Trial Balance – Page 2

FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

Question

The accountant of Apex Chemical Solutions has prepared a trial balance, but has found that the total of debit balances is GH₵864,600 and the total of credit balances is GH₵862,150.

On investigation, he discovers the following errors in the book-keeping:

(1) Total purchases in the period were recorded at GH₵100 below their correct value, although the total value of trade payables was correctly recorded.

(2) Total telephone expenses were recorded at GH₵1,000 above their correct amount, although the total value of the amounts payable was correctly recorded.

(3) Purchase returns of GH₵550 were recorded as a debit entry in the sales returns account, but the correct entry had been made in the trade payables control account.

(4) Equipment costing GH₵2,000 had been recorded as a debit entry in the repairs and maintenance account.

(5) Rental expenses of GH₵5,490 were entered incorrectly as GH₵5,940 in the expense account but were entered correctly in bank account in the ledger.

(6) Bank charges of GH₵200 have been omitted entirely from the ledger.

Required

Prepare journal entries for the correction of the errors.

Open a suspense account. Record the appropriate corrections in the suspense account, so that the balance on this account is eliminated.

Answer

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Tags: Correction of Errors, Double Entry Bookkeeping, Journal entries, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q54 – Inventory

Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.

Question

(A) Under IFRS Accounting Standards, IAS 2 deals with inventories. Define the following terms:

(i) Inventories

(ii) Net realisable value

(A) AfraHealth Ltd. controls its creditors’ accounts by preparing monthly creditors’ ledger control account in two parts, Upper and Lower Regions.
The following figures were available as at January 31st 20X9 when there was a difference of GH¢3,000 on the Trial Balance.

Upper Region	GH¢	Lower Region	GH¢
Credit Balance b/d	15,600	Credit Balance b/d	10,200
Debit Balance b/d	2,500	Debit Balance b/d	284
Purchases	115,200	Purchases	18,500
Returns	8,000	Returns	1,400
Charges	800	Charges	120
Bank	30,500	Bank	15,200
Discount	2,500	Discount	1,520
Balance c/d	1,500	Balance c/d	1,300

On 31st January, 20X9 the officer in charge of Upper Region Ledger declared GH¢89,600 while that of Lower Region declared GH¢15,016.
You are required to:
(i) Prepare creditors ledger control account for the Upper and Lower Regions respectively.
(ii) Draw any conclusion you can from the two control accounts.

Answer

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Tags: Control Accounts, Creditors Ledger, Financial accounting, Reconciliation, Trial Balance
Level: Level 1

Topic: Control accounts and account reconciliations

FA – L1 – Q49 – Control accounts and account reconciliations

Prepare receivables and payables control accounts for Sahara Health Ltd for 20X9 using provided financial data.

Question

Sahara Health Ltd has an accounting system where all separate ledger accounts are maintained for each individual customer and supplier.
The management wishes to draft the related control accounts.
The following information is available:

Description	GH₵
Receivables as on December 31, 20X8	32,000,000
Payables as on December 31, 20X8	23,350,000
Cheques issued to suppliers in settlement	14,360,000
Cash sales memos issued	550,000
Goods returned to suppliers	180,000
Cheques received from receivables in settlement	31,650,000
Cheque received from suppliers against return of goods	120,000
Credit sales invoices issued	35,900,000
Returns by customers: from cash sales	320,000
Returns by customers: from credit sales	980,000
Goods purchased on credit	27,700,000
Cash refund to a debtor who had paid the amount due twice	200,000
Cheque issued by a debtor on Dec. 28, 20X8 was dishonoured on May 13, 20X9	500,000
Increase in allowance for receivables (from GH₵1,750,000 to GH₵2,250,000)	500,000
Irrecoverable debts written off	430,000
Contra settlement between payables and receivables accounts	1,660,000
Credit balances included in customers’ accounts as on December 31, 20X9	75,000
A supplier’s invoice received on December 30, 20X9 relating to goods supplied on December 28, 20X9 has not been entered in the books	350,000

Required
Prepare the receivables and payables control accounts from the above information for the year ended December 31, 20X9.

Answer

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Topic: Control accounts and account reconciliations

FA – L1 – Q48 – Control accounts and account reconciliations

Reconcile receivables control account with ledger balances, correcting errors to determine trade receivables for Adom Ventures.

Question

Adom Ventures uses a sales day book to record its sales. A receivables control account is maintained in the general ledger whereas a receivables ledger is maintained separately. On December 31, 20X9, the total of the list of receivables amounting to GH₵301,000 as per receivables ledger did not agree with the balance in the receivables control account which showed a balance of GH₵345,000. On checking, the following errors were discovered:
(i) The credit side of the subsidiary account of Kofi has been under cast by GH₵7,000.
(ii) Invoice number 23612 sent to Yaw amounting to GH₵11,000 has been recorded twice in the sales day book but has not been recorded at all in the receivables ledger.
(iii) A debit balance of GH₵9,300 and credit balances amounting to GH₵4,600 had been omitted from the list of balances.
(iv) An account of GH₵1,800 owed by Ama had been written off as irrecoverable on March 31, 20X9 and debited to irrecoverable debts, but no entry had been made in the control account.
(v) A debit balance of GH₵2,000 in the receivables ledger had been listed as a credit balance.
(vi) No entry had been made in the control account in respect of a transfer of GH₵4,100 standing to the credit of Kwame’s account in the purchases ledger to his account in the sales ledger.
(vii) The total of sales returns book had been under cast by GH₵12,000.
(viii) The list of balances had been overcast by GH₵1,000.
(ix) B’s account had been credited with GH₵3,400 for goods returned by him but no other entry had been made in the books.

Required
Prepare a statement reconciling the balance as per the list with the receivables control account clearly identifying the amount which shall be reported in the statement of financial position as ‘trade receivables’.

Answer

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Tags: accounting adjustments, Double Entry, Error Correction, Financial accounting, Irrecoverable debts, ledger reconciliation, Receivables control account, sales day book, suspense account, Trial Balance
Level: Level 1

Topic: Control accounts and account reconciliations

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

Question

The following list of account balances was extracted from the books of Kweku at 30 April 20X9.

	Dr GH¢(000)	Cr GH¢(000)
Revenue		18,955
Purchases	12,556
Inventory 1 May 20X8	3,776
Salaries and wages	2,447
Motor expenses	664
Rent	456
Rates	120
Insurance	146
Packing expenses	276
Lighting and heating expenses	665
Sundry expenses	115
Motor vehicles	2,400
Fixtures and fittings	600
Trade receivables	4,577
Trade payables		3,045
Cash at bank	3,876
Cash in hand	120
Drawings	2,050
Capital		12,844
	34,844	34,844

Notes at 30 April:
(1) Expenses which have been prepaid – rates GH¢20,000; Insurance GH¢35,000.
(2) Expenses which are owing – motor expenses GH¢56,000; rent GH¢24,000; sundry expenses GH¢26,000.
(3) Inventory GH¢4,998,000.

Required:
From the list of balances and the notes, prepare Kweku’s statement of profit or loss for the year ended 30 April 20X9 and a statement of financial position at that date.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Inventory, Ledger accounts, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

Question

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

	Dr GH₵(000)	Cr GH₵(000)
Capital		5,000
Cash	4,200
Motor van	600
Trade payable – A		200
Trade receivable – B	300
Rates prepaid	100
	5,200	5,200

Cash transactions during the period to 31 March 20X9 were

	GH₵(000)
Purchases	2,000
Revenue	3,000
Drawings	500
Motor running expenses	350
Rates	250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

Answer

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Tags: Cash Transactions, Financial Statements, Inventory, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

Question

The following is an extract from the trial balance of Nyame at 31 December 20X9.

| | Dr | Cr | |

| GH¢(000) | GH¢(000) |

| Stationery | 560 |

| | Rent | 900 | |

| Rates | 380 | |

| Lighting and heating | 590 | |

| Insurance | 260 | |

| Wages and salaries | 2,970 | |

There was stationery still in hand at 31 December 20X9 which had cost GH¢15,000.
Rent of GH¢300,000 for the last three months of 20X9 had not been paid and no entry has been made in the books at all for it.
Of the rates, GH¢280,000 was for the year ended 31 March 20Y0. The remaining GH¢100,000 was for the three months ended 31 March 20X9.
Fuel had been delivered on 18 December 20X9 at a cost of GH¢15,000 and had been consumed before the end of 20X9. No invoice had been received for the GH¢15,000 fuel in 20X9 and no entry has been made in the records of the business.
GH¢70,000 of the insurance paid was in respect of insurance cover for the year 20Y0.
Nothing was owing to employees for wages and salaries at the close of 20X9.
Required:
Record the above information in the relevant accounts for the year ended 31 December 20X9 and close the accounts.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Insurance, Ledger accounts, lighting and heating, Prepayments, rates, rent, stationery, Trial Balance
Level: Level 1

Topic: Accruals and prepayments

FA – L1 – Q37 – Accruals and prepayments

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

Question

Vulcan owns a removal business and runs a small fleet of vans. He prepares his accounts to 31 December each year.
The following transactions occur in relation to insurance for the year 20X9.
1 January: The amount prepaid for insurance was GH¢1,140,000.
1 April: He paid GH¢840,000 insurance for the year ended 31 March 20Y0 on six of the vans.
1 May: He paid GH¢3,540,000 insurance for twenty vans for the year ended 30 April 20Y0.
1 July: He paid GH¢560,000 insurance for the remaining vans for the year ended 30 June 20Y0.

Required:
Write up the insurance account for the year ended 31 December 20X9.

Answer

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Tags: Accruals, Bookkeeping, Financial accounting, Insurance, Ledger accounts, Non-current Assets, Prepayments, Statement of Financial Position, Trial Balance, Year-end adjustments
Level: Level 1

Topic: Accruals and prepayments

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 – Q13 – Preparing financial statements of a sole trader

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

Question

The following is a trial balance for Worthe after his first year’s trading. You are required to prepare a statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position as at that date.

Worthe – Trial balance as at 30 June 20X9

	DR GH₵(000)	CR GH₵(000)
Sales		28,794
Purchases	23,803
Rent	854
Lighting and heating expenses	422
Salaries and wages	3,164
Insurance	105
Land and buildings	50,000
Fixtures and fittings	1,000
Receivables	3,166
Sundry expenses	506
Payables		1,206
Cash at bank	3,847
Drawings	2,400
Motor vans	5,500
Motor running expenses	1,133
Capital		65,900
Total	95,900	95,900

Inventory at 30 June 20X9 was GH₵4,166,000.

Answer

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Tags: Capital, Drawings, Expenses, Financial Statements, Inventory, Non-current Assets, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

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FA – L1 – Q60 – Correction of Errors

Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

FA – L1 – Q54 – Inventory

Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.

FA – L1 – Q49 – Control accounts and account reconciliations

Prepare receivables and payables control accounts for Sahara Health Ltd for 20X9 using provided financial data.

FA – L1 – Q48 – Control accounts and account reconciliations

Reconcile receivables control account with ledger balances, correcting errors to determine trade receivables for Adom Ventures.

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

FA – L1 – Q38 – Accruals and prepayments

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

FA – L1 – Q37 – Accruals and prepayments

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

FA – L1 – Q14 – Sales and Purchases

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

FA – L1 – Q13 – Preparing financial statements of a sole trader

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

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Prepare journal entries to correct errors in a trial balance and clear a suspense account for a company with a debit-credit imbalance.

You're reporting an error for "FA – L1 – Q60 – Correction of Errors"

Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.

You're reporting an error for "FA – L1 – Q54 – Inventory"

Prepare receivables and payables control accounts for Sahara Health Ltd for 20X9 using provided financial data.

You're reporting an error for "FA – L1 – Q49 – Control accounts and account reconciliations"

Reconcile receivables control account with ledger balances, correcting errors to determine trade receivables for Adom Ventures.

You're reporting an error for "FA – L1 – Q48 – Control accounts and account reconciliations"

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

You're reporting an error for "FA – L1 – Q41 – Preparing financial statements of a sole trader"

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

You're reporting an error for "FA – L1 – Q39 – Preparing financial statements of a sole trader"

Record adjustments for stationery, rent, rates, insurance, and lighting in ledger accounts for Nyame at 31 Dec 20X9.

You're reporting an error for "FA – L1 – Q38 – Accruals and prepayments"

Write up the insurance account for Vulcan's removal business for 20X9, including prepayments and multiple insurance payments.

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

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Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

You're reporting an error for "FA – L1 – Q13 – Preparing financial statements of a sole trader"

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