accrued invoice) = GH₵4,692
- Building supplies: GH₵814 (no adjustments, repairs expensed as incurred)
- Electricity: GH₵935 – GH₵220/3 (May portion) = GH₵935 – GH₵74 = GH₵861
- Gas: GH₵566 – (2 × GH₵17) (prepaid cylinders) = GH₵566 – GH₵34 = GH₵532
- Wages: GH₵1,150 + GH₵42 (accrued wages) = GH₵1,192
(B) Statement of financial position
| Item | GH₵(000) | GH₵(000) |
|---|---|---|
| Current assets | ||
| Prepayments (gas cylinders) | 34 | |
| Total assets | 34 | |
| Current liabilities | ||
| Trade payables (wholesaler) | 292 | |
| Trade payables (butcher) | 431 | |
| Accrued expenses (wages) | 42 | |
| Accrued expenses (electricity) | 74 | |
| Deposits in advance | 4,300 | |
| Total liabilities | 5,139 |
Workings
- Prepayments: 2 gas cylinders × GH₵17,000 = GH₵34,000
- Trade payables (wholesaler): GH₵292,000 (unpaid invoice)
- Trade payables (butcher): GH₵431,000 (unpaid invoice)
- Accrued expenses (wages): GH₵42,000 (one week in arrears)
- Accrued expenses (electricity): GH₵220,000 / 3 = GH₵74,000 (May portion)
- Deposits in advance: GH₵4,300,000 (cash received for future holidays)
- Topic: Accruals and prepayments
- Uploader: Samuel Duah