Journal entries – Knowsia

FA – L1 – Q79 – Preparation of Partnership accounts

Prepare journal entries for partner retirement and admission, excluding goodwill in the books.

Question

A summarized statement of financial position of ABC Partnership as on January 31, 20X9 is given below:

Debit	GH₵	Credit	GH₵
Non-current assets	1,700,000	Current liabilities	1,900,000
Current assets	4,700,000	James, Capital	1,000,000
		Emma, Capital	1,500,000
		Liam, Capital	2,000,000
	6,400,000		6,400,000

James, Emma, and Liam share profits in the ratio of their capital in the partnership.
On January 31, 20X9, James retired from the partnership. For the purposes of his retirement, goodwill of the partnership was estimated at GH₵1.89 million. It was agreed that James would take cash from the business equal to the value of his closing capital after the goodwill adjustment.
On February 1, 20X9, Sophia was admitted to the partnership. The new profit sharing ratio was agreed at 3:4:2 for Emma, Liam, and Sophia respectively. Sophia agreed to bring in cash equivalent to her share of assets (excluding goodwill) in the new partnership plus an additional amount of GH₵0.5 million for goodwill.

Required:
Prepare journal entries to record the above transactions under the following assumption:
(a) Goodwill is not recorded in the books of account.

(b) Goodwill is recorded in the books of account.

Answer

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Tags: Admission, Capital accounts, Goodwill, Journal entries, Partnership accounting, Profit-sharing ratio, Retirement
Level: Level 1

Topic: Preparation of Partnership accounts

FA – L1 – Q64 – Correction of Errors

Prepare journal entries to correct errors in Mensah and Partners' trial balance, including irrecoverable debts and misposted transactions.

Question

The trial balance of Mensah and Partners did not agree as at 31 December 20X9, and the difference was carried to a suspense account. On scrutinising the books of account, the following types of errors were detected:
(i) Receivables include GH₵15,000 which are irrecoverable and need to be written off.
(ii) Goods invoiced at GH₵4,600 were returned by a customer. It was entered in the purchases book and posted from there to a creditor’s account as GH₵6,400.
(iii) A cheque of GH₵8,000 received from a customer was not posted to his ledger account. Moreover, the corresponding sales invoice for GH₵12,000 was incorrectly passed through the sales day book as GH₵2,000.
(iv) Sales include goods sold for cash amounting to GH₵25,000 on behalf of Mr Kwame. Mensah and Partners were entitled to a commission of 10% on the sales plus selling expenses, for which no adjustment was made. The related selling expenses amounted to GH₵1,500.
(v) An amount of GH₵3,800 owed by Y & Co. for goods supplied was to be adjusted against an amount of GH₵8,500 owed to Y & Co. No entry has been made in this regard.
(vi) A purchase of GH₵15,100 was entered in the purchase day book as GH₵1,500 and posted to the supplier’s account as GH₵5,100.
(vii) Goods invoiced at GH₵23,000 and returned by J K, a debtor, were entered in the purchase day book and posted therefrom to K J, a creditor, as GH₵32,000.
(viii) A supplier’s invoice for GH₵12,300 had been entered in the purchase day book on 28 December 20X9. However, the goods were received on 2 January 20Y0.
(ix) Some items of furniture which stood in the books at GH₵24,000 on 1 January 20X9 were disposed of on 30 June 20X9 in exchange for new furniture costing GH₵20,800. A net invoice of GH₵9,200 was passed through the purchase day book. Depreciation on furniture is charged at 10% on written down value.
(x) Mensah and Partners maintains an allowance of 5% of the gross amount of receivables.

Required:
Prepare journal entries to rectify the errors identified above.
(Narrative is not required.)

Answer

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Tags: Bad Debt, Depreciation, Error Correction, Inventory, Journal entries, Purchases, Receivables, Sales, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

Question

The accountant of Apex Chemical Solutions has prepared a trial balance, but has found that the total of debit balances is GH₵864,600 and the total of credit balances is GH₵862,150.

On investigation, he discovers the following errors in the book-keeping:

(1) Total purchases in the period were recorded at GH₵100 below their correct value, although the total value of trade payables was correctly recorded.

(2) Total telephone expenses were recorded at GH₵1,000 above their correct amount, although the total value of the amounts payable was correctly recorded.

(3) Purchase returns of GH₵550 were recorded as a debit entry in the sales returns account, but the correct entry had been made in the trade payables control account.

(4) Equipment costing GH₵2,000 had been recorded as a debit entry in the repairs and maintenance account.

(5) Rental expenses of GH₵5,490 were entered incorrectly as GH₵5,940 in the expense account but were entered correctly in bank account in the ledger.

(6) Bank charges of GH₵200 have been omitted entirely from the ledger.

Required

Prepare journal entries for the correction of the errors.

Open a suspense account. Record the appropriate corrections in the suspense account, so that the balance on this account is eliminated.

Answer

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Tags: Correction of Errors, Double Entry Bookkeeping, Journal entries, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

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.

Question

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.

Answer

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Tags: Bank reconciliation, Cash book, Financial Statements, Journal entries, Overdraft
Level: Level 1

Topic: Bank reconciliations

FA – L1 – Q47 – Control accounts and account reconciliations

Correct errors in trade payables control account and payables ledger with journal entries and state the correct total balance.

Question

KRAIS Solutions

The balance on the trade payables control account is GH₵79,500,000. This does not agree with the sum of the balances on the accounts in the payables ledger.

On investigation, you discover the following errors:

(1) Purchases of GH₵1,850,000 from Vendor X have been recorded in the payables control account, but not in the vendor’s account in the payables ledger.

(2) A payment of GH₵2,000,000 to Vendor Y has been correctly recorded in the bank account in the ledger, but not in Vendor Y’s account in the payables ledger.

(3) A discount received of GH₵300,000 from Vendor Z has been recorded correctly in the payables control account, but not in Vendor Z’s account in the payables ledger.

(4) Purchase returns to Vendor W of GH₵1,500,000 have been correctly recorded in Vendor W’s account in the payables ledger, but have not been recorded at all in the main ledger.

Required

Prepare journal entries to correct the errors. (Note: When the error is in the payables ledger, only one entry, a debit or a credit, is required as a journal entry.)

State the correct total balance for trade payables.

Answer

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Tags: Account Reconciliation, Control Accounts, Error Correction, Journal entries, Payables Ledger, Trade Payables
Level: Level 1

Topic: Control accounts and account reconciliations

FA – L1 – Q31 – Bad and doubtful debt

Prepare journal entries and ledger accounts for irrecoverable debts and allowance for receivables for Kwame Boateng over two years.

Question

The following information is available for Kwame Boateng:
Year 1
(1) 1 January: Allowance for receivables of GH¢860,000 standing on the books.
(2) 31 December: Trade receivables amount to GH¢15,000,000.
(3) Irrecoverable debts written off during the year amounted to GH¢1,000,000.
(4) An allowance for 7.5% of trade receivables is required.
Year 2
(1) 31 December: Trade receivables, before adjustments are GH¢13,700,000.
(2) Irrecoverable debts to be written off are GH¢1,100,000.
(3) Allowance for 7.5% of receivables is still considered necessary.

Required:
Show the journal entries to record the above and the relevant irrecoverable debt expense and allowance for receivables ledger accounts.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for receivables, Bad Debts, Doubtful debts, Financial accounting, Journal entries, Ledger accounts
Level: Level 1

Topic: Bad and doubtful debt

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FA – L1 – Q79 – Preparation of Partnership accounts

Prepare journal entries for partner retirement and admission, excluding goodwill in the books.

FA – L1 – Q64 – Correction of Errors

Prepare journal entries to correct errors in Mensah and Partners' trial balance, including irrecoverable debts and misposted transactions.

FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

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.

FA – L1 – Q47 – Control accounts and account reconciliations

Correct errors in trade payables control account and payables ledger with journal entries and state the correct total balance.

FA – L1 – Q31 – Bad and doubtful debt

Prepare journal entries and ledger accounts for irrecoverable debts and allowance for receivables for Kwame Boateng over two years.

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FA – L1 – Q79 – Preparation of Partnership accounts

Prepare journal entries for partner retirement and admission, excluding goodwill in the books.

You're reporting an error for "FA – L1 – Q79 – Preparation of Partnership accounts"

FA – L1 – Q64 – Correction of Errors

Prepare journal entries to correct errors in Mensah and Partners' trial balance, including irrecoverable debts and misposted transactions.

You're reporting an error for "FA – L1 – Q64 – Correction of Errors"

FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

You're reporting an error for "FA – L1 – Q60 – Correction of Errors"

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.

You're reporting an error for "FA – L1 – Q59 – Bank reconciliations"

FA – L1 – Q47 – Control accounts and account reconciliations

Correct errors in trade payables control account and payables ledger with journal entries and state the correct total balance.

You're reporting an error for "FA – L1 – Q47 – Control accounts and account reconciliations"

FA – L1 – Q31 – Bad and doubtful debt

Prepare journal entries and ledger accounts for irrecoverable debts and allowance for receivables for Kwame Boateng over two years.

You're reporting an error for "FA – L1 – Q31 – Bad and doubtful debt"

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