Advantages – Knowsia

BCL – L1 – Q61 – Alternative forms and constitutions of business organisations

Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.

Question

Your mother trades in locally made fruit juice in a container at the front of the house at Adiembra-Zongo. The booming business is putting pressure on her working capital. But she plans to open two new retail branches and a semi-wholesale by the end of the year using sale proceeds of her private car which will not be enough. A bank manager working on her personal loan application advised her to convert the sole proprietorship into a private limited liability company, but your mother thinks that will reduce her power and influence. She adores the business name registration certificate with her name boldly engraved ‘HAJIA AMINA SIEDU ENTERPRISE’.

(a) Which of the options will you recommend?

(b). Discuss why you would support your mother’s position or that of the bank manager.

Answer

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Tags: Advantages, Disadvantages, Limited Liability Company, Sole proprietorship
Level: Level 1

Topic: Alternative forms and constitutions of business organisations

BCL – L1 – Q56 – Alternative forms and constitutions of business organisations

State five advantages of forming an incorporated company.

Question

The desire to form an incorporated company is the legal wish of one or more persons. State FIVE (5) advantages that exist for persons who form an incorporated company.

Answer

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Tags: Advantages, Incorporated Company, Legal personality, Limited liability, Perpetual
Level: Level 1

Topic: Alternative forms and constitutions of business organisations

BCL – L1 – Q52 – Alternative forms and constitutions of business organisations

State two advantages and two disadvantages of forming a sole proprietorship.

Question

It appears that many residents of Kumasi prefer to own their businesses without going through the cumbersome details of forming an incorporated company limited by shares.

Required:

State TWO (2) advantages and TWO (2) disadvantages of forming sole proprietorship.

Answer

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Tags: Advantages, Business structure, Disadvantages, Registration, Sole proprietorship
Level: Level 1

Topic: Alternative forms and constitutions of business organisations

FM – L2 – Q112 – Management of receivables and payables

Calculate the profit impact of using a debt factor for Nsawkaw Tech Solutions Limited and comment on the findings.

Question

Nsawkaw Tech Solutions Limited is a software business owned and managed by computer software specialists. Although sales have remained stable at GH¢40,000,000 per annum in recent years, the level of trade receivables has increased significantly. A recent financial report submitted to the owners indicates an average settlement period of 60 days for trade receivables compared with an industry average of 40 days. The level of bad debts has also increased in recent years, and the company now writes off approximately GH¢40,000 in bad debts each year.
The recent problems experienced in controlling credit have led to a liquidity crisis for the company. At present, the company finances its trade receivables by a bank overdraft at an interest rate of 14% a year. However, the overdraft limit has been exceeded on several occasions in recent months, and the bank is now demanding a significant decrease in the size of the overdraft.
To meet this demand, the owners of the company have approached a factor who has offered to make an advance payment equivalent to 85% of trade receivables, based on the assumption that the level of receivables will be in line with the industry average.
The factor will charge a rate of interest of 12% a year for this advance. The factor will take over the sales records of the company and, for this service, will charge a fee based on 2% of sales. The company believes that the services offered by the factor should eliminate bad debts and lead to administrative cost savings of GH¢52,000 per year.

Required
(a) Calculate the effect of employing a debt factor on the profit of Nsawkaw Tech Solutions Limited. Comment on your findings.

Note: You may assume 360 days in a year.

(b) State FIVE potential advantages and TWO disadvantages of using the services of a debt factor by a business organisation.

Answer

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Tags: Advantages, Business Operations, Credit Control, Debt Management, Disadvantages, Factoring
Level: Level 2

Topic: Management of receivables and payables

FM – L2 – Q30 – Financial markets

Outline advantages/disadvantages of stock exchange listing and types of issue costs associated.

Question

(a) Outline the advantages and disadvantages of obtaining a stock exchange listing.

(b) What are the types of issue costs that are associated with obtaining a stock exchange listing?

Answer

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Tags: Advantages, Disadvantages, Equity Finance, issue costs, listing, public quotation, Stock exchange
Level: Level 2

Topic: Financial markets

FA – L1 – Q53 – Control accounts and account reconciliations

Prepare a revised sales ledger control account for Biomed Supplies Ltd for 20X8, correcting identified errors.

Question

The sales ledger control account of BioHealth Solutions Ltd for the year ended 31st December 20X8 has been prepared from the following information:

	GH¢
Debit balance b/d 1st January 20X8	128,540
Credit balance b/d 1st January 20X8	2,800
Total for the year 1st January 20X8 to 31st December 20X8
Credit Sales	1,144,200
Cheques received from customers	1,046,200
Cash received from customers	7,100
Sales returns from customers	12,000
Discounts allowed	2,480
Dishonoured cheques	5,000
Contras purchases ledger	10,640
Irrecoverable debts	6,500

The sales ledger control account balance, which is part of the double entry system, failed to agree with the total receivables of GH¢189,380 as shown by the schedule of receivables. The following errors were subsequently discovered:

(i) A customer had returned goods to BioHealth Solutions Ltd at the selling price of GH¢2,400. The goods had been bought on credit. No entries had been made to record the return of the goods in the accounts of BioHealth Solutions Ltd.
(ii) The discounts allowed column in the cash book had been overcast by GH¢1,080.
(iii) No contra entry had been made in the receivables account in the sales ledger in respect of purchases by BioHealth Solutions Ltd of goods at a list price of GH¢2,000. PC Ltd received a trade discount of 10% on these goods. This transaction had been correctly dealt with in the Sales Ledger Control Account.
(iv) A credit sale of GH¢3,520 to JT Private Health Ltd was correctly recorded in the sales ledger control account, but no other entry had been made.
(v) A cheque received from a customer for GH¢6,900, correctly processed through the books, had subsequently been dishonoured. No entries have yet been made to record this dishonoured cheque.
(vi) DT Medical Ltd, a customer, has recently been declared bankrupt and the debt of GH¢3,500 is to be written off, but no entries have yet been made.

Required:
(a) Prepare a revised sales ledger control account for the year ended 31 December 20X8.

(b) Prepare a statement showing the correct total of the Schedule of Receivables for the year ended 31 December, 20X8.

Answer

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Tags: Advantages, Control Accounts, Errors, Financial accounting, Fraud Prevention, Payables, Receivables
Level: Level 1

Topic: Control accounts and account reconciliations

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BCL – L1 – Q61 – Alternative forms and constitutions of business organisations

Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.

BCL – L1 – Q56 – Alternative forms and constitutions of business organisations

State five advantages of forming an incorporated company.

BCL – L1 – Q52 – Alternative forms and constitutions of business organisations

State two advantages and two disadvantages of forming a sole proprietorship.

FM – L2 – Q112 – Management of receivables and payables

Calculate the profit impact of using a debt factor for Nsawkaw Tech Solutions Limited and comment on the findings.

FM – L2 – Q30 – Financial markets

Outline advantages/disadvantages of stock exchange listing and types of issue costs associated.

FA – L1 – Q53 – Control accounts and account reconciliations

Prepare a revised sales ledger control account for Biomed Supplies Ltd for 20X8, correcting identified errors.

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BCL – L1 – Q61 – Alternative forms and constitutions of business organisations

Recommend whether Hajia Amina’s business should remain a sole proprietorship or convert to a private limited company.

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BCL – L1 – Q56 – Alternative forms and constitutions of business organisations

State five advantages of forming an incorporated company.

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BCL – L1 – Q52 – Alternative forms and constitutions of business organisations

State two advantages and two disadvantages of forming a sole proprietorship.

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FM – L2 – Q112 – Management of receivables and payables

Calculate the profit impact of using a debt factor for Nsawkaw Tech Solutions Limited and comment on the findings.

You're reporting an error for "FM – L2 – Q112 – Management of receivables and payables"

FM – L2 – Q30 – Financial markets

Outline advantages/disadvantages of stock exchange listing and types of issue costs associated.

You're reporting an error for "FM – L2 – Q30 – Financial markets"

FA – L1 – Q53 – Control accounts and account reconciliations

Prepare a revised sales ledger control account for Biomed Supplies Ltd for 20X8, correcting identified errors.

You're reporting an error for "FA – L1 – Q53 – Control accounts and account reconciliations"

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