Tag (SQ): Financial Statements

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  • 20 Marks

FA – L1 – Q74 – Preparation of limited liability company financial statements

Prepare Pakasa Bepo Industries Ltd's statement of profit or loss and financial position for 20X9 per IAS 1, using trial balance and additional info.

The list of balances of Pakasa Bepo Industries Limited shows the following balances at 31 December 20X9.

Dr GH¢000 Cr GH¢000
Inventory (goods for resale) at 1 January 20X9 330 Share capital (600,000 shares) 300
Revenue 1,000
Purchases 484
Purchases returns 60
Sales returns 28
Carriage outwards 28
Warehouse wages 80
Sales representatives salaries 60
Administrative wages 40
Warehouse plant and equipment – cost 126
Accumulated depreciation – 1 January 20X9 50
Delivery vehicle hire 20
Goodwill 100
Distribution expenses 10
Administrative expenses 30
Directors’ salaries (charge to administrative expenses) 30
Rental income 16
Trade receivables 60
Cash at bank 60
Trade payables 60
Total 1,542 Total 1,542

Additional Information
(1) Inventory (goods for resale) at 31 December 20X9 amounted to GH¢100,000.
(2) Annual depreciation on warehouse plant and equipment of GH¢32,000 should be provided.
(3) Income tax for 20X9 should be taken as GH¢50,000.
(4) Goodwill is to be written down to GH¢90,000.

Required:
Prepare the company’s statement of profit or loss for the year to 31 December 20X9 and a statement of financial position at that date in accordance with IAS 1 Presentation of Financial Statements.

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  • 20 Marks

FA – L1 – Q73 – Preparation of limited liability company financial statements

Prepare Kamisa Health Limited's statement of profit or loss and financial position for 31 March 20X9 per IAS 1, using trial balance and additional info.

The following trial balance has been extracted from the books of account of Kamisa Health Limited, a limited liability company, at 31 March 20X9.

Description ZMW ‘000 (DR) ZMW ‘000 (CR)
Administrative expenses 210
Share capital (ordinary shares of ZMW 1 fully paid) 600
Trade receivables 470
Bank overdraft 80
Income tax (overprovision in 20X8) 25
Retirement benefit liability 180
Distribution costs 420
Non-current asset investments 560
Investment income 75
Plant and equipment (At cost) 750
Accumulated depreciation (at 31 March 20X9) 220
Accumulated profit (at 1 April 20X8) 240
Purchases 960
Inventories (at 1 April 20X8) 140
Trade payables 260
Revenue 1,950
Dividend paid 120
Total 3,630 3,630

Additional Information
(1) Inventories at 31 March 20X9 were valued at ZMW 150,000.
(2) The following items are already included in the balances listed in the above trial balance.
(3) The income tax expense based on the profit on ordinary activities is estimated to be ZMW 54,000.
(4) The retirement benefit liability is to be increased by ZMW 16,000. The increase should be charged to administrative expenses. No retirement benefits are expected to be paid for the foreseeable future.

Required:
Prepare the company’s statement of profit or loss for the year to 31 March 20X9 and a statement of financial position at that date in accordance with IAS 1 Presentation of Financial Statements.

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  • 20 Marks

FA – L1 – Q72 – Preparing financial statements of a sole trader

Prepare Zanko Ventures' statement of profit or loss for 20X9 using trial balance and adjustments.

(a) Distinguish between capital expenditure and revenue expenditure.
(b) (i) The following trial balance was extracted from the books of Zanko Ventures, a second-hand bags dealer as at 31st December, 20X9.

Description DR (GH₵) CR (GH₵)
Inventory 120,000
Vehicle (Cost) 150,000
Trade receivables 25,000
Accumulated depreciation: Vehicle 30,000
Accumulated depreciation: Furniture & fittings 10,120
Trade payables 100,000
Drawings 120,000
General expenses 65,000
Allowance for receivables 2,500
Rate & rent 14,000
Insurance 5,000
Irrecoverable debt 7,000
Discount received 25,150
Discount allowed 15,160
Bank balance 165,240
Wages & salaries 250,000
Sundry expenses 6,150
Vehicle running expenses 15,650
Furniture & fittings 50,600
Repairs to the shop 6,500
Purchases 650,120
Sales 1,079,130
Capital 473,520
Total 1,720,420 1,720,420

The following additional information is provided:
(i) Allowance for receivables is to be reduced by 10%.
(ii) Rate and rent has been paid in advance by two (2) months. Note that Zanko Ventures pays GH₵1,000 each month.
(iii) Inventory as at 31st December, 20X9 is GH₵80,150.
(iv) A bill of GH₵6,150 for vehicle running was outstanding as at 31st December, 20X9.
(v) The enterprise provides depreciation as follows:

  • Vehicle: 20% per annum on straight-line basis.
  • Furniture and fittings: 20% per annum on straight-line basis.

You are required to:
(i) Prepare the statement of profit or loss for the year ending 31st December 20X9.

(ii) Prepare the statement of financial position as at 31st December 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 – Q69 – Preparing financial statements of a sole trader

Prepare Sarah's statement of profit or loss for 20X8 and financial position as at 31 Dec 20X8 using given balances and adjustments.

The following information relates to the business of Sarah for the year ended December 20X8.

GH$ GH$
Capital account, 1 January 20X8 13,640
Freehold properties at cost 7,500
Furniture and fittings at cost 2,000
Motor cars at cost 6,300
Accumulated depreciation to 1 January
Freehold properties 450
Furniture and fittings 800
Motor cars 2,370
Inventory 1 January 6,740
Purchases 54,520
Sales 79,060
Salaries 8,760
Rates 1,170
Office expenses 3,950
Motor expenses 3,790
Drawings 4,800
Allowance for receivables 1 January 600
Loan 4,000
Trade receivables 9,240
Trade payables 10,040
Bank balance 2,190
110,960 110,960

You are also supplied with the following information:
(1) Inventory at 31 December 20X8 was GH$7,330.
(2) Rates paid in advance at 31 December 20X8 amounted to GH$250.
(3) Allowance for receivables is to be made equal to 5% of accounts receivable at 31 December 20X8.
(4) Depreciation is to be provided for the year at the following annual rates calculated on cost at the year end:

  • Freehold properties: 1%
  • Furniture and fittings: 10%
  • Motor cars: 20%
    (5) Interest on the loan at 5% per annum is to be provided.

Required:
Prepare a statement of profit or loss for the year ended 31 December 20X8 and a statement of financial position 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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  • 15 Marks

FA – L1 – Q59 – Bank reconciliations

Prepare a bank reconciliation statement for Kofi & Associates as of 31 December 20X9, addressing discrepancies between cash book and bank statement.

Kofi & Associates
Mr. Kofi is a sole trader and carries on business under the name “Kofi & Associates”. The balance on his cash book at 31 December 20X9 did not agree with the balance as per the bank statement which shows a credit balance of GH¢367,500.
An examination of the cash book and bank statement disclosed the following:
(i) A deposit of GH¢49,200 made on 29 December 20X9 had been credited by the bank on 1 January 20Y0.
(ii) Bank charges of GH¢1,700 have not been entered in the cash book.
(iii) A debit of GH¢4,200 appeared on the bank statement for an unpaid cheque which has been returned marked “out of date”. The cheque was re-dated by his customer and paid into the bank again on 3 January 20Y0.
(iv) A standing order for payment of an annual subscription amounting to GH¢1,000 has not been entered in the cash book.
(v) On 26 December 20X9, Mr. Kofi had given the cashier a cheque for GH¢10,000 tos to pay into his personal account at the bank. The cashier deposited it into the business account by mistake.
(vi) On 27 December 20X9, a customer had made an online transfer of GH¢49,900 in payment against goods supplied. The advice was received and recorded in the cash book on 2 January 20Y0.
(vii) On 30 September 20X9, Mr. Kofi entered into a hire purchase agreement and issued a standing order to the bank to pay a sum of GH¢2,600 on the 10th day of each month, commencing from October 20X9. No entries have been made in the cash book for these payments.
(viii) A cheque for GH¢36,400 received from Mr. Kwame had been entered twice in the cash book.
(ix) Cheques issued amounting to GH¢467,200 had not been presented to the bank for payment until after 31 December 20X9.
(x) Dividend collected by the bank amounting to GH¢12,000 has not been recorded in the cash book.
(xi) A cheque of GH¢243,000 received from Mr. Asante was deposited in the bank but entered in the cash book as GH¢234,000.

Required
(a) Prepare a bank reconciliation statement as on 31 December 20X9.

(b) Prepare necessary journal entries in the books of Kofi & Associates and determine the correct cash balance that should be reported in the statement of financial position. Also specify the situations in which no adjustment/entry is required.

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  • 12 Marks

FA – L1 – Q58 – Bank reconciliations

Prepare a bank reconciliation statement for Accra & Sons as at 31 Dec 20X9, identifying the cash at bank balance.

While reconciling the bank statement with the cash/bank book of Accra & Sons for the year ended December 31, 20X9, you noted the following:

(i) Balance as per bank statement at December 31, 20X9, overdrawn: GH¢806,436
(ii) Cheques drawn but not presented till December 31, 20X9: GH¢377,784
(iii) Mark-up on overdraft charged by the bank on January 2, 20Y0 was recorded in the cash/bank book on December 31, 20X9: GH¢118,686
(iv) Collections made on December 30 and 31, 20X9 were not lodged with the bank till January 3, 20Y0: GH¢250,600
(v) A bill which was due on December 29, 20X9 was sent to the bank for collection on December 28, 20X9, and entered in the cash/bank book. However, the proceeds were credited by the bank on January 1, 20Y0: GH¢196,500
(vi) Subscription for a magazine was paid by the bank, as per the auto-debit instructions, on December 1, 20X9. This transaction has not been recorded in the cash/bank book so far: GH¢3,144
(vii) A time-barred cheque was replaced with a new cheque on December 30, 20X9 and entered in the cash/bank book without the previous cheque being cancelled / reversed. Both the cheques are included in (ii) above: GH¢5,000
(viii) A cheque received on December 21 was erroneously recorded on the credit side of the cash/bank book: GH¢7,500
(ix) A cheque issued to a supplier was time-barred as of January 2, 20Y0: GH¢13,200
(x) A cheque issued by the company has been entered in the credit column of the bank statement: GH¢13,200

Required:
Prepare a bank reconciliation statement as at December 31, 20X9 and identify the amount to be carried to the statement of financial position as “cash at bank”.

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