Statement of profit or loss

FR – L2 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

Question

NOVA BEKASI LIMITED
The list of balances of Nova Bekasi Limited shows the following balances at 31 December 20X5.

	Dr GH₵’000	Cr GH₵’000
Share capital (600,000 shares)		320
General reserve		20
Accumulated profit 1 January 20X5		50
Inventory (goods for resale) at 1 January 20X5	60
Revenue		1,000
Purchases	540
Purchases returns		26
Sales returns	28
Carriage outwards	28
Warehouse wages	80
Sales representatives salaries	60
Administrative wages	40
Warehouse plant and equipment – cost	126
Accumulated depreciation – 1 January 20X5		50
Delivery vehicle hire	20
Goodwill	100
Distribution expenses	10
Administrative expenses	30
Directors’ salaries (charge to administrative expenses)	30
Rental income		16
Trade receivables	330
Cash at bank	60
Trade payables		60
	1,542	1,542

Additional information
(1) Inventory (goods for resale) at 31 December 20X5 amounted to GH₵100,000.
(2) Annual depreciation on warehouse plant and equipment of GH₵32,000 should be provided.
(3) Income tax for 20X5 should be taken as GH₵50,000.
(4) The recoverable amount of goodwill was only GH₵90,000.

Required
Prepare the company’s statement of profit or loss for the year to 31 December 20X5 and a statement of financial position at that date in accordance with IAS 1 Presentation of Financial Statements.

Answer

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Tags: Depreciation, Financial Reporting, Financial Statements, Goodwill Impairment, IAS 1, Income Tax, Inventory Valuation, Statement of Financial Position, Statement of profit or loss, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements, Presentation of Financial Statements (IAS 1)

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

Question

The trial balance of Wenchi Exports Limited at 31 December 20X4 is as follows.

	GH₵ in million
	Dr	Cr
Patent rights	60
Work-in-progress, 1 January 20X4	125
Buildings at cost	300
Ordinary share capital		600
Revenue		1,740
Staff costs	260
Accumulated depreciation on buildings, 1 January 20X4		60
Inventories of finished games, 1 January 20X4	155
Consultancy fees	44
Directors’ salaries	360
Computers at cost	50
Accumulated depreciation on computers, 1 January 20X4		20
Dividends paid	125
Cash	440
Receivables	420
Trade payables		294
Sundry expenses	94
Accumulated profits, 1 January 20X4		279
	2,633	2,633

The following information is also relevant.
(1) Closing inventories of finished games are valued at GH₵180 million. Work in progress has increased to GH₵140 million.
(2) The patent rights relate to a computer program with a three-year lifespan.
(3) On 1 January 20X4 buildings were revalued to GH₵360 million. This has not yet been reflected in the accounts. Computers are depreciated over five years. Buildings are now to be depreciated over 30 years.
(4) An allowance for bad debts (irrecoverable debts) of 5% is to be created.
(5) There is an estimated bill for current tax of GH₵120 million which has not yet been recognised.

Required
Prepare a statement of profit or loss (analysing expenses by nature) for the year ended 31 December 20X4 and a statement of financial position as at that date.

Answer

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Tags: Amortisation, Bad Debts, Depreciation, Inventory Valuation, Revaluation, Statement of Financial Position, Statement of profit or loss, Tax Provision, Trial Balance
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)

FR – L2 – Q65 – Presentation of Financial Statements

Prepare a statement of profit or loss and financial position for Lorry Limited using the trial balance and additional info for 20X4.

Question

LORRY LIMITED
The trial balance of Lorry Limited at 31 December 20X4 is as follows.

	GH₵ in million
Administration	86
	5
	918
	189
	175
	2,830
	20
	400
	18
	1,562
	3,304
	6,313

The following information is also relevant.
(1) Inventories on 31 December 20X4 amounted to GH₵127 million.
(2) Current tax of GH₵75 million is to be provided.
(3) The loan is repayable by equal annual instalments over three years.

Required
Prepare a statement of profit or loss (analysing expenses by function) for the year ended 31 December 20X4 and a statement of financial position as at that date.

Answer

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Tags: Financial Statements, Income Tax, Inventory, Loan repayment, Statement of Financial Position, Statement of profit or loss, Trial Balance
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)

FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

Question

On 1 January 20X4, Finley Ltd entered into an agreement to lease a boat. The initial measurement of the lease liability was GH¢36,000 and the term of the lease was four years. Annual lease payments of GH¢10,000 are payable in advance. The interest rate implicit in the lease is 7.5%.

Required
Show how this lease would be presented in the statement of profit or loss of Finley Ltd for the year ended 31 December 20X4 and the statement of financial position as at that date. Detailed disclosure notes are not required.

Answer

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Tags: Depreciation, Finance Costs, Financial Statements, IFRS 16, Interest rate, Lease Accounting, Statement of Financial Position, Statement of profit or loss
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q38 – Financial Reporting Standards and Their Applications

Define non-current assets held for sale and discontinued operations, and explain the usefulness of discontinued operations information.

Question

(a) State the definition of both non-current assets held for sale and discontinued operations and explain the usefulness of information for discontinued operations.

Adenta Holdings is in the process of preparing its financial statements for the year ended 31 October 20X4. The company’s main activity is in the travel industry mainly selling package holidays (flights and accommodation) to the general public through the Internet and retail travel agencies. During the current year the number of holidays sold by travel agencies declined dramatically and the directors decided at a board meeting on 15 October 20X4 to cease marketing holidays through its chain of travel agents and sell off the related high-street premises. Immediately after the meeting the travel agencies’ staff and suppliers were notified of the situation and an announcement was made in the press. The directors wish to show the travel agencies’ results as a discontinued operation in the financial statements to 31 October 20X4. Due to the declining business of the travel agents, on 1 August 20X4 (three months before the year-end) Adenta Holdings expanded its Internet operations to offer car hire facilities to purchasers of its Internet holidays.

The following are Adenta Holdings’s summarised statement of profit or loss results – years ended 31 October:

	20X4 Total	20X4 Travel Agencies	20X3 Total	20X3 Travel Agencies
Revenue	39,000	14,000	40,000	18,000
Cost of sales	(36,000)	(16,500)	(32,000)	(15,000)
Gross profit/(loss)	3,000	(2,500)	8,000	3,000
Operating expenses	(2,600)	(1,500)	(2,000)	(1,500)
Profit/(loss) for period	400	(4,000)	6,000	1,500

Required:

(b) Discuss whether the directors’ wish to show the travel agencies’ results as a discontinued operation is justifiable.

(c) Assuming the closure of the travel agencies is a discontinued operation, prepare the (summarised) statement of profit or loss of Adenta Holdings for the year ended 31 October 20X4 together with its comparatives.

Answer

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Tags: Comparatives, Continuing operations, Discontinued operations, Financial Reporting, IFRS 5, Statement of profit or loss
Level: Level 2

Topic: Preparation of Financial Statements

FR – L2 – Q3 – Conceptual Framework for Financial Reporting

Appraise the validity of a statement claiming the statement of financial position is sufficient for assessing business performance, defining key terms.

Question

“A statement of financial position is a snapshot of a business at a point in time. It shows the assets that an entity owns and the liabilities that it owes. This is all that is required to convey a business’s performance, position and adaptability.

As income generated and expenses incurred by a business are already reflected within the assets and liabilities shown in the statement of financial position, a statement of profit or loss is a superfluous statement.”

Required

Briefly appraise the validity of the above statement, defining the words underlined.

Answer

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Tags: Assets, Conceptual Framework, Expenses, Financial Statements, Income, Liabilities, Statement of Financial Position, Statement of profit or loss
Level: Level 2

Topic: Conceptual Framework for Financial Reporting

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 – 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.

Answer

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Tags: Accruals, Depreciation, Incomplete records, Inventory, Sole Trader, 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

Tag (SQ): Statement of profit or loss

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FR – L2 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

FR – L2 – Q65 – Presentation of Financial Statements

Prepare a statement of profit or loss and financial position for Lorry Limited using the trial balance and additional info for 20X4.

FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

FR – L2 – Q38 – Financial Reporting Standards and Their Applications

Define non-current assets held for sale and discontinued operations, and explain the usefulness of discontinued operations information.

FR – L2 – Q3 – Conceptual Framework for Financial Reporting

Appraise the validity of a statement claiming the statement of financial position is sufficient for assessing business performance, defining key terms.

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 – 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.

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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FR – L2 – Q69 – Presentation of Financial Statements

Prepare Nova Bekasi Ltd's statement of profit or loss and financial position for 20X5 per IAS 1, considering inventory, depreciation, tax, and goodwill impairment.

You're reporting an error for "FR – L2 – Q69 – Presentation of Financial Statements"

FR – L2 – Q67 – Presentation of Financial Statements

Prepare Wenchi Exports' profit/loss statement and financial position for 20X4 using trial balance, with adjustments for inventory, patents, revaluation, bad debts, and tax.

You're reporting an error for "FR – L2 – Q67 – Presentation of Financial Statements"

FR – L2 – Q65 – Presentation of Financial Statements

Prepare a statement of profit or loss and financial position for Lorry Limited using the trial balance and additional info for 20X4.

You're reporting an error for "FR – L2 – Q65 – Presentation of Financial Statements"

FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

You're reporting an error for "FR – L2 – Q40 – Financial Reporting Standards and Their Applications"

FR – L2 – Q38 – Financial Reporting Standards and Their Applications

Define non-current assets held for sale and discontinued operations, and explain the usefulness of discontinued operations information.

You're reporting an error for "FR – L2 – Q38 – Financial Reporting Standards and Their Applications"

FR – L2 – Q3 – Conceptual Framework for Financial Reporting

Appraise the validity of a statement claiming the statement of financial position is sufficient for assessing business performance, defining key terms.

You're reporting an error for "FR – L2 – Q3 – Conceptual Framework for Financial Reporting"

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 – 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.

You're reporting an error for "FA – L1 – Q95 – 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"

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