Financial accounting

FA – L1 – Q93 – Inventory

Calculate gross profit and percentage for FreshProduce with given sales, inventory, and purchases.

Question

(A). A FreshProduce made sales during the month of GH₵49,200. Opening inventory amounted to GH₵3,784 and month-end inventory was GH₵5,516. During the month, he purchased for cash goods which cost GH₵38,632.

Required:
Determine the gross profit and calculate the gross profit percentage as a percentage of sales value.

(B). A Competitor has made sales of GH₵50,100 at a fixed mark-up of 25%. Closing inventory was valued at GH₵5,438 and he purchased goods during the month amounting to GH₵38,326.

Required:
Determine the value of the opening inventory.

(C) . A CommunityMart makes sales at a fixed gross profit of 10% on sales value. Sales during the month amounted to GH₵186,460; closing inventory was GH₵16,800 and represents an increase of 25% over the value of the opening inventory.

Required:
Determine the cost of purchases during the month.

Answer

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Tags: Cost of Sales, Financial accounting, Gross Profit, Inventory, Purchases
Level: Level 1

Topic: Inventory

FA – L1 – Q91 – Inventory

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

Question

(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’?

Answer

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Tags: Bankings, Drawings, Financial accounting, Sales, Trade Payables, Trade Receivables
Level: Level 1

Topic: Sales and Purchases

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 – Q63 – Correction of Errors

Prepare journal entries to correct errors in B.B. Ventures' trial balance, including unposted returns, sales errors, and inventory issues.

Question

The trial balance prepared by B.B. Ventures showed a difference of GH₵47,060, which was put on the credit side of a suspense account. An investigation disclosed that:
(i) The total of purchase return day book amounting to GH₵16,160 had not been posted to the ledger.
(iii) The sales account had been added short by GH₵10,000.
(iv) An asset bought four years ago for GH₵7,000 and depreciated to GH₵1,200 had been sold for GH₵1,500 at the beginning of the year. The receipt of cash has been posted in the bank book but corresponding entries have not been recorded.
(v) A credit sale of GH₵1,470 had been credited to the customer’s account as GH₵1,740. An irrecoverable debt of GH₵1,560 has to be written off. Allowance for receivables is to be maintained at 10% of receivables. Receivables appearing in the trial balance are GH₵23,390, and the allowance for receivables account shows a credit balance of GH₵2,320.
(vi) A sub-total of GH₵29,830 on the list of closing inventory had been carried over as GH₵29,380, and another sheet had been overcast by GH₵1,000.

Required:
(a) Prepare journal entries to correct the above errors. (Narrations are not required)

(b) Explain why it is important that the accountant of B.B. Ventures behaves in an ethical manner when preparing financial statements.

Answer

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Tags: Error Correction, Ethics, Financial accounting, Financial Reporting, Professional conduct, Trial Balance
Level: Level 1

Topic: Correction of Errors

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 – Q54 – Inventory

Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.

Question

(A) Under IFRS Accounting Standards, IAS 2 deals with inventories. Define the following terms:

(i) Inventories

(ii) Net realisable value

(A) AfraHealth Ltd. controls its creditors’ accounts by preparing monthly creditors’ ledger control account in two parts, Upper and Lower Regions.
The following figures were available as at January 31st 20X9 when there was a difference of GH¢3,000 on the Trial Balance.

Upper Region	GH¢	Lower Region	GH¢
Credit Balance b/d	15,600	Credit Balance b/d	10,200
Debit Balance b/d	2,500	Debit Balance b/d	284
Purchases	115,200	Purchases	18,500
Returns	8,000	Returns	1,400
Charges	800	Charges	120
Bank	30,500	Bank	15,200
Discount	2,500	Discount	1,520
Balance c/d	1,500	Balance c/d	1,300

On 31st January, 20X9 the officer in charge of Upper Region Ledger declared GH¢89,600 while that of Lower Region declared GH¢15,016.
You are required to:
(i) Prepare creditors ledger control account for the Upper and Lower Regions respectively.
(ii) Draw any conclusion you can from the two control accounts.

Answer

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Tags: Control Accounts, Creditors Ledger, Financial accounting, Reconciliation, Trial Balance
Level: Level 1

Topic: Control accounts and account reconciliations

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

FA – L1 – Q51 – Control accounts and account reconciliations

Prepare a corrected trade receivables control account for Tobi and Co for the year ended 31 October 20X9, adjusting for identified errors.

Question

Tobi and Co sells goods on credit to most of its customers. In order to control a debt collection system, the company maintains a trade receivables ledger control account. In preparing the accounts for the year to 30 October 20X9 the accountant discovers that the total of all the personal accounts in the trade receivables’ ledger amounts to GH¢12,802, whereas the control account balance discloses a balance of GH¢12,550.
Upon investigation the following errors were discovered:
(1) Sales for the week ending 27 March 20X9 amounting to GH¢850 had been omitted from the control account.
(2) An account balance of GH¢300 had not been included in the list of balances.
(3) Cash received of GH¢750 had been entered in a personal account as GH¢570.
(4) A customer had qualified for an early settlement discount when not expected to do so. The amount of GH¢100 had not been entered in the control account.
(5) A personal account balance had been undercast by GH¢200.
(6) A contra item of GH¢400 with the trade payables ledger had not been entered in the control account.
(7) An irrecoverable debt of GH¢500 had not been entered in the control account.
(8) Cash received of GH¢250 had been debited to a personal account.
(9) Discounts received of GH¢50 had been debited to a customer’s ledger account.
(10) Returns inwards valued at GH¢200 had not been included in the control account.
(11) Cash received of GH¢80 had been credited to a personal account as GH¢8.
(12) A cheque for GH¢300 received from a customer had been dishonoured by the bank, but no adjustment had been made in the control account.

Required:
(a) Prepare a corrected trade receivables control account, bringing down the amended balance at 31 October 20X9.

(b) Prepare a statement showing the adjustments that are necessary to the list of personal account balances so that it reconciles with the amended control account balance.

Answer

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Tags: Control Accounts, Error Correction, Financial accounting, ledger reconciliation, Trade Receivables
Level: Level 1

Topic: Control accounts and account reconciliations

Tag (SQ): Financial accounting

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FA – L1 – Q93 – Inventory

Calculate gross profit and percentage for FreshProduce with given sales, inventory, and purchases.

FA – L1 – Q91 – Inventory

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

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 – Q63 – Correction of Errors

Prepare journal entries to correct errors in B.B. Ventures' trial balance, including unposted returns, sales errors, and inventory issues.

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 – Q54 – Inventory

Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.

FA – L1 – Q53 – Control accounts and account reconciliations

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

FA – L1 – Q51 – Control accounts and account reconciliations

Prepare a corrected trade receivables control account for Tobi and Co for the year ended 31 October 20X9, adjusting for identified errors.

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FA – L1 – Q93 – Inventory

Calculate gross profit and percentage for FreshProduce with given sales, inventory, and purchases.

You're reporting an error for "FA – L1 – Q93 – Inventory"

FA – L1 – Q91 – Inventory

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

You're reporting an error for "FA – L1 – Q91 – Inventory"

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 – Q63 – Correction of Errors

Prepare journal entries to correct errors in B.B. Ventures' trial balance, including unposted returns, sales errors, and inventory issues.

You're reporting an error for "FA – L1 – Q63 – Correction of Errors"

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 – Q54 – Inventory

Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.

You're reporting an error for "FA – L1 – Q54 – Inventory"

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"

FA – L1 – Q51 – Control accounts and account reconciliations

Prepare a corrected trade receivables control account for Tobi and Co for the year ended 31 October 20X9, adjusting for identified errors.

You're reporting an error for "FA – L1 – Q51 – Control accounts and account reconciliations"

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