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  • 11 Marks

FA – L1 – Q91 – Inventory

Calculate closing inventory given sales, purchases, opening inventory, and a 25% mark-up.

(a) A business makes all of its sales at a mark-up of 25%. During the year sales totalled GH¢98,000 and purchases were GH¢71,000. The inventory at the start of the year was valued at GH¢10,200.

What was the value of the closing inventory at the end of the year?

(b) A business has the following assets and liabilities at the start and end of March.

1 March 31 March
GH¢ GH¢
Trade receivables 6,100 7,400
Trade payables 3,900 3,500

The summarised bank statements for the year showed the following figures:

  • Bankings for the year were GH¢78,500
  • Payments to suppliers for the year were GH¢49,700
  • The owner banks her takings from the till each month but before doing so in March she took GH¢5,000 for her own use.

What are the sales for the year?

(c) An accountant has prepared the following list of the assets and liabilities of a business, but has forgotten to enter the cash balance.

GH¢
Trade payables 4,900
Inventory 9,300
Non-current assets 98,900
Capital 97,200
Bank loan 15,700
Receivables 16,800
Bank

What is the missing figure for ‘Bank’?

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  • 20 Marks

FA – L1 – Q83 – Preparation of Partnership accounts

Define books of prime entry and list four examples.

(a) (i) Define book of prime entry.

(ii) Mention any four (4) books of prime entry.

(b) Farida, Jibril, and Esther are in partnership sharing profits and losses in the ratio of 5:3:2 respectively. According to the partnership agreement, partners’ capital accounts attract an interest of 20% per annum, while any drawings by a partner also attract 10% interest per annum.
The following trial balance has been extracted after the preparation of the statement of profit or loss for the period ending 31st December, 20X9.

Debit GH¢ Credit GH¢
Building 55,000 Capital – Farida 50,000
Furniture and Fittings 20,000 Capital – Jibril 30,000
Motor vehicle 45,000 Capital – Esther 20,000
Inventory 20,000 Payables 25,000
Receivables 20,000 Loan – Esther 20,000
Cash and bank 35,000 Current account – Farida 2,000
Current account – Jibril 5,000 Profit for the year 60,000
Current account – Esther 10,000
Total 210,000 Total 210,000

The following entries have not been recorded in the books:
(i) Salary of GH¢5,000 was paid to Esther during the period.
(ii) Farida personally paid general expenses of GH¢2,500 on behalf of the partnership.
(iii) Cash drawings made by partners: Farida GH¢500, Jibril GH¢1,500, and Esther GH¢1,200.
(iv) Interest on loan – Esther – GH¢2,000.
(v) Jibril took goods worth GH¢2,000 for personal use.
(vi) Interest on capital account. All capital accounts were to remain fixed.

You are required to prepare:
(i) Profit or loss and appropriation account.

(ii) Partners’ current account.

(iii) Farida, Jibril, and Esther Partnership

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  • 20 Marks

FA – L1 – Q80 – Preparation of Partnership accounts

Prepare capital accounts for Djembo, Akwele, and Eduvie partnership after Eduvie's admission, including revaluation, goodwill, and profit allocation.

Djembo and Akwele were in partnership and shared profits and losses in the ratio of 3:2 respectively. The balances on the partners’ capital accounts at July 1 20X8 were: Djembo GH₵250,000, Akwele GH₵400,000.
Due to expansion of business, Eduvie was admitted as a partner on October 1, 20X8 under the following arrangements:
(i) Assets were revalued upwards by GH₵200,000 but the revaluation was not recorded in the books.
(ii) Goodwill of the firm was assessed at GH₵300,000 and was retained in the books.
(iii) Eduvie invested GH₵500,000 as capital.
(iv) Eduvie was allowed a monthly salary of GH₵20,000 whereas Djembo and Akwele continued to receive salaries of GH₵28,000 and GH₵25,000 per month respectively, as in the past.
(v) The balance profit was to be shared: Djembo 35%; Akwele 35% and Eduvie 30%.
(vi) Mr. Atikpui was hired as manager from October 1, 20X8 at a salary equal to 5% of the profit remaining after deducting such salary but before charging partners’ salaries.
The profit for the year ended June 30, 20X9 amounted to GH₵486,000 after:
(i) Making allowance for a debt of GH₵48,000 incurred prior to July 20X8; and
(ii) providing for the partners’ salaries.
In addition to salaries, the partners withdrew the following amounts:
Djembo GH₵150,000; Akwele GH₵120,000; and Eduvie GH₵90,000

Required:
Partners’ capital accounts for the year ended June 30, 20X9.

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  • 20 Marks

FA – L1 – Q71 – Preparing financial statements of a sole trader

Prepare Harmony Ventures' statement of profit or loss for the year ended 30 September 20X9 using the trial balance and additional info.

Harmony Ventures is run by a sole trader. The following Trial Balance was prepared from the business accounts on 30th September 20X9.

Harmony Ventures: Trial Balance as at 30th September 20X9

DR GH₵ CR GH₵
Capital 185,280
Inventory 37,360
Sales 421,450
Purchases 193,150
Purchase returns 6,040
Electricity 3,410
Discounts allowed 2,230
Discounts received 2,420
Motor expenses 4,270
Drawings 32,000
Bank 24,511
Salaries 108,000
Insurance 15,400
Receivables 110,140
Irrecoverable debts 1,420
Allowance for receivables 3,153
Payables 76,283
General expenses 6,780
9% Loan (20Y16 – 20Y3) 150,000
Loan interest 12,000
Land and buildings 340,000
Accumulated depreciation for buildings 16,000
Equipment 22,000
Accumulated depreciation for equipment 10,300
Motor vehicles 26,000
Accumulated depreciation for motor vehicles 13,250
Total 896,031 896,031

The following information is also available:
(i) Only 10 months’ salaries are shown in the Trial Balance. An equal amount is paid for salaries for each month of the year.
(ii) As at 30th September 20X9, GH₵3,200 had been prepaid for insurance, whilst GH₵410 was owing for general expenses.
(iii) GH₵4,600 had been charged to general expenses for the owner’s private holiday.
(iv) As at 30th September 20X9, inventory was valued at GH₵22,500.
(v) A customer, owing GH₵5,040 has been declared bankrupt. This amount is to be written off in full.
(vi) An allowance for receivables is to be maintained at 3% of the remaining receivables.
(vii) As at 30th September 20X9, the business’s land was valued at GH₵100,000. Land is not depreciated.
(viii) Depreciation is to be provided as follows:

  • Buildings: 4% per annum using the straight line method.
  • Equipment: 25% per annum using the straight line method.
  • Motor vehicles: 40% per annum using the reducing balance method.
    (ix) There were no additions or disposals of non-current assets during the financial year.

Required:
(a) Prepare the statement of profit or loss for the year ended 30th September 20X9.

(b) Prepare the statement of financial position as at 30th September 20X9.

(c) (i) Identify the accounting concept involved in each of the footnotes/items (i), (iii) and (v).

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  • 15 Marks

FA – L1 – Q70 – Preparing financial statements of a sole trader

Prepare Henry's statement of profit or loss for the year ended 31 May 20X9 and statement of financial position as at that date using the trial balance.

The following trial balance has been extracted from the ledger of Henry, a sole trader, as at 31 May 20X9, the end of his most recent financial year.

Henry: Trial balance as at 31 May 20X9

DR GH₵(000) CR GH₵(000)
Land and buildings at cost 90,000
Equipment at cost 57,500
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 12,500
On equipment 32,500
Inventory as at 1 June 20X8 27,400
Sales 405,000
Purchases 259,600
Discounts received 4,420
Wages and salaries 52,360
Irrecoverable debts 1,720
Loan interest 1,560
Other operating expenses 38,800
Trade receivables 46,200
Trade payables 33,600
Allowance for receivables 280
Cash in hand 151
Bank overdraft 14,500
Carriage out 8,680
Drawings 28,930
10% loan 15,600
Capital as at 1 June 20X8 94,501
Total 612,901 612,901

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH₵25,900,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Property – 1% using the straight-line method;
  • Equipment – 15% using the straight-line method.
    (c) There are accrued wages and salaries of GH₵140,000.
    (d) Other operating expenses include some prepaid expenses of GH₵500,000 and some accrued expenses of GH₵200,000.
    (e) The allowance for receivables should be adjusted to 5% of trade receivables as at 31 May 20X9.
    (f) The amount for purchases includes goods valued at GH₵1,040,000 which were withdrawn by Henry for his own personal use.

Required
Prepare Henry’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

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  • 15 Marks

FA – L1 – Q68 – Preparing financial statements of a sole trader

Prepare Michael Tan's statement of profit or loss for 20X9 and financial position as at 31 May 20X9 using trial balance and adjustments.

The following trial balance was extracted from the main ledger of Michael Tan, a sole trader, as at 31 May 20X9 – the end of his financial year.

Michael Tan: Trial balance as at 31 May 20X9

DR GH$(000) CR GH$(000)
Land and buildings at cost 120,000
Equipment at cost 80,000
Accumulated depreciation (as at 1 June 20X8)
On land and buildings 36,000
On equipment 38,000
Purchases 250,000
Sales 402,200
Inventory as at 1 June 20X8 50,000
Discounts received 4,800
Returns outwards 15,000
Wages and salaries 79,800
Irrecoverable debts 2,100
Loan interest 2,100
Other operating expenses 17,700
Trade payables 36,000
Trade receivables 38,000
Cash in hand 300
Bank 1,300
Drawings 24,000
Allowance for receivables 500
7% long-term loan 30,000
Capital as at 1 June 20X8 121,300
665,300 683,800

The following additional information as at 31 May 20X9 is available:
(a) Inventory as at 31 May 20X9 was valued at GH$42,000,000.
(b) Depreciation for the year ended 31 May 20X9 has yet to be provided as follows:

  • Land and buildings: 1.5% using the straight-line method;
  • Equipment: 25% on the carrying amount at the year-end (i.e., cost less accumulated depreciation at 1 June 20X8).
    (c) There are accrued wages and salaries of GH$800,000.
    (d) Other operating expenses include some prepaid expenses of GH$300,000.
    (e) The allowance for receivables should be adjusted to 2% of trade receivables as at 31 May 20X9.

Required:
Prepare Michael Tan’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.

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  • 15 Marks

FA – L1 – Q67 – Preparing financial statements of a sole trader

Prepare DOVE's statement of profit or loss for 20X9 and statement of financial position as at 31 Dec 20X9 using given ledger balances and adjustments.

The following balances were extracted from the main ledger of DOVE on 31 December 20X9.

Description GH$(000)
Capital 10,059
Inventory at 1 January 20X9 2,720
Cash in hand 55
Bank overdraft 2,522
Sundry receivables 7,009
Sundry payables 6,735
Motor vans (Cost GH$2,000) 1,500
Drawings in cash 2,459
Fixtures and fittings (Cost GH$4,000) 3,800
Purchases 33,436
Allowance for receivables 162
Sales 50,261
Purchases returns 120
Carriage inwards 546
Rent 626
Salaries and wages 5,226
Motor vehicle expenses 920
Interest on bank overdraft and bank charges 56
Carriage outwards 785
Returns inwards 240
Freehold land 10,300
Irrecoverable debts 240

You are given the following information:
(1) The inventory at 31 December 20X9 was GH$4,270,000.
(2) Wages and salaries payable at 31 December 20X9 were GH$426,000.
(3) Rent paid in advance at 31 December 20X9 amounted to GH$100,000.
(4) The allowance for receivables is to be increased to GH$260,000.
(5) Depreciation is to be charged as follows: motor vans at 25% per year on cost, fixtures and fittings 5% per year on cost.
(6) During 20X9, the owner of DOVE withdrew goods valued at GH$180,000 for his own use. No entry has been made in the accounts for the withdrawal of these goods.
(7) One quarter of the motor vehicle expenses is the cost of the owner’s private motoring, as distinct from expenses for business purposes.

Required:
Prepare a statement of profit or loss for the year ending on 31 December 20X9 and a statement of financial position as at that date.

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  • 10 Marks

FA – L1 – Q13 – Preparing financial statements of a sole trader

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

The following is a trial balance for Worthe after his first year’s trading. You are required to prepare a statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position as at that date.

Worthe – Trial balance as at 30 June 20X9

DR GH₵(000) CR GH₵(000)
Sales 28,794
Purchases 23,803
Rent 854
Lighting and heating expenses 422
Salaries and wages 3,164
Insurance 105
Land and buildings 50,000
Fixtures and fittings 1,000
Receivables 3,166
Sundry expenses 506
Payables 1,206
Cash at bank 3,847
Drawings 2,400
Motor vans 5,500
Motor running expenses 1,133
Capital 65,900
Total 95,900 95,900

Inventory at 30 June 20X9 was GH₵4,166,000.

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  • 12 Marks

FA – L1 – Q11 – Preparing financial statements of a sole trader

Prepare statement of profit or loss and financial position for Blake's business for 20X9 using trial balance and inventory data.

Using the following information, prepare the statement of profit or loss for Blake for the year ended 31 December 20X9 and a statement of financial position as at that date.

Blake – Trial balance as at 31 December 20X9

Debit GH₵ Credit GH₵
Purchases 54,261
Sales 135,650
Sales returns 50
Purchase returns 61
Carriage inwards (delivery cost of purchases) 100
Carriage outwards (cost of deliveries to customers) 150
Inventory – 1 January 20X9 7,500
Wages and salaries 8,900
Rent 4,500
Telephone 560
Heat and lighting 890
Motor van running expenses 1,250
Bank interest 534
Land and buildings 60,000
Motor van 5,000
Payables 5,900
Bank overdraft 6,500
Receivables 8,700
Cash in hand 150
Drawings 15,000
Capital 19,434
Total 167,545 167,545

Inventory at 31 December 20X9 was GH₵9,500.

Required
Prepare the statement of profit or loss for the year ended 31 December 20X9 and a statement of financial position as at that date.

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