Tag (SQ): Cash Transactions
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- 20 Marks
Prepare income and expenditure account and statement of financial position for Sankofa Hockey Club for the year ended 30 June 20Y0 using provided cash transactions and asset details.
Question
The Sankofa Hockey Club does not have any formal accounting records but the following information is available.
(1) The payments that have been made by the club for the year ending 30 June 20Y0 are as follows:
| Description | GH¢(000) |
|---|---|
| Purchase of second hand table tennis table | 250 |
| Rent | 600 |
| Tea stall purchases | 980 |
| Annual fair expenses | 1,450 |
| Outings expenses | 370 |
| Prizes for whist evenings | 190 |
| Repairs to snooker table | 110 |
| Refreshments at social evenings | 180 |
(2) The club’s income, apart from annual subscriptions, is as follows:
| Description | GH¢(000) |
|---|---|
| Contributions to outings | 300 |
| Takings at the annual fair | 2,150 |
The club also runs a tea stall in the community park every Sunday in the summer months. This sells tea and coffee, cakes, biscuits, and ice creams, etc. The profit margin on the tea stall is normally 20% of selling price.
(3) All the club’s transactions are in cash, but if there are any surplus funds, they are banked in a local bank account. The balance on the bank account was GH¢30,000 at 1 July 20X9.
(4) The club has an annual subscription rate of GH¢20,000 per annum per person or GH¢50,000 per annum for a family membership. Members are asked to pay their subscription in July at the beginning of the club’s accounting year.
There are 10 family members of the club. Of these, two paid their 20Y0 subscription in June 20X9, and all the rest were received before 30 June 20Y0.
No individual members had paid their 20Y0 subscriptions in advance, but at 30 June 20Y0, four members still owed their subscriptions. They had been contacted, and all four had promised to pay at the next evening social event. There are in total 80 individual members.
(5) The club has the following other assets and liabilities:
| Description | 1 July 20X9 (GH¢(000)) | 30 June 20Y0 (GH¢(000)) |
|---|---|---|
| Sports equipment | 2,560 | – |
| Inventory for the tea stall | 110 | 190 |
| Payables for the tea purchases | 100 | – |
| Prepayment of rent | 50 | 50 |
(6) The sports equipment is all depreciated at 20% per annum on carrying amount on the basis of the equipment held at 30 June each year.
(7) The old table tennis table was sold during the year for GH¢40,000. Its value as recorded by the club at 30 June 20X9 was GH¢30,000.
You are required to prepare an income and expenditure account for the year ended 30 June 20Y0 and a statement of financial position at that date.
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- 15 Marks
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.
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- 12 Marks
Record May 20X9 transactions in T accounts and prepare a trial balance for Pine Grove Garden Traders.
Question
The following transactions in May 20X9 are those of a new business entity, Pine Grove Garden Traders.
May 20X9
Date
1 Set up the entity with capital in cash: GH₵2,500,000.
2 Bought goods on credit from the following suppliers: Green Leaf Company GH₵540,000, Blossom Town GH₵870,000, D Smith GH₵250,000, HerbSafe GH₵760,000, Forest Green GH₵640,000.
4 Sold goods on credit to: City Office Supplies GH₵430,000, V Pine GH₵640,000, Coastal Chain Stores GH₵1,760,000.
6 Paid rent GH₵120,000.
9 City Office Supplies paid the GH₵430,000 that it owed.
10 Coastal Chain Stores paid GH₵1,500,000.
12 The following payments were made: to D Smith GH₵250,000 and to Green Leaf Company GH₵540,000.
15 Advertising costs of GH₵230,000 were paid to the local newspaper publisher.
18 Bought goods on credit from the following suppliers: Green Leaf Company GH₵430,000, Horizon Plants GH₵1,100,000.
21 Sold goods on credit to Community Gardens GH₵670,000.
31 Paid rent GH₵180,000.
Required
(a) Use T accounts to show how these transactions should be recorded in the main ledger accounts of the entity. The accounting system maintains separate accounts for each individual payable and receivable in the main ledger.
(b) Prepare a trial balance as at 31 May 20X9.
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- Tags: Accounting records, Capital, Cash Transactions, Ledger accounts, Payables, Purchases, Receivables, Sales, T accounts, Trial Balance
- Level: Level 1
- Topic: Double entry bookkeeping
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- 20 Marks
Describe audit procedures to ensure completeness of income for Accra Sports Club.
Question
The Accra Sports Club owns 12 tennis courts. The club uses ‘all weather’ tarmac tennis courts, which have floodlights for night-time use. The club’s year end is 30 September.
Members pay an annual fee to use the courts and participate in club championships. The club had 430 members as at 1 October 20X7.
Income is derived from two main sources:
Membership fees. Each member pays a fee of ₵2,000 per annum. Fees for the new financial year are payable within one month of the club year end.
Approximately 10% of members do not renew their membership. New members joining during the year pay 50% of the total fees that would have been payable had they been members for a full year. During 20X8, 50 new members joined the club. No members pay their fees before they are due.
Court hire fees: Non-members pay ₵50 per hour to hire a court. Non-members have to sign a list in the clubhouse showing courts hired. Money is placed in a cash box in the clubhouse for collection by the club secretary.
All fees (membership and court hire) are paid in cash. They are collected by the club secretary and banked on a regular basis. The paying-in slip shows the analysis between fees and court hire income.
The secretary provides the treasurer with a list of bankings showing member’s names (for membership fees) and the amount banked. Details of all bankings are entered into the cash book by the treasurer.
Main items of expenditure are:
Court maintenance including re-painting lines on a regular basis.
Power costs for floodlights.
Tennis balls for club championships. Each match in the championship uses 12 tennis balls.
The treasurer pays for all expenditure using the club’s debit card. Receipts are obtained for all expenses and these are maintained in date order in an expenses file. The treasurer also prepares the annual financial statements.
Under the rules of the club, the annual financial statements must be audited by an independent auditor. The date is now 13 December 20X8 and the treasurer has just prepared the financial statements for audit.
Required:
(a)Â Describe the audit work that should be performed to determine the completeness of income for the Accra Sports Club.
(b)Â Describe the audit procedures that should be performed to check the completeness and accuracy of expenditure for the Accra Sports Club.
(c) Discuss why internal control testing has limited value when auditing not-for-profit entities such as the Accra Sports Club.
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- Tags: Analytical Review, Cash Transactions, Court Hire, Income Completeness, Membership Fees
- Level: Level 2
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- 10 Marks
Explain procedures for obtaining a bank report and substantive procedures for Zenith Healthcare Ltd's bank report. List substantive procedures for auditing bank balances in Zenith Healthcare Ltd's financial statements.
Question
Elisa Medical Co
Elisa Medical Co has a significant number of cash transactions and recent non-current asset purchases have been financed by a bank loan. This loan is repayable in equal annual instalments for the next five years.
Required:
(a) Explain the procedures to obtain a bank report for audit purposes from Elisa Medical Co’s bank and the substantive procedures that should be carried out on that report.
(5 marks)
(b) List the further substantive procedures that should be carried out on the bank balances in Elisa Medical Co’s financial statements.
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