Discounts – Knowsia

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.

Question

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.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accruals, Bad Debts, Depreciation, Discounts, Incomplete records, Inventory, Payables, Receivables, Statement of Financial Position, Statement of profit or loss
Level: Level 1

Topic: Preparation of accounts from incomplete records

FA – L1 – Q52 – Control accounts and account reconciliations

Adjust sales/purchase ledger control accounts and reconcile with individual ledger balances for Kofi Enterprises.

Question

Kofi Enterprises maintains accounts on a fully integrated computerised accounting system which produces control accounts as an integral part of the DOUBLE ENTRY system. At the end of each month individual sales and PURCHASE ledger balances are reconciled automatically to the respective control accounts as a pre-programmed control check.

Unfortunately Kofi was taken ill in the middle of August and his assistant input a number of entries without the correct integration codes. Consequently the system has been unable to reconcile the control accounts at the end of that month. The assistant has manually extracted the individual ledger balances, and the net totals at 31 August are as follows.

Purchase ledger	Sales ledger
GH¢3,556	GH¢8,946

The assistant has also manually produced draft accounts for the six months to 31 August and provides you with the following abridged trial balance.

	GH¢	GH¢
Sales ledger control account	8,979
Purchase ledger control account		7,496
Net profit per draft accounts		4,322
Sundry balances (net)	2,839
	11,818	11,818

You have checked through the accounting records and discovered the following discrepancies.
(1) The total for the PURCHASES day book input total for August has been incorrectly shown as GH¢6,241 following a manual override. The total should have been GH¢2,641.
(2) An old debit balance of GH¢28 in the PURCHASE ledger had been written off during August as bad. You discover that no ENTRY had been input other than in the individual supplier’s ledger account.
(3) A payment of GH¢260 on 14 August relating to the payment of a July PURCHASES invoice had been wrongly input in the cash account as wages.
(4) During the month of August there had been a mix-up over goods supplied to a CUSTOMER, Kwame. The goods were invoiced for GH¢62, despatched to Kwame and correctly entered in the system on 5 August. Several items turned out to be defective and were returned by Kwame on 28 August. These goods, originally costing GH¢14, were included in the original invoice of GH¢62 at an amount of GH¢17. No ENTRY was made in the books as a result of the return of the goods but they were manually input into the INVENTORY account at GH¢17. Owing to their damaged state their net realisable value is estimated to be GH¢5.
(5) Kofi has received discounts during the month amounting to GH¢280. However, these have only been manually input to the individual suppliers’ accounts.
(6) Certain discrepancies in the print-out of balances at 31 August have come to light, suggesting a software error might also have occurred. You discover that
(i) debit balances on the sales ledger of GH¢54 and GH¢69 respectively had been completely omitted from the listing
(ii) a CREDIT balance on the PURCHASE ledger of GH¢71 had been listed as a debit balance of GH¢17
(iii) the total of debit entries on Adwoa’s account in the sales ledger had been overcast by GH¢90.

Required
(a) Adjust the sales and PURCHASE ledger control accounts and show the reconciliation of the closing balances with the aggregate of the individual balances extracted from the PURCHASE and sales ledgers.

(b) Compute a revised net profit for the six month period to 31 August.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bad Debts, Discounts, Error Correction, Financial Statements, Inventory Valuation, Ledger adjustments, Misclassification, Net profit
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q15 – Control accounts and account reconciliations

Record Kweku's May transactions in receivables and payables control accounts using T accounts.

Question

The following are the transactions of Kweku, who commenced a new business on 1 May.

May

Transaction	Details
1	Started the business with capital of GH₵2,500,000, paid into a business bank account.
2	Bought goods on credit from the following entities: Elliot GH₵810,000; Martinez Traders GH₵1,305,000; Grayson GH₵375,000; Legacy GH₵1,140,000; Linden GH₵960,000. (Total: GH₵4,590,000).
3	Sold goods on credit to: Benson Retail for GH₵753,000, Quickmart for GH₵1,120,000 and Sanders for GH₵3,080,000. (Total: GH₵4,953,000).
4	Benson Retail paid by cheque GH₵723,000 taking a discount of GH₵30,000 for early payment. Benson Retail had not been expected to take the discount when the goods were originally sold to them.
5	Sanders paid GH₵1,500,000 by cheque.
6	GH₵700,000 was paid to Elliot.
7	The following payment was made to Grayson: GH₵350,000. A discount of GH₵25,000 was received for early payment.
8	Paid carriage outwards: GH₵345,000.
9	Purchase returns to Legacy GH₵400,000.
10	Sales returns from Sanders: GH₵270,000.
11	Purchases on credit from Martinez Traders GH₵753,000; Legacy GH₵1,650,000. (Total: GH₵2,403,000).
12	Sold goods on credit to Quickmart GH₵1,005,000.

Kweku maintains control accounts for receivables and payables in the main ledger, and accounts for individual customers and suppliers in a receivables ledger and a payables ledger respectively.

Required
(a) Use T accounts to show how the relevant transactions will be recorded in the receivables control account and the payables control account in the main ledger of Kweku in May. (You are not required to prepare T accounts for any of the other main ledger accounts.)

(b) Show the list of balances in the receivables ledger after recording the above transactions.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Account Balances, Control Accounts, Discounts, Payables Ledger, Purchase Returns, Reconciliation
Level: Level 1

Topic: Control accounts and account reconciliations

Tag (SQ): Discounts

Search

Filter by Professional Bodies

Filter by Subject

Filter by Topics

Filter by Levels

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.

FA – L1 – Q52 – Control accounts and account reconciliations

Adjust sales/purchase ledger control accounts and reconcile with individual ledger balances for Kofi Enterprises.

FA – L1 – Q15 – Control accounts and account reconciliations

Record Kweku's May transactions in receivables and payables control accounts using T accounts.

Our Offerings

Contact Info

My Account

Get In Touch

Tag (SQ): Discounts

Search

Filter by Professional Bodies

Filter by Subject

Filter by Topics

Filter by Levels

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.

You're reporting an error for "FA – L1 – Q94 – Preparation of accounts from incomplete records"

FA – L1 – Q52 – Control accounts and account reconciliations

Adjust sales/purchase ledger control accounts and reconcile with individual ledger balances for Kofi Enterprises.

You're reporting an error for "FA – L1 – Q52 – Control accounts and account reconciliations"

FA – L1 – Q15 – Control accounts and account reconciliations

Record Kweku's May transactions in receivables and payables control accounts using T accounts.

You're reporting an error for "FA – L1 – Q15 – Control accounts and account reconciliations"

admin

Pick a Form