Receivables – Knowsia

AA – L2 – SA – Q5.6 – Internal Control Components

Components of internal control system.

Question

Select the appropriate component of a system of internal controls for each of the below examples.

The authorizing of inventory write-offs prior to inventory being scrapped.
The preparation of a reconciliation between the receivable’s ledger control account and the receivables ledger
A Control environment
B Control activity
C Information system and communication
D Information system and communication
E Control environment
F Control activity

Answer

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Tags: Control Components, ICAG, Internal controls, Inventory, Receivables
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements

AA – L2 – SA – Q2.9 – Receivables Cut-Off

Which item should appear in receivables.

Question

Which of the following should appear in receivables in the financial statements?

A Last GRN this year

B First GRN next year

C First GDN next year

D Last GDN this year

Answer

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Tags: Cut-off, Goods Despatched Note, ICAG, Receivables
Level: Level 2

Topic: Audit and Assurance Evidence

PSAF – L2 – Q8.3 – Revenue from Exchange Transactions

Explain accounting treatment of tuition fees for Wisdom Academy for 2023 per IPSAS 9.

Question

The academic year of Wisdom Academy starts from September each year but has a financial year from January 1 to December 31, consistent with the fiscal year of the Government of Ghana. With respect to the 2023/2024 academic year, a total of 6,000 students were on the roll of students, each expected to pay tuition fees of GHc8,000 for the academic year, divided into two equal parts for each semester. All students are expected to pay 25% of the first semester tuition fees at the start of September each year and pay the remaining 25% before the end of first semester examinations which starts in the first week of December. Similar arrangements pertain to the second semester which starts in February of the following year and ends in May. As at 31st December 2023, 20% of the total students’ population had paid their entire fees for the academic year, 60% of the students had paid full fees for the first semester only, the remaining 20% of the students had managed to pay only 90% of the tuition fees for the first semester but were allowed to write the end of semester examinations.

Required:

Explain the accounting treatment of tuition fees in the financial statements of Wisdom Academy for the year ended 31st December 2023 being guided by IPSAS 9: Revenue from exchange transactions.

Answer

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Tags: Accrual accounting, Deferred Income, Exchange Transactions, IPSAS 9, Receivables, Revenue Recognition, Tuition Fees
Level: Level 2

Topic: International Public Sector Accounting Standards

PSAF – L2 – Q8.1 – International Public Sector Accounting Standards

Detail the accounting treatment of outstanding tax revenue for the Federal Government of Nigeria as at 31st December 2024.

Question

As at 31st December 2024, corporate tax assessments amounting to NGN170 million were still outstanding to be paid by corporate entities to the Federal Government of Nigeria, whilst the total amount owed to the Federal Government of Nigeria as at 31st December 2024 in respect of taxes on goods and services stood at NGN140 million. It is estimated that, only 85% and 90% of the outstanding corporate taxes and taxes on goods and services respectively may be recovered.

Required:

Detail out the accounting treatment of tax revenue for the year ended 31st December 2024.

Answer

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Tags: Financial Performance, IPSAS 23, Non-Exchange Transactions, Provisions, Receivables, Tax Revenue, Uncollectible Revenue
Level: Level 2

Topic: International Public Sector Accounting Standards

L2 – Q73 – Cash Budgets and Master Budgets

Prepare a cash budget for Ministry of Commerce for April–June 202X, showing monthly and quarterly totals.

Question

On 31st March 202X the bank balance in the books of the Ministry of Commerce was GHC 900,000. The department provides you with the information below.

Month	IGF GHC’000	Govt releases GHC’000	Donations GHC’000	Salaries GHC’000	Goods and services GHC’000	Office equipment GHC’000	Advances GHC’000
Jan	4,100	2,000		1,200	1,000	600	50
Feb	900	500		320	300		40
March	1,300	500	400	320	400		50
April	1,200	600	200	620	320		40
May	1,000	600		550	220		60
June	1,000	600	200	660	420	500	50

Relevant notes to the data:
(i) The Internally Generated Funds (IGF) are made up of 70% cash receipts and 30% receivables. The receivables are collected as follows: 60% in the month following the service delivery and remaining 40% in the second month following the service delivery. The department is entitled to retention of 80% of the IGF collected and the remaining 20% is payable into the National Treasury (the central government fund) in the month in which the money is collected.
(ii) The department also enjoys budget allocation and Government promises to follow schedule.
(iii) The department anticipates some donations as shown in the table above. It is expected that 30%, 40%, and 70% of donations in March, April, and June respectively will be in cash. The remaining portions are expected to come in the form of materials.
(iv) The staff salaries will be paid at the end of each month.
(v) Goods and services are paid for one month in arrears.
(vi) The office equipment acquired in January will be paid for in the third month following the purchase, and the one to be acquired in June will be paid for immediately.
(vii) The office equipment is to be depreciated at 2.5% per month.
(viii) From January 20X0, staff of the department will be granted advances under an advance scheme approved by the government. The advances will be recovered in four equal monthly instalments, beginning in the month following the month in which the advances are granted (i.e. advances in January will be repaid in four equal monthly instalments beginning in February). Estimated advances are shown in the table above.

Required:
(a) Prepare a cash budget for the department for the Second Quarter of 202X (April – June 202X) showing the cash forecast for each individual month and the total for the quarter as a whole.

(b) Advise management based on the outcomes obtained in question (a) above.

Answer

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Tags: Advances, Budget Allocation, Cash Budgeting, Cash Flow, Consolidated Fund, Donations, Payments, Public Sector Accounting, Receivables, Short-Term Investments
Level: Level 2

Topic: Cash budgets and master budgets

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 – 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.

Question

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.

Answer

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Tags: Accruals, Depreciation, Drawings, Financial Statements, Inventory, Prepayments, Profit or Loss, Receivables, Sole Trader, Statement of Financial Position
Level: Level 1

Topic: Preparing financial statements of a sole trader

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

Tag (SQ): Receivables

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AA – L2 – SA – Q5.6 – Internal Control Components

Components of internal control system.

AA – L2 – SA – Q2.9 – Receivables Cut-Off

Which item should appear in receivables.

PSAF – L2 – Q8.3 – Revenue from Exchange Transactions

Explain accounting treatment of tuition fees for Wisdom Academy for 2023 per IPSAS 9.

PSAF – L2 – Q8.1 – International Public Sector Accounting Standards

Detail the accounting treatment of outstanding tax revenue for the Federal Government of Nigeria as at 31st December 2024.

L2 – Q73 – Cash Budgets and Master Budgets

Prepare a cash budget for Ministry of Commerce for April–June 202X, showing monthly and quarterly totals.

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 – 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.

FA – L1 – Q64 – Correction of Errors

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

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AA – L2 – SA – Q5.6 – Internal Control Components

Components of internal control system.

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AA – L2 – SA – Q2.9 – Receivables Cut-Off

Which item should appear in receivables.

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PSAF – L2 – Q8.3 – Revenue from Exchange Transactions

Explain accounting treatment of tuition fees for Wisdom Academy for 2023 per IPSAS 9.

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PSAF – L2 – Q8.1 – International Public Sector Accounting Standards

Detail the accounting treatment of outstanding tax revenue for the Federal Government of Nigeria as at 31st December 2024.

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L2 – Q73 – Cash Budgets and Master Budgets

Prepare a cash budget for Ministry of Commerce for April–June 202X, showing monthly and quarterly totals.

You're reporting an error for "L2 – Q73 – Cash Budgets and Master Budgets"

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.

You're reporting an error for "FA – L1 – Q97 – 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.

You're reporting an error for "FA – L1 – Q96 – 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.

You're reporting an error for "FA – L1 – Q94 – Preparation of accounts from incomplete records"

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.

You're reporting an error for "FA – L1 – Q70 – Preparing financial statements of a sole trader"

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"

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