Accruals – Page 2

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 – 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

AA – L2 – Q51 – Audit Evidence

Describe audit work to check supplier statements against purchase ledger balances for Kumasi Manufacturing Ltd. Describe audit work to verify purchases cut-off at year-end for Kumasi Manufacturing Ltd. Describe audit work to ensure sundry payables and accruals are correctly stated for Kumasi Manufacturing Ltd.

Question

our firm is the auditor of Kumasi Manufacturing Ltd, and you have been asked to suggest the audit work you will carry out in verifying accounts payable and purchase accruals at the company’s year-end of 30 September 2025. You attended the inventory count at the year end.

The company operates from a single site and all raw materials for production are received by the goods inwards department. When the materials are received they are checked for quantity and quality to the delivery note and purchase order, and a multipart goods received note is made out and signed by the storekeeper. If there are any problems with the raw materials, a discrepancy note is raised which gives details of the problems (e.g. incorrect quantities or faulty materials).

The purchase accounting department receive the purchase invoices, check them to the purchase order and goods received note and post them to the purchase ledger. At the end of each month, payments are made to suppliers. The purchase ledger is maintained on a PC.

The main sundry payables and accruals at the year-end include:
(i) wages accruals and associated taxes payable;
(ii) sales taxes payable;
(iii) time dependent accruals, such as interest on loans and overdrafts, telephone, heat and light, and other expenses paid in arrears.

Most employees’ wages are paid weekly in arrears.

Required:
(a) Describe in detail the audit work you will carry out to check suppliers’ statements to the balances on the purchase ledger.

(b) Verify that purchases cut-off has been correctly carried out at the year-end.

(c) Ensure that sundry payables and accruals are correctly stated.

Answer

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Tags: Accruals, Audit Evidence, Payroll, Substantive Procedures, Sundry Payables, Taxes
Level: Level 2

Topic: Audit Evidence

Tag (SQ): Accruals

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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 – 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.

AA – L2 – Q51 – Audit Evidence

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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.

You're reporting an error for "FA – L1 – Q41 – 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.

You're reporting an error for "FA – L1 – Q40 – Accruals and prepayments"

FA – L1 – Q38 – Accruals and prepayments

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

You're reporting an error for "FA – L1 – Q38 – 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.

You're reporting an error for "FA – L1 – Q37 – Accruals and prepayments"

FA – L1 – Q36 – Accruals and prepayments

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

You're reporting an error for "FA – L1 – Q36 – Accruals and prepayments"

AA – L2 – Q51 – Audit Evidence

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