- 15 Marks
BMIS – L1 – QA2 – Business and Organisational Structure
Identify three business entity types and differentiate their characteristics.
Find Related Questions by Tags, levels, etc.
Report an error
Tag (SQ): Sole Trader
Search
500
+ past questions and counting.
- 10 Marks
FA – L1 – Q103 – Interpretation of Financial Statements
Calculate five financial ratios for KK Enterprises based on its 20X8 financial statements.
Question
KK is the owner of a business supplying goods to other traders. He has just received the financial accounts for his business for the year ended 31st December 20X8 from his accountant. These are reproduced below.
Statement of profit or loss for the year ended 31st December 20X8
| GH¢ | GH¢ |
|---|---|
| Sales | |
| Cost of sales | |
| Gross profit | |
| Expenses | |
| Net profit |
Statement of financial position as at 31st December 20X8
| GH¢ | GH¢ |
|---|---|
| Non-current assets (net) | |
| Current assets | |
| Inventory | 52,000 |
| Receivables | 15,000 |
| Cash | 100 |
| Total assets | |
| Current liabilities | |
| Payables | 6,000 |
| Bank | 2,500 |
| Capital | |
| Balance b/d | 200,000 |
| Net profit | 30,000 |
| Drawings | (21,400) |
| Total capital and liabilities |
Note: Inventory on 1st January 20X8 was valued at GH¢ 48,000.
Required:
Calculate for KK Enterprises each of the following ratios for the year ended 31st December 20X8 (where appropriate, calculations should be approximated to two decimal places):
(i) Net profit margin.
(ii) Return on capital employed (using the closing year-end value for capital employed).
(iii) Current ratio.
(iv) Liquid (acid test) ratio.
(v) Rate of inventory turnover.
Find Related Questions by Tags, levels, etc.
Report an error
- 20 Marks
FA – L1 – Q95 – Preparation of accounts from incomplete records
Prepare Kofi Mensah's statement of profit or loss and financial position for 20X9 using incomplete records and bank summary.
Question
Kofi Mensah retired from his employment abroad and returned to this country, where he purchased a small kiosk.
He took over the business on 1 July 20X8, acquiring the existing inventory at a valuation of GH¢1,142,000. The rest of the purchase price was apportioned as to GH¢1,500,000 for fixtures and fittings and the balance for goodwill.
The following day he acquired a second-hand computer and accounts package at a price of GH¢80,000. Unfortunately, Kofi Mensah made an error when printing his year-end accounts causing him to lose all data except for printed a summary listing of payments from the till. Other than this, the only records available were his bank statements and a number of vouchers. Surplus cash was banked during the year.
A summary of his bank account for the year ended 30 June 20X9 shows the following.
| Receipts | GH¢000 | Payments | GH¢000 |
|---|---|---|---|
| Cash introduced | 5,000 | Purchase of business | 3,192 |
| Bankings from shop | 16,427 | Purchase of accounts computer | 80 |
| Loan from mother (long-term) (interest at 5% pa) | 1,000 | Rent (15 months to 30 September 20X9) | 500 |
| Rates (9 months to 31 March 20X9) | 84 | ||
| Electricity | 92 | ||
| Purchases for resale | 14,700 | ||
| Private cheques | 1,122 | ||
| Balance 30 June 20X9 | 2,657 | ||
| 22,427 | 22,427 |
The computer print-out was as follows.
| GH¢000 | |
|---|---|
| Cash purchases for resale | 1,606 |
| Staff wages | 742 |
| Sundry shop expenses | 156 |
| Cash drawings | 520 |
On 30 June 20X9 inventory, measured at cost, amounted to GH¢1,542,000, amounts due from customers GH¢74,000, and cash in hand amounted to GH¢54,000. Depreciation is to be recognised on fixtures and fittings at a rate of 10%.
Accounts outstanding on 30 June 20X9 were purchases of GH¢470,000 and rates of GH¢120,000 for the year ended 31 March 20Y0.
Required:
Prepare Kofi Mensah’s statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position at that date.
Find Related Questions by Tags, levels, etc.
Report an error
- 8 Marks
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.
Find Related Questions by Tags, levels, etc.
Report an error
- 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.
Question
(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.
Find Related Questions by Tags, levels, etc.
Report an error
- 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.
Question
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).
Find Related Questions by Tags, levels, etc.
- Tags: Accounting Concepts, Accruals, Bad Debts, Business Entity, Drawings, Financial Statements, Prudence, Sole Trader
- Level: Level 1
Report an error
- 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.
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.
Find Related Questions by Tags, levels, etc.
Report an error
- 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.
Question
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$250.
(3) Allowance for receivables is to be made equal to 5% of accounts receivable at 31 December 20X8.
(4) Depreciation is to be provided for the year at the following annual rates calculated on cost at the year end:
- Freehold properties: 1%
- Furniture and fittings: 10%
- Motor cars: 20%
(5) Interest on the loan at 5% per annum is to be provided.
Required:
Prepare a statement of profit or loss for the year ended 31 December 20X8 and a statement of financial position at that date.
Find Related Questions by Tags, levels, etc.
Report an error
- 15 Marks
FA – L1 – Q68 – Preparing financial statements of a sole trader
Prepare Michael Tan's statement of profit or loss for 20X9 and financial position as at 31 May 20X9 using trial balance and adjustments.
Question
The following trial balance was extracted from the main ledger of Michael Tan, a sole trader, as at 31 May 20X9 – the end of his financial year.
Michael Tan: Trial balance as at 31 May 20X9
| DR GH$(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$300,000.
(e) The allowance for receivables should be adjusted to 2% of trade receivables as at 31 May 20X9.
Required:
Prepare Michael Tan’s statement of profit or loss for the year ended 31 May 20X9 and his statement of financial position as at that date.
Find Related Questions by Tags, levels, etc.
Report an error
- 15 Marks
FA – L1 – Q67 – Preparing financial statements of a sole trader
Prepare DOVE's statement of profit or loss for 20X9 and statement of financial position as at 31 Dec 20X9 using given ledger balances and adjustments.
Question
The following balances were extracted from the main ledger of DOVE on 31 December 20X9.
| Description | GH$(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.
Find Related Questions by Tags, levels, etc.
Report an error
