Ledger accounts – Page 2

FA – L1 – Q33 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance for receivables accounts for two years, including recovery of written-off debt.

Question

Kofi, a trader, had receivables of GH₵50,000,000 at 30 June 20X7. He decided to establish an allowance for receivables balance based on 5% of the account balance at the statement of financial position date. He made the first allowance at 30 June 20X7.
The following relates to the years ended 30 June 20X8 and 30 June 20X9:

	Year ended 30 June
	20X8	20X9
	GH₵(000)	GH₵(000)
Credit sales	480,000	550,000
Cash received from customers	432,000	560,600
Irrecoverable debts written off	6,000	2,000

On 30 September 20X8, cash was received in respect of an irrecoverable debt written off in the year ended 30 June 20X8. The amount is included in the GH₵560,600 “cash received from customers” above.

Required
Write up the receivables account, the irrecoverable debts expense account, and allowance for receivables account.

Answer

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Tags: Allowance for receivables, Bad Debts, Cash receipts, Credit Sales, Doubtful debts, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

FA – L1 – Q32 – Bad and doubtful debt

Write up irrecoverable debts and allowance for receivables accounts for three years, including financial statement extracts.

Question

Nana makes allowance for receivables at varying percentages based on statistical analysis and the level of outstanding trade receivables. The result of this policy for the last three years is as follows.

Year to December	20X6	20X7	20X8
	GH₵(000)	GH₵(000)	GH₵(000)
Trade receivables at the year end (before adjusting for any irrecoverable debts)	196,860	151,020	216,020
Estimated irrecoverable debts (accounts in liquidation)	1,860	1,020	6,020
Allowance for receivables (%)	5%	6%	7.5%

The allowance for receivables at 1 January 20X6 was GH₵10,000.

Required
Write up the irrecoverable debts expense account and allowance for receivables account for each of the three years. Show the relevant extracts from the statement of financial position for each of the three years.

Answer

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Tags: Accounting entries, Allowance for receivables, Bad Debts, Doubtful debts, Financial Statements, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

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

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

Topic: Bad and doubtful debt

FA – L1 – Q30 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kojo Mensah.

Question

The financial records of Kojo Mensah include an allowance for receivables of GH¢206,000 brought forward on 1 January. Trade receivables at 31 December amount to GH¢2,440,000 and irrecoverable debts to be written off total GH¢55,000. An allowance for receivables of 5% of receivables is to be carried forward.

Required:
Write up the irrecoverable debts expense account and the allowance for receivables account.

Answer

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

Topic: Bad and doubtful debt

FA – L1 – Q29 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kwame Asare.

Question

The allowance for receivables brought forward on 1 January in the books of Kwame Asare was GH¢86,000. Trade receivables at 31 December amounted to GH¢2,840,000 and irrecoverable debts to be written off totalled GH¢115,000. Kwame Asare has estimated that the closing balance on the allowance for receivables account should be 5% of accounts receivable.

Required:
Write up the irrecoverable debts expense account and the allowance for receivables account.

Answer

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

Topic: Bad and doubtful debt

FA – L1 – Q28 – Bad and doubtful debt

Prepare ledger accounts and financial statement extracts for Ama Kusi's receivables adjustments for Year 7.

Question

Ama Kusi is a sole trader making up accounts to 31 July each year.
At 31 July Year 6 the balance on the allowance for receivables account was GH¢1,420,000. During the following financial period ending 31 July Year 7, Ama Kusi suffered a number of irrecoverable debts amounting to GH¢723,000, which she wrote off to the irrecoverable debts account.
At 31 July Year 7 Ama Kusi listed out all receivables balances, which totalled GH¢32,456,000. After reviewing the list Ama Kusi decided that three balances – namely Kwame Boateng GH¢230,000, Adwoa Mensah GH¢562,000, and Kofi Owusu GH¢56,000 – were all doubtful and had to be allowed for as doubtful debts. In addition, Ama Kusi considered that 2% of all the remaining balances were doubtful and an allowance for receivables should be recognised.

Required:
Show the ledger accounts reflecting the necessary adjustments, and the relevant extracts from the financial statements.

Answer

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

Topic: Bad and doubtful debt

FA – L1 – Q27 – Non-current assets and depreciation

Explain the terms depreciation and useful life of a non-current asset for Kofi Ansah. List four factors/causes contributing to depreciation of a non-current asset.

Question

(A) Explain the following Terms:

(i) Depreciation.

(ii) Useful life of a non-current asset.

(B) There are four (4) factors/causes that contribute to depreciation of a Non-current asset. List these factors or causes.

(C).

Kofi Ansah is a trader who prepares accounts to 31st December each year. The following transactions with regard to assets have taken place:
(i) 3rd January, 20X7 purchased one office equipment (laptop) for GH¢2,000.
(ii) 5th July, 20X8 purchased plant and machinery costing GH¢50,000.
(iii) 1st December, 20X8 purchased plant and machinery for GH¢20,000.
(iv) 15th December, 20X9 bought office equipment (printer) for GH¢1,000.
Mr. Kofi maintains its non-current assets at cost and depreciates its assets at a constant rate of 20% using the straight-line method of providing for depreciation for all assets. Assets purchased attract full depreciation charge in the year of purchase, whilst any asset disposed of attracts no depreciation charge.

Required:
Prepare the following:
(i) Plant and machinery account.
(ii) Office equipment account.
(iii) Accumulated depreciation account.

Answer

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Tags: Depreciation, Financial accounting, Ledger accounts, Non-current Assets, Office equipment, Plant and Machinery, Straight-line Method
Level: Level 1

Topic: Non-current assets and depreciation

FA – L1 – Q25 – Non-current assets and depreciation

Adjust plant and equipment and accumulated depreciation accounts for Akosua Pharmaceuticals Limited for errors in 20X9 financial statements.

Question

The draft statement of financial position of Akosua Pharmaceuticals Limited as on December 31, 20X9, depicts the following:

Description	GH¢
Plant and equipment – Cost	12,387,060
Less: Accumulated Depreciation	(4,792,540)
	7,594,520

On reviewing the accounts of the business, its auditor found that the records have been correctly maintained except for the following events:
(i) On January 17, 20X9, a contract was signed for the purchase of a packaging machine from Kofi Enterprises Limited for GH¢1,125,000 which is to be delivered on July 17, 20Y0. The company paid an advance of GH¢450,000 on the signing of the contract and the balance was to be paid on delivery of the machine. The advance was debited to the plant and equipment account.
(ii) Installation of a production machine was completed on January 21, 20X9. The cost of the machine of GH¢2,700,000 was debited to the plant and equipment account. The cost of installation amounting to GH¢300,000 had been debited to a repairs account.

Depreciation is charged on a reducing balance method at 10% per annum. Depreciation on new assets commences in the month in which the asset is acquired.
The depreciation expense for the year 20X9 have been correctly calculated and recorded except for the impact of errors discussed above.

Required
Determine the correct balances as at December 31, 20X9 by recording appropriate adjustments in the following accounts:
(a) Plant and equipment
(b) Accumulated depreciation – plant and equipment

Answer

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Tags: Accounting errors, Adjustments, Depreciation, Financial Statements, Ledger accounts, Non-current Assets, Plant and equipment, Reducing Balance Method
Level: Level 1

Topic: Non-current assets and depreciation

FA – L1 – Q24 – Non-current assets and depreciation

Prepare vehicle, accumulated depreciation, and depreciation accounts for Ama's car leasing business for 20X6 to 20X9.

Question

Ama leases out German sports cars on a short-term basis. She started business on 1 January 20X6 and has decided to depreciate the cars on a straight line basis at 25% per annum on cost at the year-end. During the years 20X6 to 20X9 the following purchases took place:

Year	Purchase Details	Cost (GH¢000)
20X6	Acquired 20 Porsche 924 Turbos at a cost of GH¢18,600,000 each	372,000
20X7	Purchased 6 Porsches for a total cost of GH¢108,600,000	108,600
20X8	Purchased a further two cars costing GH¢19,800,000 each	39,600
20X9	Purchased 15 cars for GH¢21,000,000 each	315,000

Ama prepares accounts to 31 December each year.

Required
Prepare a vehicle account, an accumulated depreciation account, and a depreciation account for the years 20X6 to 20X9.

Answer

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Tags: Accumulated Depreciation, Asset management, Depreciation, Financial accounting, Ledger accounts, Non-current Assets, Straight-line Method, Vehicle account
Level: Level 1

Topic: Non-current assets and depreciation

FA – L1 – Q14 – Sales and Purchases

Prepare sales and purchase day book extracts for Green Haven Garden Traders' May 20X9 transactions.

Question

The following transactions in May 20X9 are those of a new business entity, Green Haven Garden Traders.

May 20X9

Date	Transaction
1	Set up the entity with capital in cash: GH₵2,500,000.
2	Bought goods on credit from the following suppliers: Bushwood Suppliers GH₵540,000, Blossom Town GH₵870,000, D. Grayson GH₵250,000, Weedstop GH₵760,000, T. Verdant GH₵640,000. (Total: GH₵3,060,000).
4	Sold goods on credit to: Office Works GH₵430,000, V. Carson GH₵640,000, Southern Retail GH₵1,760,000. (Total: GH₵2,830,000).
6	Paid rent GH₵120,000.
9	Office Works paid the GH₵430,000 that it owed.
10	Southern Retail paid GH₵1,500,000.
12	The following payments were made: to D. Grayson GH₵250,000 and to Bushwood Suppliers GH₵540,000. (Total: GH₵790,000).
15	Advertising costs of GH₵230,000 were paid to the local newspaper publisher.
18	Bought goods on credit from the following suppliers: Bushwood Suppliers GH₵430,000, Landview GH₵1,100,000. (Total: GH₵1,530,000).
21	Sold goods on credit to Community Greens GH₵670,000.
31	Paid rent GH₵180,000.

Required
(a) Prepare extracts of the sales day book and purchase day book for the relevant transactions above.

(b) Use T accounts to show how these transactions should be recorded in the main ledger accounts of the entity. The accounting system contains a receivables ledger and a payables ledger for individual accounts, and there are control accounts (Total: accounts) for receivables and payables in the main ledger.

(c) Post the transactions to individuals’ accounts in the receivables ledger and the payables ledger and extract a list of balances from these. (The total of each list should agree with the balance on the receivables control account and payables control account respectively).

(d) Prepare a trial balance as at 31 May 20X9.

Answer

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Tags: Capital, Double Entry, Ledger accounts, Payables, Purchases, Receivables, Sales, Trial Balance
Level: Level 1

Topic: Double entry bookkeeping

Tag (SQ): Ledger accounts

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FA – L1 – Q33 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance for receivables accounts for two years, including recovery of written-off debt.

FA – L1 – Q32 – Bad and doubtful debt

Write up irrecoverable debts and allowance for receivables accounts for three years, including financial statement extracts.

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.

FA – L1 – Q30 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kojo Mensah.

FA – L1 – Q29 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kwame Asare.

FA – L1 – Q28 – Bad and doubtful debt

Prepare ledger accounts and financial statement extracts for Ama Kusi's receivables adjustments for Year 7.

FA – L1 – Q27 – Non-current assets and depreciation

Explain the terms depreciation and useful life of a non-current asset for Kofi Ansah. List four factors/causes contributing to depreciation of a non-current asset.

FA – L1 – Q25 – Non-current assets and depreciation

Adjust plant and equipment and accumulated depreciation accounts for Akosua Pharmaceuticals Limited for errors in 20X9 financial statements.

FA – L1 – Q24 – Non-current assets and depreciation

Prepare vehicle, accumulated depreciation, and depreciation accounts for Ama's car leasing business for 20X6 to 20X9.

FA – L1 – Q14 – Sales and Purchases

Prepare sales and purchase day book extracts for Green Haven Garden Traders' May 20X9 transactions.

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Write up receivables, irrecoverable debts expense, and allowance for receivables accounts for two years, including recovery of written-off debt.

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Write up irrecoverable debts and allowance for receivables accounts for three years, including financial statement extracts.

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

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Prepare irrecoverable debts expense and allowance for receivables accounts for Kojo Mensah.

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Prepare irrecoverable debts expense and allowance for receivables accounts for Kwame Asare.

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Prepare ledger accounts and financial statement extracts for Ama Kusi's receivables adjustments for Year 7.

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Explain the terms depreciation and useful life of a non-current asset for Kofi Ansah. List four factors/causes contributing to depreciation of a non-current asset.

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Adjust plant and equipment and accumulated depreciation accounts for Akosua Pharmaceuticals Limited for errors in 20X9 financial statements.

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Prepare vehicle, accumulated depreciation, and depreciation accounts for Ama's car leasing business for 20X6 to 20X9.

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Prepare sales and purchase day book extracts for Green Haven Garden Traders' May 20X9 transactions.

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