Adjustments – Knowsia

FR – L2 – Q46 – Events After the Reporting Period

Explain accounting treatment for post-year-end events affecting receivables, property, inventory, subsidiaries, and other events for Earley Enterprises.

Question

Earley Enterprises is finalising its accounts for the year ended 31 December 20X3. The following events have arisen since the year end and the financial director has asked you to comment on the final accounts.

(a) At 31 December 20X3 trade receivables included a figure of GH¢250,000 in respect of NedenCorp. On 8 March 20X4, when the current debt was GH¢200,000, NedenCorp went into receivership. Recent correspondence with the receiver indicates that no dividend will be paid to unsecured creditors.

(b) On 15 March 20X4 Earley Enterprises sold its former head office building, Whiteley Grove, for GH¢2.7 million. At the year end the building was unoccupied and carried at a value of GH¢3.1 million.

(c) Inventories at the year-end included GH¢650,000 of a new electric tricycle the Oparis. In January 20X4 the European Union declared the tricycle to be unsafe and prohibited it from sale. An alternative market, in Bongaria, is being investigated, although the current price is expected to be cost less 30%.

(d) Stingray Ltd, a subsidiary in Outer Sarnia, was nationalised in February 20X4. The Outer Sarnia authorities have refused to pay any compensation. The net assets of Stingray Ltd have been valued at GH¢200,000 at the year end.

(e) Freak floods caused GH¢150,000 damage to the Southridge branch of Earley Enterprises in January 20X4. The branch was fully insured.

(f) On 1 April 20X4 Earley Enterprises announced a 1 for 1 rights issue aiming to raise GH¢15 million.

Required

Explain how you would respond to the matters listed above.

Answer

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Tags: Adjustments, Disclosures, Events After Reporting Period, Financial Statements, IAS 10, Impairment, Inventories, Subsidiaries
Level: Level 2

Topic: Events After the Reporting Period

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.

Question

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.

Answer

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Tags: Accruals, Adjustments, Club accounting, Depreciation, Financial Statements, Income and expenditure, Non-profit organizations, Not-for-profit, Statement of Financial Position, Subscriptions
Level: Level 1

Topic: Preparation of not-for-profit accounts

FA – L1 – Q81 – Preparation of Partnership accounts

Prepare capital accounts and statement of financial position for Alvin, Boris, and Gina partnership after Gina's admission, including adjustments for goodwill and revaluation.

Question

Alvin and Boris are partners in a firm sharing profits and losses in the ratio of 3:2. The Statement of financial position of the firm as on 31 March 20X9 was as under:

Assets	GH¢
Furniture and fixture	600,000
Office equipment	300,000
Motor car	375,000
Inventory	250,000
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Due to expansion in the business, Gina was admitted as a partner with effect from 1 April 20X9. Gina brought furniture worth GH¢120,000 and inventory costing GH¢80,000. She also contributed cash of GH¢150,000 plus her proportionate share of goodwill valued at two years’ purchase of the average profits of the last three years.
Following adjustments were considered necessary, at the time of admission:
(i) On 1 April 20X7, new furniture costing GH¢8,000 was purchased but wrongly debited to revenue account. The firm charges depreciation on furniture @ 10% on straight line basis.
(ii) An invoice dated 1 October 20X8 for purchase of goods amounting to GH¢24,000 has not been recorded.
(iii) Value of the sundry receivables on 31 March 20X9 is to be reduced by 6%.
The profits of the last three years, before the above adjustments were:

Year	GH¢
20X8-11	352,100
20X7-10	232,000
20X9-09	128,000

It was decided that the future profits of the firm would be shared among Alvin, Boris, and Gina in the ratio of 5:3:2 respectively.

Required:
Prepare the capital accounts of the partners and the statement of financial position of the firm on Gina’s admission as a partner.

Answer

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Tags: Adjustments, Capital accounts, Depreciation, Financial Statements, Goodwill, Partner admission, Partnership accounts, Profit-sharing ratio, Revaluation, Statement of Financial Position
Level: Level 2

Topic: Preparation of Partnership accounts, Preparing financial statements

FA – L1 – Q66 – Bank reconciliations

Prepare an adjusted cash book for Mama Clara as at 31st December 20X9 based on bank statement and cash book discrepancies.

Question

The following information was extracted from the records of Mama Clara, a sole trader as at 31st December, 20X9.
Balance as per bank statement as at 31st December, 20X9 was GH¢10,000 credit.
Cash book balance was GH¢40,000 credit in the bank account column.
The following had been reflected in the bank statement but not in the cash book.
(i) Bank loan interest GH¢2,000
(ii) Bank charges GH¢6,000
(iii) Dividends from Investment GH¢10,000
(iv) Interest from treasury bill GH¢4,000
In addition, a cheque of GH¢20,000 issued to Madam Grace was dishonoured because of insufficient funds. A cheque of GH¢25,000 from Samuel has not been credited. A cheque of GH¢49,000 issued to Simon remained unpresented.

You are required to prepare:
(i) An adjusted cash book.

(ii) Bank reconciliation statement as at 31st December, 20X9.

Answer

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Tags: Adjustments, Bank reconciliation, Cash book, Financial accounting, Uncredited deposits, Unpresented cheques
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q65 – Bank Reconciliations

Demonstrate adjustments needed to KW Ltd's cash book for July 20X9 due to errors and unrecorded transactions.

Question

The following is a summary from the cash book of KW Ltd for July 20X9:

Opening balance	1,530
Receipts	23,104
Payments	23,005
Closing balance	1,629

On investigation it was discovered that:
(i) Bank charges of GH₵15 shown on the bank statement have not been entered in the cash book.
(ii) A cheque drawn for GH₵110 to pay a supplier has been entered in the cash book as a receipt.
(iii) A cheque from a customer for GH₵120, which was banked (and included above in receipts), has been returned by the bank, but this has not been adjusted in the company’s books.
(iv) An error of transposition which occurred in the opening balance of the cash book should have been recorded as GH₵1,350.
(v) Cheques totaling GH₵264 have been sent by post to suppliers but were not presented to the company’s bank until August 20X9.
(vi) The last page of a bank account paying-in book shows a deposit of GH₵1,040 which was not credited to the account by the bank until 1st August 20X9.
(vii) The company’s bank statement at 31st July 20X9 shows a balance of GH₵318.

Required:
(a) Demonstrate any adjustments needed to the company’s accounting records.

(b) Prepare a Bank Reconciliation Statement as at 31st July 20X9.

Answer

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Tags: Adjustments, Bank reconciliation, Bank statement, Cash book, Cheques, Deposits, Error Correction, Financial accounting
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q57 – Bank reconciliations

Prepare a bank reconciliation for Newman & Co as at 31 August 20X9, correcting errors in the cash book and bank statement.

Question

Following information has been collected from the books of Newman & Co, as at August 31, 20X9:
(a) Balance as per bank book
(b) Cash balance on bank statement
(c) Cheques outstanding on August 31 were as follows:

Cheque No.	GH¢
670	13,353
679	14,152
690	17,108
996	3,535
997	14,430
999	23,629

(d) The company made the following payments into the bank in the last week in August but these had not yet appeared on the bank statement.

GH¢
83,250
144,641

(e) The following matters have been discovered.
(i) Receipt of GH¢15,000 was erroneously recorded on the credit side of the bank book.
(ii) A payment of GH¢12,480 was erroneously recorded on the debit side of the bank book.
(iii) The credit side of the bank book has been overcasted by GH¢4,800.
(iv) The bank statement showed an amount collected by the bank but not shown in the cash book in the amount of GH¢87,188.

Required
Prepare the bank reconciliation as at 31 August.

Answer

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Tags: Adjustments, Bank reconciliation, Bank statement, Cash book, Cheques, Errors, Financial accounting, Overdraft
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q56 – Bank reconciliations

Reconcile cash book with bank statement for Sandwell Ltd, adjust ledger for unrecorded items.

Question

A company, Sandwell Ltd, receives a bank statement. The balance on its cash book (= bank account in the main ledger) is a debit balance of GH₵1,600,000. In reconciling the cash book balance with the bank statement balance, the accountant discovers that the bank statement does not show cheques received from customers for GH₵8,200,000 and banked, or cheque payments to suppliers for GH₵4,700,000. The bank statement also shows bank charges of GH₵150,000, a direct debit payment of GH₵400,000, and a dishonoured cheque for GH₵300,000. None of these three items have yet been recorded in the ledger.

Required:

What is the balance on the bank statement?
What entries should be made in the company’s ledger accounts when the cash book and the bank statement balances have been reconciled?

Answer

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Tags: Adjustments, Bank charges, Bank reconciliation, Bank statement, Cash book, Direct Debit, Dishonoured Cheque, Errors, Financial accounting, Ledger Entries
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q50 – Control accounts and account reconciliations

Prepare a receivables control account for Wako Associates with adjustments for errors identified in the sales ledger as of 31 December 20X9.

Question

The net sales ledger balances of Wako Associates aggregated GH¢319,000 as on December 31, 20X9. However, the receivables control account showed balance of GH¢350,410. On checking the following errors were identified:
(i) A credit balance amounting to GH¢1,200 had been omitted from the list of balances.
(ii) The Sales Return Book had been undercast by GH¢12,000.
(iii) A balance owed by Murad amounting to GH¢2,100 had been written off by debiting irrecoverable debts and crediting allowance for receivables accounts.
(iv) A debit balance of GH¢2,600 in the sales ledger had been listed as a credit balance.
(v) No entry had been made in the control account to record transfer of GH¢3,600 standing to the credit of David’s account in the purchases ledger to his account in the sales ledger.
(vi) Goods returned by Kwame amounting to GH¢1,700 were credited to his account in the sales ledger but debited to purchase account in the general ledger.
(vii) Enoch had been expected to take a settlement discount of GH¢800 and this had been correctly accounted for. However, Enoch did not settle on time and thus did not qualify for the discount.
(viii) A dishonoured bill of exchange from AC & Company for GH¢1,800 was properly entered in sales ledger but was debited to miscellaneous expense account in general ledger.
(ix) GH¢450 received from Thompson & Co., a customer, were correctly posted in the control account but was debited in the customers ledger as GH¢540.
(x) The trial balance included a credit balance of GH¢18,000 in the suspense account. It was revealed that 60% of the amount represents posting errors in the receivables control account.

Required:
(a) The receivables control account showing the necessary adjustments.

(b) A statement reconciling the receivables ledger balance with the corrected balance of the receivables control account.

Answer

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Tags: Account Reconciliation, Adjustments, Double Entry, Error Correction, Financial accounting, Ledger balances, Receivables control account, Sales Ledger, suspense account, Trade Receivables
Level: Level 1

Topic: Control accounts and account reconciliations

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 – 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

Tag (SQ): Adjustments

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FR – L2 – Q46 – Events After the Reporting Period

Explain accounting treatment for post-year-end events affecting receivables, property, inventory, subsidiaries, and other events for Earley Enterprises.

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.

FA – L1 – Q81 – Preparation of Partnership accounts

Prepare capital accounts and statement of financial position for Alvin, Boris, and Gina partnership after Gina's admission, including adjustments for goodwill and revaluation.

FA – L1 – Q66 – Bank reconciliations

Prepare an adjusted cash book for Mama Clara as at 31st December 20X9 based on bank statement and cash book discrepancies.

FA – L1 – Q65 – Bank Reconciliations

Demonstrate adjustments needed to KW Ltd's cash book for July 20X9 due to errors and unrecorded transactions.

FA – L1 – Q57 – Bank reconciliations

Prepare a bank reconciliation for Newman & Co as at 31 August 20X9, correcting errors in the cash book and bank statement.

FA – L1 – Q56 – Bank reconciliations

Reconcile cash book with bank statement for Sandwell Ltd, adjust ledger for unrecorded items.

FA – L1 – Q50 – Control accounts and account reconciliations

Prepare a receivables control account for Wako Associates with adjustments for errors identified in the sales ledger as of 31 December 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 – Q38 – Accruals and prepayments

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

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FR – L2 – Q46 – Events After the Reporting Period

Explain accounting treatment for post-year-end events affecting receivables, property, inventory, subsidiaries, and other events for Earley Enterprises.

You're reporting an error for "FR – L2 – Q46 – Events After the Reporting Period"

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.

You're reporting an error for "FA – L1 – Q86 – Preparation of not-for-profit accounts"

FA – L1 – Q81 – Preparation of Partnership accounts

Prepare capital accounts and statement of financial position for Alvin, Boris, and Gina partnership after Gina's admission, including adjustments for goodwill and revaluation.

You're reporting an error for "FA – L1 – Q81 – Preparation of Partnership accounts"

FA – L1 – Q66 – Bank reconciliations

Prepare an adjusted cash book for Mama Clara as at 31st December 20X9 based on bank statement and cash book discrepancies.

You're reporting an error for "FA – L1 – Q66 – Bank reconciliations"

FA – L1 – Q65 – Bank Reconciliations

Demonstrate adjustments needed to KW Ltd's cash book for July 20X9 due to errors and unrecorded transactions.

You're reporting an error for "FA – L1 – Q65 – Bank Reconciliations"

FA – L1 – Q57 – Bank reconciliations

Prepare a bank reconciliation for Newman & Co as at 31 August 20X9, correcting errors in the cash book and bank statement.

You're reporting an error for "FA – L1 – Q57 – Bank reconciliations"

FA – L1 – Q56 – Bank reconciliations

Reconcile cash book with bank statement for Sandwell Ltd, adjust ledger for unrecorded items.

You're reporting an error for "FA – L1 – Q56 – Bank reconciliations"

FA – L1 – Q50 – Control accounts and account reconciliations

Prepare a receivables control account for Wako Associates with adjustments for errors identified in the sales ledger as of 31 December 20X9.

You're reporting an error for "FA – L1 – Q50 – Control accounts and account reconciliations"

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 – 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"

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