Topic: The IASB’s Conceptual Framework

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FA – Mar 2024 – L1 – Q1a – The IASB’s Conceptual Framework

Explain the qualitative characteristics of financial information, including consistency, completeness, materiality, and going concern.

Question

It is understood that different users require financial information for assistance in their economic decisions. Financial statements need to have certain characteristics or adhere to certain accounting principles in order to be useful to its users.

Required:

In relation to the statement above, write brief notes about the following:
i) Consistency
ii) Completeness
iii) Materiality
iv) Going concern

Answer

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Tags: Completeness, Consistency, Going Concern, Materiality, Qualitative Characteristics
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: MAR 2024

FA – Nov 2023 – L1 – Q1a – The IASB’s Conceptual Framework

Explain the key qualitative characteristics of useful accounting information according to the IASB's Conceptual Framework.

Question

Explain each of the following characteristics of useful accounting information:
i) Relevance (2 marks)
ii) Understandability (2 marks)
iii) Materiality (2 marks)
iv) Completeness (2 marks)
v) Neutrality (2 marks)

Answer

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Tags: Accounting Information, Completeness, Materiality, Neutrality, Qualitative Characteristics, Relevance, Understandability
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: NOV 2023

FA – July 2023 – L1 – Q1 – Non-current assets and depreciation | The IASB’s Conceptual Framework

Describe the elements of financial statements per the IASB framework and compute depreciation using different methods, adjusting net profit accordingly.

Question

a) Describe the FIVE (5) main elements of financial statements in accordance with the IASB’s Conceptual Framework. (10 marks)

b) Bimbila Ltd commenced business on 1 June 2020 and reported the following net profits during its first two years in business:

	GHȼ
1 June 2020 to 31 May 2021	135,000
1 June 2021 to 31 May 2022	140,000

During this period the following non-current assets were purchased on the dates shown:

Bimbila Ltd has a policy to depreciate machinery at 25% per annum on cost (straight line method) and equipment at 20% per annum on cost (straight line method), rates being charged for each month of ownership. Bimbila Ltd is now considering using the reducing balance method, with the following rates applying to the balance at the end of each year:

Machinery: 20%
Equipment: 15%

A full year’s depreciation is charged irrespective of the date of purchase.

Required:

i) Calculate the total depreciation for the years ended 31 May 2021 and 31 May 2022 using the original method (straight line) and rates for:

Machinery (2 marks)
Equipment (1 mark)

ii) Calculate the total depreciation for the years ended 31 May 2021 and 31 May 2022 using the alternative method (reducing balance) and rates for:

Machinery (2 marks)
Equipment (1 mark)

iii) Prepare a statement to show the net profit which would have been reported for each of the years ended 31 May 2021 and 31 May 2022 if the reducing balance method had been used. (4 marks)

Answer

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Topic: Non-current assets and depreciation, The IASB’s Conceptual Framework
Series: JULY 2023

FA – Mar 2023 – L1 – Q1 – Double entry bookkeeping | Inventory | The IASB’s Conceptual Framework

Explains going concern assumption, inventory valuation, faithful representation, and prepares various day books and cash book.

Question

a) The Conceptual Framework for Financial Reporting is a set of principles which underpin the foundation of financial accounting. The Conceptual Framework sets out the going concern concept as one of the important underlying assumptions for the preparation of financial statements.

Required:
Explain what is meant by ‘the assumption that an entity is operating under the going concern concept’. Support your answer with a suitable example. (3 marks)

b) A trader who trades in Machines commences business on 1 Jan 2021 and buys 200 machines, each costing GH¢50,000. During the year, he sells 150 machines at GH¢60,000 each.

Required:
How should the remaining machines be valued at the end of the year if:
i) He is forced to close down his business at the end of the year and the remaining machines will realise only GH¢30,000 each in a forced sale. (2 marks)
ii) He intends to continue the business into the next year. (2 marks)

c) One of the fundamental qualitative characteristics of useful financial information in the Conceptual Framework for Financial Reporting is ‘faithful representation’.

Required:
Explain what is meant by ‘faithful representation’. (3 marks)

d) Davidco is a trader who commenced business on January 1, 2021. He introduced capital of GH¢50,000. He bought Vehicle worth GH¢30,000 out of the capital introduced. The following transaction took place in the month of January (Jan) 2021:

Jan 5: Davidco bought goods on credit from the following:
- Tradco: GH¢2,500, Trade Discount 10%
- Vamco: GH¢8,000, Trade Discount 10%
Jan 8: Davidco Sold goods on credit to the following:
- Markcom: GH¢5,000, Trade Discount 20%
- Kathrine: GH¢2,000, Trade Discount 5%
Jan 12: Davidco returned defective goods worth GH¢200 to Tradco.
Jan 15: Davidco paid all amounts outstanding to Tradco and Vamco less cash discount of 5%.
Jan 22: Kathrine returned spoiled goods worth GH¢300.
Jan 24: Davidco received payment from Markcom and Kathrine of all outstanding debt less cash discount of 5%.

Required:
Prepare the following:
i) Sales day book
ii) Purchase day book
iii) Cash book
iv) Purchase returns
v) Sales returns

(10 marks)

Answer

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Tags: Day Books, Faithful Representation, Going Concern, Inventory Valuation
Level: Level 1

Topic: Double entry bookkeeping, Inventory, The IASB’s Conceptual Framework
Series: MAR 2023

FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework

Explains the purpose and differences between Financial and Management Accounting, prepares ledger accounts, and links prudence concept to allowance for receivables.

Question

a) Financial Accounting and Management Accounting are similar with regard to the determination of costs, their assignment to different accounting periods, and allocation of costs to different departments and segments. This implies that the concepts and principles that are used in Financial Accounting may be suitable for Management Accounting.

Required:
i) Explain the purpose and scope of financial accounting. (4 marks)
ii) Explain THREE (3) differences between Financial Accounting and Management Accounting. (6 marks)

b) On 1 January 2021, Mankessim Traders had the following entries in its ledger accounts:

Insurance: GHȼ600 owing
Commission receivable: GHȼ500 owing to Mankessim Traders
Allowance for receivables: GHȼ1,600 credit balance

The following information is available for the financial year ended 31 December 2021:

Insurance was paid as follows:
- 26 February 2021 GHȼ2,000
- 15 October 2021 GHȼ2,600
- The payment on 15 October 2021 relates to the period 1 October 2021 to 31 March 2022.
Commission receivable was as follows:
- 10 January 2021 GHȼ400
- 18 January 2021 GHȼ200
- 13 November 2021 GHȼ3,000
On 31 December 2021, GHȼ600 was owing in commission to Mankessim Traders.
The trade receivables balance at 31 December 2021 was GHȼ38,400. The allowance for receivables is to be provided as GHȼ600 for a specific debt, plus 2% on the remainder of receivables.

Required:
Prepare the following ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
i) Insurance. (2 marks)
ii) Commission receivable. (2 marks)
iii) Allowance for receivables. (2 marks)

c) Explain why maintaining an allowance for receivables is an application of the prudence concept. (4 marks)

Answer

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Tags: Financial Accounting, Ledger Accounts, Management Accounting, Prudence Concept
Level: Level 1

Topic: Bad and doubtful debt, Double entry bookkeeping, The IASB’s Conceptual Framework
Series: DEC 2023

FA – Aug 2022 – L1 – Q1 – Accruals and prepayments | The IASB’s Conceptual Framework

Explanation of the IASB’s enhancing qualitative characteristics of financial information and preparation of ledger accounts for commission received, stationery, and rates, including adjustments for accruals and prepayments.

Question

a) IASB Conceptual Framework underpins what IFRS say and why they identify a particular accounting treatment. Another important aspect of the conceptual framework is an attempt to define “high quality” information or in other words, what makes financial information useful.

Required:
Explain in accordance with the IASB’s Conceptual Framework the enhancing qualitative characteristics of useful financial accounting information.
(10 marks)

b) On 1 January 2021, Koo Nimo, a trader, had the following entries in his ledger:

Account	Amount (GHȼ)
Commission received (owing)	900
Stationery (owing)	400
Rates (prepaid)	600

The following information relates to the financial year ended 31 December 2021. All transactions were by cheque.

i) Commission received was as follows:

Date	Amount (GHȼ)
14 January	850
16 November	3,200

On 31 December 2021 GHȼ800 was still owing in commission to Koo Nimo for the 2021 financial year.

ii) Stationery was paid as follows:

Date	Amount (GHȼ)
19 January	800
13 November	4,200

On 1 January 2021 there was no stock of stationery, while at 31 December 2021 stock of stationery was GHȼ200. There were no outstanding invoices for stationery at 31 December 2021.

iii) Rates were paid as follows:

Date	Amount (GHȼ)
9 April	2,600
24 November	2,800

A refund for rates of GHȼ800 was received on 15 December 2021. At 31 December 2021 rates were overpaid by GHȼ250.

Required:
Prepare the commission received, stationery and rates ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
(6 marks)

c) Explain TWO (2) reasons why a business entity will make adjustments for accruals and prepayments in the final accounts.
(4 marks)

Answer

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Tags: Accruals, Conceptual Framework, Enhancing Qualitative Characteristics, Ledger Accounts, Prepayments
Level: Level 1

Topic: Accruals and prepayments, The IASB’s Conceptual Framework
Series: AUG 2022

FA – Nov 2021 – L1 – Q1 – Non-current assets and depreciation | The IASB’s Conceptual Framework

Explanation of duties of those charged with governance and preparation of motor vehicle-related accounts, including cost, depreciation, and disposal.

Question

a) Those charged with governance describe the role of persons entrusted with an entity’s supervision, control, and direction, thus ordinarily accountable for ensuring that the entity achieves its objectives.

Required:
Explain FOUR (4) duties and responsibilities of those charged with governance.
(10 marks)

b) On 1 January 2020, the following was extracted from the books of Gaga:

Item	Amount (GH¢)
Motor vehicles at cost	150,800
Accumulated depreciation on vehicles	95,700

During the year, the following occurred:

On 1 February 2020, Motor Vehicle C was traded in against a motor vehicle D.
Motor Vehicle C was purchased on 1 September 2016 for GHȼ 80,000.
Gaga wrote a cheque of GHȼ 40,000 for Motor Vehicle D. On the date of purchase, the list price of Motor Vehicle D was GHȼ 71,400.
Motor Vehicles are depreciated at 20% per annum on a straight-line basis from the month of purchase to the month of sale.

Required:
Prepare the following accounts for the year ended 31 December 2020.
i) Motor Vehicle at cost.
ii) Motor Vehicle accumulated depreciation.
iii) Disposal account for Motor Vehicle C.
(10 marks)

Answer

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Tags: Accumulated Depreciation, Depreciation, Disposal Account, Governance, Motor Vehicles
Level: Level 1

Topic: Non-current assets and depreciation, The IASB’s Conceptual Framework
Series: NOV 2021

FA – May 2021 – L1 – Q1 – Non-current assets and depreciation | The IASB’s Conceptual Framework

Explanation of stakeholders' interest in financial statements and preparation of a schedule for non-current assets with depreciation and revaluation adjustments.

Question

a) Explain why each of the following would be interested in the published financial statements of a company.
i) Shareholders
ii) Lenders
iii) Customers
iv) Suppliers
v) Financial analysts and advisers
(10 marks)

b) The following details were taken from the books of Suban Ltd for the year ended 31 July 2020.
i) Tangible non-current assets at cost as at 1 August 2019 were:

Item	Amount (GH¢)
Land and Buildings (Land GH¢120,000)	520,000
Motor Vehicles	310,000
Equipment	115,000

ii) Accumulated depreciation as at 1 August 2019:

Item	Amount (GH¢)
Land and Buildings	75,000
Motor Vehicles	110,000
Equipment	40,000

Suban Ltd depreciates non-current assets as follows:

Buildings: 3% per annum on cost.
Motor vehicles: 20% per annum reducing balance basis.
Equipment: 10% per annum on cost.
Depreciation is charged for each month of ownership.

iii) On 1 October 2019, Land was revalued at GH¢200,000.
iv) A Motor Vehicle purchased on 1 May 2018 for GH¢40,000 was sold on 1 February 2020.
v) All equipment as at 1 August 2019 had been purchased after 1 February 2013, except for one equipment which cost GH¢10,000 purchased on 1 August 2008.
vi) During the year, the following assets were purchased:

Motor vehicles GH¢35,000 on 1 November 2019.
Equipment GH¢20,000 on 1 February 2020.

Required:
Prepare the Schedule of Non-Current Assets for the year ended 31 July 2020.
(10 marks)

Answer

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Tags: Depreciation, Non-current Assets, Revaluation, Users of financial statements
Level: Level 1

Topic: Non-current assets and depreciation, The IASB’s Conceptual Framework
Series: MAY 2021

FA – Nov 2020 – L1 – Q1 – Accruals and prepayments | Bad and doubtful debt | The IASB’s Conceptual Framework

Question on various accounting principles and preparation of specific accounts related to rent, rates, bad debts, and doubtful debts.

Question

a) Accounting principles and concepts are of fundamental importance in the preparation of financial statements.
Required:
With the aid of relevant examples, outline your understanding on any FOUR (4) of the following concepts/principles: i) Accruals
ii) Going Concern
iii) Historical Cost
iv) Materiality
v) Break up basis
(10 marks)

b) Patricia Ltd prepares accounts to 31 December each year. The following transactions relate to Rent and Rates: i) 31 December 2018 three months’ rent owing amounted to GH¢6,000.
ii) 31 December 2018 two months rates prepaid amounted to GH¢5,250.
iii) During the year 2019, cash paid for rent and rates amounted to GH¢90,000
iv) Rent owing as at 31 December 2019 amounts to GH¢9,000
v) Rates prepaid as at 31 December 2019 amounts to GH¢2,250
Required:
Prepare a combined rent and rates account to disclose the amount that is chargeable to the profit or loss account for the year ended 31 December, 2019.
(4 marks)

c) The following information was extracted from the books of Maanaa and Co.:

Year	Bad debts written off (GH¢)	Trade Receivables (GH¢)	Allowance for doubtful debt (%)
1	200,000	1,200,000	10
2	300,000	1,800,000	5
3	100,000	3,000,000	5

Required:
Prepare the following accounts for the 3 years to determine the amount chargeable to the Profit or Loss account:
i) Bad debts written off account (2 marks)
ii) Allowance for doubtful debt account (4 marks)

Answer

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Tags: Accruals, Allowance for Doubtful Debt, Bad Debts, Break-up Basis, Going Concern, Historical Cost, Materiality, Rates, Rent
Level: Level 1

Topic: Accruals and prepayments, Bad and doubtful debt, The IASB’s Conceptual Framework
Series: NOV 2020

FA – Nov 2019 – L1 – Q1 – The IASB’s Conceptual Framework

Explain the fundamental qualitative characteristics of financial information and post transactions into various ledger accounts.

Question

a) The IASB Conceptual Framework describes the fundamental qualitative characteristics of useful financial information.

Required:
State and explain the TWO (2) fundamental qualitative characteristics. (10 marks)

b) Kofi Mensah started a furniture business on January 1, 2018, and undertook the following transactions during the year:

On 1/1/18, he paid GH¢150,000 into the business.
On 4/1/18, he borrowed GH¢150,000 from Ama.
He paid GH¢200,000 on 6/1/18 for one room to be used as a small shop for his furniture business.
Kofi Mensah bought furniture costing GH¢80,000 on 8/1/18, which he plans to sell.
On 10/1/18, he bought furniture for resale from Kwame for GH¢150,000 agreeing to pay for them within 15 days.
Kofi Mensah sold furniture which had cost GH¢60,000 for GH¢90,000 on 12/1/18.
Furniture worth GH¢110,000 was sold for GH¢180,000 to AA Ltd on credit on 20/1/18.
On 24/1/18 Kwame was paid GH¢90,000.
On 28/1/18 AA Ltd paid GH¢80,000 of the amount he owed.

Note: All monies paid and received were through the bank account.

Required:
Post the above transactions to the following ledgers in the books of Kofi Mensah:
i) Bank account (3 marks)
ii) Inventory account (2 marks)
iii) Capital account (1 mark)
iv) Kwame account (2 marks)
v) AA Ltd account (2 marks)

Answer

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Tags: Accounts Receivable, Capital, Inventory, Ledger Accounts, Qualitative Characteristics
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: NOV 2019

FA – May 2019 – L1 – Q5 – Accruals and prepayments The IASB’s Conceptual Framework

Discuss internal and external users of accounting information, elements of financial statements, benefits of financial statements, accrual and going concern basis.

Question

The conceptual framework for financial reporting sets out the concepts that underlie the preparation and presentation of financial statements for users. The objectives of financial statements are to provide information about the financial position, performance, and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions. Users of accounting information are classified into internal and external users.

According to the Framework of IAS/IFRS, the underlying assumptions for the preparation of financial statements are accrual basis and going concern basis.

Required:
a) State TWO (2) internal users and TWO (2) external users of accounting information and their information needs.
(4 marks)

b) Identify and explain FOUR (4) elements of financial statements.
(8 marks)

c) Identify FOUR (4) benefits that financial statements provide to its users.
(4 marks)

d) Explain what is meant by accrual basis of accounting. Illustrate your answer with a suitable example.
(2 marks)

e) Explain what is meant by going concern basis.
(2 marks)

Answer

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Tags: Accrual Basis, External Users, Financial Reporting, Going Concern, Internal Users
Level: Level 1

Topic: Accruals and prepayments, The IASB’s Conceptual Framework
Series: MAY 2019

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

Question

a) The financial controller of Kantanka Ltd, a technology company, has asked you, a trainee financial accountant within the company, for an explanation of some accounting terminologies and for advice on how to account for various transactions that occurred after the financial year-end date of 31 December 2016.

Required:
Explain TWO (2) reasons why a company would not prepare its financial statements on a going concern basis. (4 marks)

b) In accordance with IAS 10: Events after the Reporting Period, explain what is meant by an ‘event after the reporting period’. (4 marks)

c) How should the information in (b) above be dealt with in the financial statements? (3 marks)

d) i) Kantanka purchased a motor vehicle on 30 December 2016 and paid a non-refundable deposit of GH¢5,000 on that date. He also wrote a cheque on that date for the balance of GH¢20,000. The seller cashed the cheque on 3 January 2017. (3 marks)

ii) Kantanka Ltd was sued by a customer who was unhappy with the quality of a product delivered to him in June 2016. The court case was heard in late October 2016 but it was not until 8 January 2017 that the judge ruled in favor of Kantanka Ltd and awarded it damages of GH¢20,000 to cover its solicitor’s fees. The legal costs were paid by the customer to Kantanka Ltd on 12 January 2017. Kantanka Ltd was unsure of winning the case and had previously included a provision in its financial statements for the year ended 31 December 2016 for compensation and legal costs as follows:

GH¢	GH¢
Dr Legal Fees – Administrative Expenses	25,000
Dr Cost of Sales	35,000
Cr Provisions – Current Liabilities	60,000
(4 marks)

iii) One of Kantanka’s Ltd customers was declared bankrupt on 5 January 2017, owing GH¢4,000 to Kantanka Ltd. (2 marks)

Required:
How should the issues raised in (i) to (iii) be treated in the financial statements of Kantanka Ltd?

Answer

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Tags: Adjusting Events, Events after the Reporting Period, Going Concern, IAS 10
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: NOV 2018

FA – Nov 2018 – L1 – Q4 – Inventory | The IASB’s Conceptual Framework

Explain the going concern concept, value inventory under different conditions, and outline the responsibilities of directors in preparing financial statements.

Question

Required:
Explain the going concern concept, illustrating your answer with suitable examples. (5 marks)

b) A trader who trades in computers commences business on 1 January 2018 and buys 100 computers, each costing GH¢3,500. During the year, he sells 80 machines at GH¢5,000 each.

Required:
How should the remaining machines be valued at the end of the year if:
i) He is forced to close down his business at the end of the year and the remaining machines will realize only GH¢2,000 each in a forced sale. (2 marks)
ii) He intends to continue the business into the next year. (2 marks)

c) One of the fundamental qualitative characteristics of useful financial information in the Conceptual Framework for Financial Reporting is ‘faithful representation’.

Required:
Explain what is meant by ‘faithful representation’. (5 marks)

d) Those charged with governance of a company are responsible for the preparation of the financial statements. The board of directors of a company are usually the top management in a Small and Medium Enterprise and are those who are charged with governance of the company. The responsibilities and duties of directors are usually laid down in law and are wide-ranging.

Required:
State THREE (3) responsibilities of directors towards the preparation of financial statements. (6 marks)

Answer

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Tags: Directors' Responsibilities, Going Concern, Inventory Valuation, Qualitative Characteristics
Level: Level 1

Topic: Inventory, The IASB’s Conceptual Framework
Series: NOV 2018

FA – May 2018 – L1 – Q7 – Preparation of Partnership accounts | The IASB’s Conceptual Framework

Identify key issues in a partnership agreement and advise on the accounting treatment of subsequent events.

Question

a) When two or more individuals come together to form a Partnership, it is advisable to have a correctly drafted Partnership Agreement carefully detailing the terms of the business relationship. A partnership agreement is a contract between partners in a partnership that sets out the terms and conditions of the relationship between the partners.

Required:
Identify and explain FIVE key issues that should be covered in a partnership agreement when setting up a partnership. (10 marks)

b) Ashiyie Ltd is a telecommunication company that prepares accounts in accordance with International Financial Reporting Standards (IFRS). A meeting of the Directors of Ashiyie Ltd is scheduled for 5 December 2017 to discuss the following matters with a view to finalizing the accounts for the year ending 30 October 2017:

i) A fire occurred in one of the warehouses of Ashiyie Ltd on 3 November 2017, destroying inventory that had a cost price of GH¢100,000 and a net realizable value of GH¢150,000.
ii) On 9 November 2017, Ashiyie Ltd received information that one of their largest customers had gone bankrupt. At 30 October 2017, this customer owed Ashiyie Ltd GH¢235,000. It is anticipated that Ashiyie Ltd can only receive 10 pesewas for every GH¢1 they were owed.
iii) In November 2017, Ashiyie Ltd sold inventory that had been in one of their warehouses for the past two years for GH¢75,000. This had been included in the financial statements, for the year ended 30 October 2017, at its cost price of GH¢105,000.
iv) On 30 October 2017, an employee of Ashiyie Ltd fell and injured her arm at work. This employee has commenced legal action. The Solicitors for Ashiyie Ltd informed the company on 10 August 2017 that it is probable they will be found liable and have to pay this employee GH¢33,000. The employee has worked for Ashiyie Ltd for the past four years.

Required:
Advise the board on the accounting treatment of these issues. Your answer should give a detailed reason for the accounting treatment that you have chosen. (10 marks)

Answer

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Tags: Accounting Treatment, IFRS, Partnership Agreement, Subsequent Events
Level: Level 1

Topic: Preparation of Partnership accounts, The IASB’s Conceptual Framework
Series: MAY 2018

FA – May 2017 – L1 – Q2 – Preparation of limited liability company financial statements | The IASB’s Conceptual Framework

Preparation of financial statements for Adepa Ltd, including income statement and statement of financial position from trial balance and additional information.

Question

Adepa, a limited liability Company, has the following Trial balance as at 31 December 2016:

	Dr (GH¢’000)	Cr (GH¢’000)
Cash at bank	100
Inventory at January, 2016	2,400
Administrative expenses	2,206
Distribution costs	650
Non-current assets at cost:
– Buildings	10,000
– Plant and equipment	1,400
– Motor vehicles	320
Suspense		1,500
Accumulated depreciation:
– Buildings		4,000
– Plant and equipment		480
– Motor vehicles		120
Retained earnings		560
Trade receivables	876
Purchases	4,200
Dividend paid	200
Sales revenue		11,752
Sales tax payable		1,390
Trade payables		1,050
Capital surplus		500
GH¢ 1 ordinary shares		1,000
Totals	22,352	22,352

The following additional information is relevant:

Inventory at 31 December, 2016 was valued at GH¢1,600,000. While doing the inventory count, errors in the previous year’s inventory count were discovered. The inventory brought forward at the beginning of the year should have been GH¢2,200,000 not GH¢2,400,000 as stated above.
Depreciation is to be provided as follows:
- Buildings at 5% straight line, charged to administrative expenses
- Plant and equipment at 20% on the reducing balance basis, charged to cost of sales
- Motor vehicles at 25% on the reducing balance basis, charged to distribution costs.
No final dividend is being proposed.
A customer has gone bankrupt owing GH¢76,000. This debt is not expected to be recovered and an adjustment should be made. 5% provision for bad debt is to be made.
1 million new ordinary shares were issued at GH¢1.50 on 1 December 2016. The proceeds have been left in a suspense account.

Required: a) Prepare an Income Statement for Adepa Ltd for the year ended 31 December, 2016. (10 marks)

b) Prepare a Statement of Financial Position as at 31 December, 2016. (10 marks)

Answer

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Tags: Adjustments, Financial Statements, Limited Liability Company, Trial Balance
Level: Level 1

Topic: Preparation of limited liability company financial statements, The IASB’s Conceptual Framework
Series: MAY 2017

FA – May 2017 – L1 – Q1 – Inventory | Preparation of Partnership accounts | The IASB’s Conceptual Framework

Dissolution of partnership and preparation of realization, cash, and capital accounts; explanation of inventories and elements of financial statements.

Question

a) B & C Brothers are partners sharing profits and losses equally between themselves for many years. However, they have now decided to dissolve their partnership as at 31 December 2016. Below is their Statement of financial position as at 31 December, 2016:

Statement of Financial Position as at 31 December, 2016

	GH¢000	GH¢000
Non-Current Assets:
Land and Buildings	3,200
Furniture and Fittings	3,400	6,600
Current Assets:
Trade receivables	11,200
Cash and Bank balances	7,200	18,400
Total Assets		25,000
Capital accounts:
B	8,000
C	6,000	14,000
Trade payables		11,000
Total Capital and Liabilities		25,000

Additional information: At dissolution, the trade receivables realized was GH¢10,800,000, the land and buildings GH¢1,600,000 and the furniture and fittings GH¢3,800,000. The expenses incurred on dissolution were GH¢400,000 and discounts amounted to GH¢800,000 were received from suppliers.

Required: i) Prepare Realisation Account (5 marks)

ii) Prepare Cash Account (3 marks)

iii) Prepare Partners’ Capital Account (2 marks)

b) The objective of IAS 2 Inventories is to prescribe the accounting treatment for inventories and provide guidance for measuring and valuation of inventories. It determines the cost of inventories and subsequent recognition as an expense, including any write-down to net realizable value.

Required: i) Explain Inventories. (3 marks)

ii) Explain how inventories are measured and valued in the financial statements in accordance with IAS 2. (3 marks)

c) In order to enhance the quality of information in financial statements, business transactions are grouped into different classes or categories on the basis of their economic characteristics. The broad classes or categories are called elements of financial statements.

Required: Explain any TWO elements of financial statements in line with the IASB Conceptual Framework for Financial Reporting and identify their criteria for recognition. (4 marks)

Answer

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Tags: Dissolution, Financial Reporting, Inventory, Partnership, Realisation Account
Level: Level 1

Topic: Inventory, Preparation of Partnership accounts, The IASB’s Conceptual Framework
Series: MAY 2017

FA – May 2016 – L1 – Q7 – The IASB’s Conceptual Framework

Identify users of financial statements and explain their needs, and discuss qualitative characteristics of financial information.

Question

(a) Identify any FOUR users of financial statements and explain their needs for accounting information. (8 marks)
(b) The conceptual framework of accounting recognizes qualitative characteristics of financial information that is useful for decision-making.

Required:
Identify and explain FOUR qualitative characteristics of financial information recognized by the conceptual framework. (12 marks)

Answer

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Tags: Accounting Information, Financial Statement Analysis, Qualitative Characteristics, Users' Needs
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: MAY 2016

FA – Nov 2015 – L1 – Q2 – Preparation of not-for-profit accounts | The IASB’s Conceptual Framework

Define IFRS Foundation, list its objectives, and prepare accounting statements for a not-for-profit club.

Question

(a) What is International Financial Reporting Standard (IFRS) foundation? Mention two (2) objectives of the foundation. (5 marks)

(b) The following information relates to “God will Provide” Youth Club for the accounting period of 2014.

Subscription owing for 2014: GH¢40,000
Payable for End of Year Party: GH¢1,500
Payables for Repairs – Equipment: GH¢1,000
Payables for Repairs – Vehicle: GH¢2,000

Payments:

Vehicle running Expenses: GH¢6,000
Electricity Expenses: GH¢3,000
End of Year Party Expenses: GH¢10,000
Salaries and Wages: GH¢25,000
Printing and Stationery: GH¢3,000
Cleaning Expenses: GH¢6,000

Receipts:

Car Park Renting: GH¢10,000
Sales of Party Tickets: GH¢6,000
Donation from friends of the club: GH¢15,000

Subscription Received:

2013: GH¢6,000
2014: GH¢30,000

Additional Information:
i. Cash in hand as at 01/01/14: GH¢18,000
ii. Subscription owing as at 01/01/14: GH¢8,000
iii. Any subscription outstanding is written off in the following year if it is not paid.

You are required to prepare:
i. Receipts and Payments Account for the year ended 31st December, 2014 (5 marks)
ii. Subscription Account (3 marks)
iii. Income and Expenditure for the year ended 31st December, 2014 (7 marks)

Answer

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Tags: Accounting Statements, Financial Reporting, IFRS Foundation, Not-for-profit, Objectives
Level: Level 1

Topic: Preparation of not-for-profit accounts, The IASB’s Conceptual Framework
Series: NOV 2015

Topic: The IASB’s Conceptual Framework

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