Tag (SQ): Accruals

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  • 20 Marks

FA – L1 – Q95 – Preparation of accounts from incomplete records

Prepare Kofi Mensah's statement of profit or loss and financial position for 20X9 using incomplete records and bank summary.

Kofi Mensah retired from his employment abroad and returned to this country, where he purchased a small kiosk.
He took over the business on 1 July 20X8, acquiring the existing inventory at a valuation of GH¢1,142,000. The rest of the purchase price was apportioned as to GH¢1,500,000 for fixtures and fittings and the balance for goodwill.
The following day he acquired a second-hand computer and accounts package at a price of GH¢80,000. Unfortunately, Kofi Mensah made an error when printing his year-end accounts causing him to lose all data except for printed a summary listing of payments from the till. Other than this, the only records available were his bank statements and a number of vouchers. Surplus cash was banked during the year.
A summary of his bank account for the year ended 30 June 20X9 shows the following.

Receipts GH¢000 Payments GH¢000
Cash introduced 5,000 Purchase of business 3,192
Bankings from shop 16,427 Purchase of accounts computer 80
Loan from mother (long-term) (interest at 5% pa) 1,000 Rent (15 months to 30 September 20X9) 500
Rates (9 months to 31 March 20X9) 84
Electricity 92
Purchases for resale 14,700
Private cheques 1,122
Balance 30 June 20X9 2,657
22,427 22,427

The computer print-out was as follows.

GH¢000
Cash purchases for resale 1,606
Staff wages 742
Sundry shop expenses 156
Cash drawings 520

On 30 June 20X9 inventory, measured at cost, amounted to GH¢1,542,000, amounts due from customers GH¢74,000, and cash in hand amounted to GH¢54,000. Depreciation is to be recognised on fixtures and fittings at a rate of 10%.
Accounts outstanding on 30 June 20X9 were purchases of GH¢470,000 and rates of GH¢120,000 for the year ended 31 March 20Y0.

Required:
Prepare Kofi Mensah’s statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position at that date.

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  • 20 Marks

FA – L1 – Q94 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for a sole trader using incomplete records for 20X9.

Kofi Mensah does not keep proper books of account due to his lack of knowledge of double entry system of accounting. He has supplied you the following information with respect to the year ended 31 December 20X9 from the records kept in his diary:
(i) Transactions during the year:

GH¢
Cash received from customers 80,000
Discount allowed to customers 1,400
Irrecoverable debts written off 1,800
Cash paid to suppliers 63,000
Discount allowed by suppliers 1,000
Sales returns 3,000
Purchases returns 2,000
Expenses paid 6,000
Drawings 5,000
Rent paid 2,500

(ii) Opening balances as on 1 January 20X9:

Assets and liabilities GH¢
Receivables 45,000
Payables 24,000
Cash 4,500
Furniture and fixtures 15,000
Inventory 25,000
Motor van 16,000

(iii) Receivables and payables as on 31 December 20X9 amounted to GH¢ 48,600 and GH¢ 27,000 respectively.
(iv) Outstanding expenses as on 31 December 20X9 amounted to GH¢ 1,200.
(v) Depreciation is charged on furniture and fixtures at the rate of 10% and on motor van at 20%.
(vi) Kofi Mensah sells goods at cost plus 40% and follows a policy of maintaining an allowance of 5% of the outstanding receivables.

Required:
Prepare the following:
(a) Statement of profit or loss for the year ended 31 December 20X9.
(b) Statement of financial position as at 31 December 20X9.

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  • 20 Marks

FA – L1 – Q86 – Preparation of not-for-profit accounts

Prepare income and expenditure account and statement of financial position for Sunridge Golf Club for the year ended 31 March 20X9.

The treasurer of the Sunridge Golf Club has prepared the following receipts and payments account for the year ended 31 March 20X9.

N₦(000)
Balance at 1 April 20X8 682 Functions 305
Subscriptions 2,930 Repairs 65
Functions 367 Telephone 67
Sale of land 1,600 Extension of club house 600
Bank interest 60 Furniture 135
Bequest (legacy) 255 Heat and light 115
Sundry income 46 Salary and wages 2,066
Sundry expenses 110
Balance at 31 March 20X9 2,520
5,940 5,940

(a) Subscriptions received included N₦65,000 which had been in arrears at 31 March 20X8 and N₦35,000 which had been paid for the year commencing 1 April 20X9.
(b) Land sold had been valued in the club’s books at cost N₦500,000.
(c) Accrued expenses

31 March 20X8 N₦(000) 31 March 20X9 N₦(000)
Heat and light 32 40
Salaries and wages 12 14
Telephone 14 10
Total 58 64

(d) Depreciation is to be charged on the original cost of assets appearing in the books at 31 March 20X9 as follows:

  • Buildings: 5%
  • Fixtures and fittings: 10%
  • Furniture: 20%

(e) The following balances are from the club’s books at 31 March 20X8:

  • Land at cost: N₦4,000,000
  • Buildings at cost: N₦3,200,000
  • Buildings allowance for depreciation: N₦860,000
  • Fixtures and fittings at cost: N₦470,000
  • Fixtures allowance for depreciation: N₦82,000
  • Furniture at cost: N₦380,000
  • Furniture allowance for depreciation: N₦164,000
  • Subscriptions in arrears (including N₦15,000 irrecoverable – member had emigrated): N₦80,000
  • Subscriptions in advance: N₦30,000

Required:
Prepare an income and expenditure account for the year ended 31 March 20X9 and a statement of financial position as at that date.

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  • 20 Marks

FA – L1 – Q72 – Preparing financial statements of a sole trader

Prepare Zanko Ventures' statement of profit or loss for 20X9 using trial balance and adjustments.

(a) Distinguish between capital expenditure and revenue expenditure.
(b) (i) The following trial balance was extracted from the books of Zanko Ventures, a second-hand bags dealer as at 31st December, 20X9.

Description DR (GH₵) CR (GH₵)
Inventory 120,000
Vehicle (Cost) 150,000
Trade receivables 25,000
Accumulated depreciation: Vehicle 30,000
Accumulated depreciation: Furniture & fittings 10,120
Trade payables 100,000
Drawings 120,000
General expenses 65,000
Allowance for receivables 2,500
Rate & rent 14,000
Insurance 5,000
Irrecoverable debt 7,000
Discount received 25,150
Discount allowed 15,160
Bank balance 165,240
Wages & salaries 250,000
Sundry expenses 6,150
Vehicle running expenses 15,650
Furniture & fittings 50,600
Repairs to the shop 6,500
Purchases 650,120
Sales 1,079,130
Capital 473,520
Total 1,720,420 1,720,420

The following additional information is provided:
(i) Allowance for receivables is to be reduced by 10%.
(ii) Rate and rent has been paid in advance by two (2) months. Note that Zanko Ventures pays GH₵1,000 each month.
(iii) Inventory as at 31st December, 20X9 is GH₵80,150.
(iv) A bill of GH₵6,150 for vehicle running was outstanding as at 31st December, 20X9.
(v) The enterprise provides depreciation as follows:

  • Vehicle: 20% per annum on straight-line basis.
  • Furniture and fittings: 20% per annum on straight-line basis.

You are required to:
(i) Prepare the statement of profit or loss for the year ending 31st December 20X9.

(ii) Prepare the statement of financial position as at 31st December 20X9.

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  • 20 Marks

FA – L1 – Q71 – Preparing financial statements of a sole trader

Prepare Harmony Ventures' statement of profit or loss for the year ended 30 September 20X9 using the trial balance and additional info.

Harmony Ventures is run by a sole trader. The following Trial Balance was prepared from the business accounts on 30th September 20X9.

Harmony Ventures: Trial Balance as at 30th September 20X9

DR GH₵ CR GH₵
Capital 185,280
Inventory 37,360
Sales 421,450
Purchases 193,150
Purchase returns 6,040
Electricity 3,410
Discounts allowed 2,230
Discounts received 2,420
Motor expenses 4,270
Drawings 32,000
Bank 24,511
Salaries 108,000
Insurance 15,400
Receivables 110,140
Irrecoverable debts 1,420
Allowance for receivables 3,153
Payables 76,283
General expenses 6,780
9% Loan (20Y16 – 20Y3) 150,000
Loan interest 12,000
Land and buildings 340,000
Accumulated depreciation for buildings 16,000
Equipment 22,000
Accumulated depreciation for equipment 10,300
Motor vehicles 26,000
Accumulated depreciation for motor vehicles 13,250
Total 896,031 896,031

The following information is also available:
(i) Only 10 months’ salaries are shown in the Trial Balance. An equal amount is paid for salaries for each month of the year.
(ii) As at 30th September 20X9, GH₵3,200 had been prepaid for insurance, whilst GH₵410 was owing for general expenses.
(iii) GH₵4,600 had been charged to general expenses for the owner’s private holiday.
(iv) As at 30th September 20X9, inventory was valued at GH₵22,500.
(v) A customer, owing GH₵5,040 has been declared bankrupt. This amount is to be written off in full.
(vi) An allowance for receivables is to be maintained at 3% of the remaining receivables.
(vii) As at 30th September 20X9, the business’s land was valued at GH₵100,000. Land is not depreciated.
(viii) Depreciation is to be provided as follows:

  • Buildings: 4% per annum using the straight line method.
  • Equipment: 25% per annum using the straight line method.
  • Motor vehicles: 40% per annum using the reducing balance method.
    (ix) There were no additions or disposals of non-current assets during the financial year.

Required:
(a) Prepare the statement of profit or loss for the year ended 30th September 20X9.

(b) Prepare the statement of financial position as at 30th September 20X9.

(c) (i) Identify the accounting concept involved in each of the footnotes/items (i), (iii) and (v).

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  • 15 Marks

FA – L1 – Q70 – Preparing financial statements of a sole trader

Prepare Henry's statement of profit or loss for the year ended 31 May 20X9 and statement of financial position as at that date using the trial balance.

The following trial balance has been extracted from the ledger of Henry, a sole trader, as at 31 May 20X9, the end of his most recent financial year.

Henry: Trial balance as at 31 May 20X9

DR GH₵(000) CR GH₵(000)
Land and buildings at cost 90,000
Equipment at cost 57,500
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 12,500
On equipment 32,500
Inventory as at 1 June 20X8 27,400
Sales 405,000
Purchases 259,600
Discounts received 4,420
Wages and salaries 52,360
Irrecoverable debts 1,720
Loan interest 1,560
Other operating expenses 38,800
Trade receivables 46,200
Trade payables 33,600
Allowance for receivables 280
Cash in hand 151
Bank overdraft 14,500
Carriage out 8,680
Drawings 28,930
10% loan 15,600
Capital as at 1 June 20X8 94,501
Total 612,901 612,901

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH₵25,900,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Property – 1% using the straight-line method;
  • Equipment – 15% using the straight-line method.
    (c) There are accrued wages and salaries of GH₵140,000.
    (d) Other operating expenses include some prepaid expenses of GH₵500,000 and some accrued expenses of GH₵200,000.
    (e) The allowance for receivables should be adjusted to 5% of trade receivables as at 31 May 20X9.
    (f) The amount for purchases includes goods valued at GH₵1,040,000 which were withdrawn by Henry for his own personal use.

Required
Prepare Henry’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

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  • 15 Marks

FA – L1 – Q69 – Preparing financial statements of a sole trader

Prepare Sarah's statement of profit or loss for 20X8 and financial position as at 31 Dec 20X8 using given balances and adjustments.

The following information relates to the business of Sarah for the year ended December 20X8.

GH$ GH$
Capital account, 1 January 20X8 13,640
Freehold properties at cost 7,500
Furniture and fittings at cost 2,000
Motor cars at cost 6,300
Accumulated depreciation to 1 January
Freehold properties 450
Furniture and fittings 800
Motor cars 2,370
Inventory 1 January 6,740
Purchases 54,520
Sales 79,060
Salaries 8,760
Rates 1,170
Office expenses 3,950
Motor expenses 3,790
Drawings 4,800
Allowance for receivables 1 January 600
Loan 4,000
Trade receivables 9,240
Trade payables 10,040
Bank balance 2,190
110,960 110,960

You are also supplied with the following information:
(1) Inventory at 31 December 20X8 was GH$7,330.
(2) Rates paid in advance at 31 December 20X8 amounted to GH$250.
(3) Allowance for receivables is to be made equal to 5% of accounts receivable at 31 December 20X8.
(4) Depreciation is to be provided for the year at the following annual rates calculated on cost at the year end:

  • Freehold properties: 1%
  • Furniture and fittings: 10%
  • Motor cars: 20%
    (5) Interest on the loan at 5% per annum is to be provided.

Required:
Prepare a statement of profit or loss for the year ended 31 December 20X8 and a statement of financial position at that date.

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  • 15 Marks

FA – L1 – Q68 – Preparing financial statements of a sole trader

Prepare Michael Tan's statement of profit or loss for 20X9 and financial position as at 31 May 20X9 using trial balance and adjustments.

The following trial balance was extracted from the main ledger of Michael Tan, a sole trader, as at 31 May 20X9 – the end of his financial year.

Michael Tan: Trial balance as at 31 May 20X9

DR GH$(000) CR GH$(000)
Land and buildings at cost 120,000
Equipment at cost 80,000
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 36,000
On equipment 38,000
Purchases 250,000
Sales 402,200
Inventory as at 1 June 20X8 50,000
Discounts received 4,800
Returns outwards 15,000
Wages and salaries 79,800
Irrecoverable debts 2,100
Loan interest 2,100
Other operating expenses 17,700
Trade payables 36,000
Trade receivables 38,000
Cash in hand 300
Bank 1,300
Drawings 24,000
Allowance for receivables 500
7% long-term loan 30,000
Capital as at 1 June 20X8 121,300
665,300 683,800

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH$42,000,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Land and buildings: 1.5% using the straight-line method;
  • Equipment: 25% on the carrying amount at the year-end (i.e., cost less accumulated depreciation at 1 June 20X8).
    (c) There are accrued wages and salaries of GH$800,000.
    (d) Other operating expenses include some prepaid expenses of GH$300,000.
    (e) The allowance for receivables should be adjusted to 2% of trade receivables as at 31 May 20X9.

Required:
Prepare Michael Tan’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

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  • 15 Marks

FA – L1 – Q67 – Preparing financial statements of a sole trader

Prepare DOVE's statement of profit or loss for 20X9 and statement of financial position as at 31 Dec 20X9 using given ledger balances and adjustments.

The following balances were extracted from the main ledger of DOVE on 31 December 20X9.

Description GH$(000)
Capital 10,059
Inventory at 1 January 20X9 2,720
Cash in hand 55
Bank overdraft 2,522
Sundry receivables 7,009
Sundry payables 6,735
Motor vans (Cost GH$2,000) 1,500
Drawings in cash 2,459
Fixtures and fittings (Cost GH$4,000) 3,800
Purchases 33,436
Allowance for receivables 162
Sales 50,261
Purchases returns 120
Carriage inwards 546
Rent 626
Salaries and wages 5,226
Motor vehicle expenses 920
Interest on bank overdraft and bank charges 56
Carriage outwards 785
Returns inwards 240
Freehold land 10,300
Irrecoverable debts 240

You are given the following information:
(1) The inventory at 31 December 20X9 was GH$4,270,000.
(2) Wages and salaries payable at 31 December 20X9 were GH$426,000.
(3) Rent paid in advance at 31 December 20X9 amounted to GH$100,000.
(4) The allowance for receivables is to be increased to GH$260,000.
(5) Depreciation is to be charged as follows: motor vans at 25% per year on cost, fixtures and fittings 5% per year on cost.
(6) During 20X9, the owner of DOVE withdrew goods valued at GH$180,000 for his own use. No entry has been made in the accounts for the withdrawal of these goods.
(7) One quarter of the motor vehicle expenses is the cost of the owner’s private motoring, as distinct from expenses for business purposes.

Required:
Prepare a statement of profit or loss for the year ending on 31 December 20X9 and a statement of financial position as at that date.

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  • 10 Marks

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.

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.

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