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FA – L1 – Q97 – Preparation of accounts from incomplete records

Prepare statement of profit or loss, statement of affairs, and statement of financial position for Ansah Ventures for 20X9 using incomplete records.

Question

ANSAH VENTURES

Kwame Ansah is a vehicle spare parts dealer in Kumawu. He pays into his bank account the amount of his cash takings after keeping an amount of GH¢2,000 per week for personal use and after payment of wages and other expenses, which for the accounting period ending 31st December 20X9, were as follows:

Expenses	GH¢
Staff wages	1,440
Goods	120,580
Cleaning	1,200
Carriage	600
Sundry	5,000

The following are his bank transactions:

Bank Transactions	GH¢
Income tax	3,000
Telephone	650
Bank lodgements	15,000
Cash sales	6,000
Bulk sales (cheques)	10,000
Treasury bill interest	5,000
Payments to suppliers	15,000
Rent	11,000
Electricity	650
Balance as at 1st January 20X9	6,000

The following additional information was also provided:

Assets and Liabilities	01/01/20X9 (GH¢)	31/12/20X9 (GH¢)
Furniture & fittings	1,200	1,200
Stocks in trade	10,500	7,650
Payables – Goods purchased	1,670	2,750
Payables – Rent	5,000	6,000
Payables – Electricity	500	650
Payables – Telephone	150	200
Payables – Accountancy fee	–	750
Treasury bills	10,000	15,000
Receivables – Bulk sales	8,000	15,000

Required:
(i) Prepare statement of profit or loss for the year ending 31st December 20X9. (10 marks)
(ii) Prepare statement of affairs as at 1st January 20X9. (2 marks)
(iii) Prepare statement of financial position as at 31st December 20X9. (8 marks)

Answer

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Tags: Capital, Depreciation, Expenses, Incomplete records, Inventory, Payables, Receivables, Statement of affairs, Statement of Financial Position, Statement of profit or loss
Level: Level 1

Topic: Preparation of accounts from incomplete records

FA – L1 – Q96 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for Kofi's business for 20X9 using incomplete records.

Question

Kofi is in business but does not keep proper books of account. In order to prepare his income and expenditure account for the year ended 31 December 20X9 you are given the following information.

| | 1 Jan 20X9 | 31 Dec 20X9 | | | GH¢000 | GH¢000 | | Inventory on hand | 1,310 | 1,623 | | Receivables | 268 | 412 | | Payables for goods | 712 | 914 | | Payables for expenses | 116 | 103 |

In addition you are able to prepare the following summary of his cash and bank transactions for the year.

| Cash account | | | | | — | GH¢000 | — | GH¢000 | | Balance 1 January | 62 | Payments into bank | 3,050 | | Shop takings | 4,317 | Purchases | 316 | | Cheques cashed | 200 | Expenses | 584 | | | | Drawings | 600 | | | | Balance 31 December | 29 | | | 4,579 | | 4,579 |

| Bank account | | | | GH¢000 | | Balance 1 January | 840 | Cash withdrawn | 200 | | Cheques from customers | 1,416 | Purchases | 2,715 | | Cash paid in | 3,050 | Expenses | 519 | | | | Drawings | 400 | | | | Delivery van (purchased 1 September) | 900 | | | | Balance 31 December | 572 | | | 5,306 | | 5,306 |

In addition Kofi says that he had taken goods for personal consumption and estimates that those goods cost GH¢100,000.
In considering accounts receivable Kofi suggests that a provision is to be made of 5% of amounts due after writing off a specific irrecoverable debt of GH¢30,000.
Depreciation on the delivery van is to be recognised at 20% per annum.

Required:
Prepare the statement of profit or loss and a statement of financial position at 31 December 20X9.

Answer

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Tags: Capital account, Cash Flow, Depreciation, Financial Statements, Incomplete records, Inventory, Payables, Receivables, Statement of Financial Position, Statement of profit or loss
Level: Level 1

Topic: Preparation of accounts from incomplete records

FA – L1 – Q94 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for a sole trader using incomplete records for 20X9.

Question

Kofi Mensah does not keep proper books of account due to his lack of knowledge of double entry system of accounting. He has supplied you the following information with respect to the year ended 31 December 20X9 from the records kept in his diary:
(i) Transactions during the year:

	GH¢
Cash received from customers	80,000
Discount allowed to customers	1,400
Irrecoverable debts written off	1,800
Cash paid to suppliers	63,000
Discount allowed by suppliers	1,000
Sales returns	3,000
Purchases returns	2,000
Expenses paid	6,000
Drawings	5,000
Rent paid	2,500

(ii) Opening balances as on 1 January 20X9:

Assets and liabilities	GH¢
Receivables	45,000
Payables	24,000
Cash	4,500
Furniture and fixtures	15,000
Inventory	25,000
Motor van	16,000

(iii) Receivables and payables as on 31 December 20X9 amounted to GH¢ 48,600 and GH¢ 27,000 respectively.
(iv) Outstanding expenses as on 31 December 20X9 amounted to GH¢ 1,200.
(v) Depreciation is charged on furniture and fixtures at the rate of 10% and on motor van at 20%.
(vi) Kofi Mensah sells goods at cost plus 40% and follows a policy of maintaining an allowance of 5% of the outstanding receivables.

Required:
Prepare the following:
(a) Statement of profit or loss for the year ended 31 December 20X9.
(b) Statement of financial position as at 31 December 20X9.

Answer

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Tags: Accruals, Bad Debts, Depreciation, Discounts, Incomplete records, Inventory, Payables, Receivables, Statement of Financial Position, Statement of profit or loss
Level: Level 1

Topic: Preparation of accounts from incomplete records

FA – L1 – Q92 – Preparation of accounts from incomplete records

Calculate sales for Iridescent's business for 20X9 using incomplete records and a 40% mark-up

Question

Iridescent is a sole trader. She does not keep a full set of accounting records but does keep some records of transactions and documents. She has asked you to prepare her accounts for the year ended 31 December 20X9.
You have been given a list of the assets and liabilities of the business at the start and end of the year.

Assets and liabilities

	At 1 Jan 20X9	At 31 Dec 20X9
	GH₵000	GH₵000
Trade receivables	5,500	6,100
Trade payables	2,800	3,500
Inventory	10,400	?

Iridescent has no idea what her inventory value was at 31 December as she did not count or value her inventory at the year end.
She has also given you a summary of her bank statements for the year.

Summary of bank statements

	Receipts		Payments
	GH₵000		GH₵000
1 Jan	Balance b/d	1,620	To suppliers
Bankings		65,400	For expenses
			Living expenses
			31 Dec Balance c/d

You have also been able to gather the following information from Iridescent:
i) Iridescent banks her takings from the till each week but before doing so pays GH₵50,000 to her employees and takes GH₵30,000 herself. The business operates for 50 weeks each year.
ii) The till always has a cash float of GH₵100,000.
iii) The sales of the business are both cash and credit sales and are all made at a mark-up of 40%.

Required:
(a) Calculate sales for the year.

(b) Calculate the value of the closing inventory at 31 December 20X9.

Answer

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Tags: Closing Inventory, Incomplete records, Mark-up, Payables, Sole Trader
Level: Level 1

Topic: Preparation of accounts from incomplete records

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

Question

The trial balance of Western Medical Supplies showed a short credit of ZM₵6,264 as at June 30, 20X9. A suspense account was opened for the difference and the profit for the year was then calculated at ZM₵956,180.
The following errors and adjustments were discovered subsequently:
(i) An invoice of ZM₵3,700 was debited to purchases but the goods were received after year-end and were not included in the closing inventory.
(ii) Store equipment costing ZM₵8,100 and having a book value of ZM₵3,600 was sold for ZM₵2,500. Cash was debited and store equipment was credited. No other entries were made.
(iii) A cheque of ZM₵1,850 received from a customer was dishonoured on June 25, 20X9 but no entry was made in the books. Cash there against was received after year-end.
(iv) Purchase of office equipment costing ZM₵15,200 was entered in the purchases account. Depreciation on office equipment is provided at the rate of 10%.
(v) A purchase invoice of ZM₵197 was debited to the supplier account as ZM₵917.
(vi) Purchase returns book was under-casted by ZM₵650.
(vii) The opening balance of furniture account was brought forward as ZM₵18,300 instead of ZM₵13,800. Depreciation on furniture is provided at the rate of 10%.
(viii) A balance of ZM₵730 in the sales ledger is to be offset against a balance of ZM₵880 in the purchase ledger.

Required:
(a) Prepare journal entries to adjust the above items.

(b) Recalculate the net profit for the year.

Answer

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Tags: Depreciation, Error Correction, Inventory, Net profit, Non-current Assets, Payables, Profit Adjustment, Receivables, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

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 – 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

FA – L1 – Q12 – Double entry bookkeeping

Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

Question

Enter the following transactions in the main ledger accounts of Leah, and extract a trial balance as at 31 March 20X9.
Assume that all receipts and payments are by cheque unless told otherwise.

March 20X9

Date	Transaction
1	Started business with GH₵80,000 in the bank
2	Bought goods on credit from: K&H Supplies GH₵7,600; Hatton Traders GH₵2,700; Tobias Traders GH₵5,600
5	Cash sales GH₵8,700. The cash was kept in a safe in Leah’s office.
6	Paid wages GH₵1,400 by cheque.
7	Sold goods on credit to: Elliott Enterprises GH₵3,500; L. Lang GH₵4,200; Carter Leisure GH₵7,200
9	Bought goods for cash GH₵4,600 using cash from Leah’s safe.
10	Bought goods on credit from: K&H Supplies GH₵5,700; Tobias Traders GH₵9,800
12	Paid wages GH₵1,400 by cheque.
13	Sold goods on credit to: L. Lang GH₵3,200; Carter Leisure GH₵2,300
15	Bought shop fixtures on credit from Betta Fittings GH₵5,000
17	Paid K&H Supplies GH₵8,400
18	Goods returned to Tobias Traders GH₵2,000
21	Paid Betta Fittings GH₵5,000
24	Payment received from Carter Leisure GH₵9,500
27	Goods returned to K&H Supplies GH₵2,400
30	Royal Bank provides a loan of GH₵6,000
31	Bought a motor van, paying by cheque GH₵40,000

Answer

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Level: Level 1

Topic: Double entry bookkeeping

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.

Question

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.

Answer

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Tags: Capital, Drawings, Expenses, Inventory, Payables, Receivables, Revenue, Statement of Financial Position, Statement of profit or loss, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q10 – Double entry bookkeeping

Record May 20X9 transactions in T accounts and prepare a trial balance for Pine Grove Garden Traders.

Question

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

May 20X9
Date
1 Set up the entity with capital in cash: GH₵2,500,000.
2 Bought goods on credit from the following suppliers: Green Leaf Company GH₵540,000, Blossom Town GH₵870,000, D Smith GH₵250,000, HerbSafe GH₵760,000, Forest Green GH₵640,000.
4 Sold goods on credit to: City Office Supplies GH₵430,000, V Pine GH₵640,000, Coastal Chain Stores GH₵1,760,000.
6 Paid rent GH₵120,000.
9 City Office Supplies paid the GH₵430,000 that it owed.
10 Coastal Chain Stores paid GH₵1,500,000.
12 The following payments were made: to D Smith GH₵250,000 and to Green Leaf Company GH₵540,000.
15 Advertising costs of GH₵230,000 were paid to the local newspaper publisher.
18 Bought goods on credit from the following suppliers: Green Leaf Company GH₵430,000, Horizon Plants GH₵1,100,000.
21 Sold goods on credit to Community Gardens GH₵670,000.
31 Paid rent GH₵180,000.

Required
(a) Use T accounts to show how these transactions should be recorded in the main ledger accounts of the entity. The accounting system maintains separate accounts for each individual payable and receivable in the main ledger.
(b) Prepare a trial balance as at 31 May 20X9.

Answer

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Tags: Accounting records, Capital, Cash Transactions, Ledger accounts, Payables, Purchases, Receivables, Sales, T accounts, Trial Balance
Level: Level 1

Topic: Double entry bookkeeping

Tag (SQ): Payables

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FA – L1 – Q97 – Preparation of accounts from incomplete records

Prepare statement of profit or loss, statement of affairs, and statement of financial position for Ansah Ventures for 20X9 using incomplete records.

FA – L1 – Q96 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for Kofi's business for 20X9 using incomplete records.

FA – L1 – Q94 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for a sole trader using incomplete records for 20X9.

FA – L1 – Q92 – Preparation of accounts from incomplete records

Calculate sales for Iridescent's business for 20X9 using incomplete records and a 40% mark-up

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

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 – Q14 – Sales and Purchases

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

FA – L1 – Q12 – Double entry bookkeeping

Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

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.

FA – L1 – Q10 – Double entry bookkeeping

Record May 20X9 transactions in T accounts and prepare a trial balance for Pine Grove Garden Traders.

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FA – L1 – Q97 – Preparation of accounts from incomplete records

Prepare statement of profit or loss, statement of affairs, and statement of financial position for Ansah Ventures for 20X9 using incomplete records.

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FA – L1 – Q96 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for Kofi's business for 20X9 using incomplete records.

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FA – L1 – Q94 – Preparation of accounts from incomplete records

Prepare statement of profit or loss and financial position for a sole trader using incomplete records for 20X9.

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FA – L1 – Q92 – Preparation of accounts from incomplete records

Calculate sales for Iridescent's business for 20X9 using incomplete records and a 40% mark-up

You're reporting an error for "FA – L1 – Q92 – Preparation of accounts from incomplete records"

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

You're reporting an error for "FA – L1 – Q62 – Correction of Errors"

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 – Q14 – Sales and Purchases

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

You're reporting an error for "FA – L1 – Q14 – Sales and Purchases"

FA – L1 – Q12 – Double entry bookkeeping

Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

You're reporting an error for "FA – L1 – Q12 – Double entry bookkeeping"

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.

You're reporting an error for "FA – L1 – Q11 – Preparing financial statements of a sole trader"

FA – L1 – Q10 – Double entry bookkeeping

Record May 20X9 transactions in T accounts and prepare a trial balance for Pine Grove Garden Traders.

You're reporting an error for "FA – L1 – Q10 – Double entry bookkeeping"

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