FINANCIAL ACCOUNTING – Page 7

FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

Question

t 31 December 20X9 Bles had the following items of inventory:

Product	Quantity	Total cost GH₵	Realisable value GH₵	Estimated cost of realisation GH₵
ABC	20	80	200	20
DEF	10	150	120	10
GHI	6	6	7	2
JKL	12	36	12	1

Required
What amount of inventory should be presented in the statement of financial position of Bles at 31 December 20X9.

Answer

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Tags: Cost, Financial Position, Inventory, Net Realisable Value, Valuation
Level: Level 1

Topic: Inventory

FA – L1 – Q43 – Inventory

Write up inventory, purchases, and revenue accounts for two years for a sole trader.

Question

Kofi started business on 1 January 20X8. At the end of his first year of trading he had closing inventory of GH¢5,000. During 20X9 he traded continuously and at 31 December 20X9 he had inventory amounting to GH¢7,500.
Sales for 20X8 and 20X9 were GH¢120,000 and GH¢155,000 respectively and purchases were GH¢75,000 and GH¢110,000 respectively.

Required
(a) Write up the inventory account, purchases account, and revenue account for the two years.

(b) Prepare the trading account for EACH of the two years.

Answer

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Tags: Financial Statements, Inventory, Ledger accounts, Purchases, Revenue, Sole Trader, Trading Account
Level: Level 1

Topic: Inventory

FA – L1 – Q42 – Accruals and prepayments

Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

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

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Tags: accrual basis, Accruals, cash basis, Expenses, Financial Statements, hotel operations, Prepayments, Profit or Loss, Revenue Recognition
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

Question

The following list of account balances was extracted from the books of Kweku at 30 April 20X9.

	Dr GH¢(000)	Cr GH¢(000)
Revenue		18,955
Purchases	12,556
Inventory 1 May 20X8	3,776
Salaries and wages	2,447
Motor expenses	664
Rent	456
Rates	120
Insurance	146
Packing expenses	276
Lighting and heating expenses	665
Sundry expenses	115
Motor vehicles	2,400
Fixtures and fittings	600
Trade receivables	4,577
Trade payables		3,045
Cash at bank	3,876
Cash in hand	120
Drawings	2,050
Capital		12,844
	34,844	34,844

Notes at 30 April:
(1) Expenses which have been prepaid – rates GH¢20,000; Insurance GH¢35,000.
(2) Expenses which are owing – motor expenses GH¢56,000; rent GH¢24,000; sundry expenses GH¢26,000.
(3) Inventory GH¢4,998,000.

Required:
From the list of balances and the notes, prepare Kweku’s statement of profit or loss for the year ended 30 April 20X9 and a statement of financial position at that date.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Inventory, Ledger accounts, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q40 – Accruals and prepayments

Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

Question

James owns various properties which he rents out under short-term lets; some tenants pay in advance, some in arrears. Similarly with his various borrowings the interest is paid in arrears and in advance.
During 20X9 rent collected was GH₵229,500 and interest charged to the statement of profit or loss was GH₵52,500.
Rents receivable and paid in advance together with amounts of interest prepaid and payable at the statement of financial position dates were as follows.

	31 December
	20X8	20X9
	GH₵	GH₵
Rents owed by tenants	34,200	40,500
Rents prepaid by tenants	20,700	15,300
Prepaid interest	3,500	5,600
Interest payable	9,800	7,000

Required
Write up the rent receivable account and the interest payable account for the year ended 31 December 20X9.

Answer

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Tags: Accruals, Financial Statements, Interest Payable, Ledger accounts, Prepayments, Rent Receivable
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

Question

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

	Dr GH₵(000)	Cr GH₵(000)
Capital		5,000
Cash	4,200
Motor van	600
Trade payable – A		200
Trade receivable – B	300
Rates prepaid	100
	5,200	5,200

Cash transactions during the period to 31 March 20X9 were

	GH₵(000)
Purchases	2,000
Revenue	3,000
Drawings	500
Motor running expenses	350
Rates	250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

Answer

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Tags: Cash Transactions, Financial Statements, Inventory, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

Question

The following is an extract from the trial balance of Nyame at 31 December 20X9.

| | Dr | Cr | |

| GH¢(000) | GH¢(000) |

| Stationery | 560 |

| | Rent | 900 | |

| Rates | 380 | |

| Lighting and heating | 590 | |

| Insurance | 260 | |

| Wages and salaries | 2,970 | |

There was stationery still in hand at 31 December 20X9 which had cost GH¢15,000.
Rent of GH¢300,000 for the last three months of 20X9 had not been paid and no entry has been made in the books at all for it.
Of the rates, GH¢280,000 was for the year ended 31 March 20Y0. The remaining GH¢100,000 was for the three months ended 31 March 20X9.
Fuel had been delivered on 18 December 20X9 at a cost of GH¢15,000 and had been consumed before the end of 20X9. No invoice had been received for the GH¢15,000 fuel in 20X9 and no entry has been made in the records of the business.
GH¢70,000 of the insurance paid was in respect of insurance cover for the year 20Y0.
Nothing was owing to employees for wages and salaries at the close of 20X9.
Required:
Record the above information in the relevant accounts for the year ended 31 December 20X9 and close the accounts.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Insurance, Ledger accounts, lighting and heating, Prepayments, rates, rent, stationery, Trial Balance
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q37 – Accruals and prepayments

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

Question

Vulcan owns a removal business and runs a small fleet of vans. He prepares his accounts to 31 December each year.
The following transactions occur in relation to insurance for the year 20X9.
1 January: The amount prepaid for insurance was GH¢1,140,000.
1 April: He paid GH¢840,000 insurance for the year ended 31 March 20Y0 on six of the vans.
1 May: He paid GH¢3,540,000 insurance for twenty vans for the year ended 30 April 20Y0.
1 July: He paid GH¢560,000 insurance for the remaining vans for the year ended 30 June 20Y0.

Required:
Write up the insurance account for the year ended 31 December 20X9.

Answer

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Tags: Accruals, Bookkeeping, Financial accounting, Insurance, Ledger accounts, Non-current Assets, Prepayments, Statement of Financial Position, Trial Balance, Year-end adjustments
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q36 – Accruals and prepayments

Write up water expense ledger accounts for 20X8 and 20X9 under different payment scenarios.

Question

Kieran started a business on 1 January 20X8.

Accounting year ended 31 December 20X8:

A new warehouse was acquired on 31 March 20X8. On 21 April 20X8, Kieran received a water bill demand for GH₵1,000,000 for the 12 months to 31 March 20X9. Payment was made, in full, on 30 April 20X8.

Accounting year ended 31 December 20X9:

An office extension was built. The water bill demand for the 12 months to 31 March 20Y0 was GH₵1,600,000. Kieran paid the full amount on 1 June 20X9.

Required:

(a) Write up the water expense ledger account for 20X8 and for 20X9.

(b) Assuming now that payments were made annually in arrears (i.e. GH₵1,000,000 on 31 March 20X9 and GH₵1,600,000 on 31 March 20Y0), write up the water expense ledger account for each of the two accounting years.

Answer

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Tags: Accruals, Financial Adjustments, Ledger accounts, Prepayments, Water Expense
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q35 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance accounts for three years with specific and general allowances, including financial position extracts.

Question

In her first year of trading to 31 December 20X7, Akosua made credit sales of GH₵200,000 and received GH₵150,000 from credit customers.
At the end of the year, she decided to write off Abena’s debt of GH₵8,000, make a specific allowance for Kofi’s debt totalling GH₵3,500, and create a general allowance of 5% of remaining trade receivables.
During her second year of trading, she made sales on credit of GH₵300,000 and received cash of GH₵280,000, including GH₵4,000 from Abena. At 31 December 20X8, she decided to write off Kofi’s debt and create a specific allowance against 50% of Esi’s total debt of GH₵6,000. She decided that a general allowance should now be 8% of remaining accounts receivable.
In the year to 31 December 20X9, Akosua made credit sales of GH₵500,000 and received cash of GH₵400,000. Separate from this, she also received a cheque from Esi for GH₵6,000.
At the year-end, she decided to create a specific allowance against Kwame’s debt of GH₵50,000 and maintain a general allowance at 8%.

Required
For each of the above years, show the trade receivables account, irrecoverable debt expense account, and allowance for receivables account, and the statement of financial position extract as at each year end.

Answer

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Tags: Allowance for receivables, Bad Debts, Cash receipts, Credit Sales, Doubtful debts, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

Subject (SQ): FINANCIAL ACCOUNTING

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FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

FA – L1 – Q43 – Inventory

Write up inventory, purchases, and revenue accounts for two years for a sole trader.

FA – L1 – Q42 – Accruals and prepayments

Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

FA – L1 – Q40 – Accruals and prepayments

Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

FA – L1 – Q37 – Accruals and prepayments

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

FA – L1 – Q36 – Accruals and prepayments

Write up water expense ledger accounts for 20X8 and 20X9 under different payment scenarios.

FA – L1 – Q35 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance accounts for three years with specific and general allowances, including financial position extracts.

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Subject (SQ): FINANCIAL ACCOUNTING

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Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

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Write up inventory, purchases, and revenue accounts for two years for a sole trader.

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Calculate amounts for profit or loss for a hotel's expenses and revenue for the year ended 30 April 20X9.

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Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

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Prepare rent receivable and interest payable ledger accounts for James for 20X9 based on given rental and interest data.

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Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

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Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

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Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

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Write up water expense ledger accounts for 20X8 and 20X9 under different payment scenarios.

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Write up receivables, irrecoverable debts expense, and allowance accounts for three years with specific and general allowances, including financial position extracts.

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