Financial Accounting in Practice - Practical Questions in the Ghanaian Perspective

5/23/2018 Financial Accounting in Practice - Practical Questions in the Ghanaian Per...

http:///reader/full/financial-accounting-in-practice-practical-questions-in-the-ghan

i

2011GeeConsult, Contact: Email [email protected]: +233 249529947 George Ekegey Ekeha

Get a Copy at http://ssrn.com/abstract=1750802

FINANCIAL ACCOUNTING

IN PRACTICE

PRACTICAL QUESTIONS IN THE GHANAIAN

PERSPECTIVE

(FOR ANSWERS TO ALL THE QUESTIONS PLEASE GO TOhttp://ssrn .com/author=1590490 AND

PURCHASE THE WHOLE QUESTIONS AND ANSWERS)

FOR

UNDERGRADUATES & DIPLOMASTUDENTSCOMPILED BY

MR GEORGE EKEGEY EKEHA(MBA Fin., MBA, B.Com)



ii



Abstract

More often that not, our accounting practices at the corporate levels have been very different from what

actually goes on in our schools and universities. Many of our graduate students in accounting get into the

real world of work and realised that whatever they learnt in the classrooms have got not much impact on

the practice of accounting in the corporate environment. It is very pathetic to see graduates in accountingwith very good honours but cannot even conduct a simple bank reconciliation investigation when they got

to the office. It is therefore becoming a normal practices to engage a fresh university graduate in an

organisation with all the financial stress on the organisation, as a result of the recruitment process, and

then spend some amount again to train them for the work environment. It is therefore s common place to

see organisations asking for several years of work experience before taking them in the job. I have heard

various youth advocacy groups in the country complaining about these demands from the recruiting

organisation stating that it frustrates the ambition of the youth. But unfortunately, nobody seems to care

about designing a strategy that would help our nations to come out of these situations and we all just

cherish complaining.

It is my intention to bring this practical (not totally though, but I am sure it would help others to start

thinking about the solutions) questions for prospective accounting graduates to test themselves on the

realities of accounting jobs. The business or corporate environments, I agreed, differ from one industry to

another and also from one particular organisation to the other. However, there are various issues which

are very common with any accounting practice, such as taxation and VAT. There is also a generally

accepted practices in the Ghanaian business environment (and Africa as a whole) which are practicable

within every organisation.

The Financial Accounting Practices, Question and Answers is compiled to help aspiring accounting

professionals to engage themselves in both theory and practical questions in accounting. Most of thequestions in this book are designed to help students understand some practical activities carried out by the

account officers in the corporate environments. I hope that it would be of immense help to all those who

are currently practicing accounting and still having petty problems on the job by using it as a reference

material for their jobs. I also hope that this material would go a long way to help University students in

Accounting, Polytechnic students in DBS Accounting and aspiring Professionals in any Accounting Field

in their endeavour to helping build a good Corporate Governance for this countrys business environment

which would protect the investors interest and thereby encouraging more investor to invest in the

country.

Please, contact the author for any clarification on the questionsand the answers thereof.



iii



Table of Contents

CHAPTER 1 BASIC BOOKKEEPING AND ACCOUNTING PRINCIPLES ............................ 1

Question 1 Atongo Sole Business.................................................................................................... 1

Question 2 FA Manyame Business Ventures .................................................................................. 2

Question 3 Bazzers Bombers Car Services ..................................................................................... 2

Question 4: Geeproperties Rentals .................................................................................................. 3

Question 5: Jennifer Agueliyah Boutique ........................................................................................ 4

Question 6: Gifty Adams Showers Ltd ............................................................................................ 5

Question 7: Big Bright Business Ventures ...................................................................................... 5

Question 8: Reggis Amevors Bank Reconciliation........................................................................ 7

Question 9: Chicken John Eateries and Drinkeries ......................................................................... 8

Question 10: Suzzy and Daryl Ventures .......................................................................................... 9

Question 11: Amaglagla Business Ventures.................................................................................. 11

Question 12: Chucker and Zooloo Car Dealers ............................................................................. 12

CHAPTER 2 INCOMPLETE RECORDS AND CONTROL ACCOUNTS .............................. 13

Question 13: Prempeh Street Groceries ......................................................................................... 13

Question 14: Kwaku Agyepong Businesses .................................................................................. 14

Question 15: Volta Star Grocery Shops ......................................................................................... 15

Question 16: Blow Bambaloo Retailing Ventures......................................................................... 16

Question 17: Kokompeh Spare Parts Venture ............................................................................... 17

Question 18: Kofi Ghetto Ltd Bank Reconciliation ...................................................................... 18

Question 19: Norris Walter Ltd Control Accounts ........................................................................ 19

Question 20: Ronaldo Movete Ltd Control Accounts .................................................................. 20

Question 21: Jorgbenue Ltd Reconciliation Accounts .................................................................. 21

Question 22: Akosombo Fabrics Suspense Accounts ................................................................... 23

Question 23: John Jasper Shoes ..................................................................................................... 23

Question 24: Akwapim Botanical Gardeners ................................................................................ 24

Question 25: Ablode Tomefa Trading Company .......................................................................... 25

Question 26: Mandela Amewu Ice-cream Vendors ....................................................................... 16

Question 27: Euzebius Abusuapanyi Eye Clinic ........................................................................... 28

Question 28: Johnson Azaglo Conner Shops................................................................................. 31

CHAPTER 3 MANUFACTURING ACCOUNTS AND STOCK VALUATION ..................... 33

Question 29: Gomoah Rubber Producers ...................................................................................... 33

Question 30: Kangaroo Carrier Bags Plc ....................................................................................... 33

Question 31: Calippo Sweets Production ...................................................................................... 34

Question 32: Bonavester Plc .......................................................................................................... 35

Question 33: Atongo Plastic Manufacturers .................................................................................. 36

Question 34: Jerry Leggs Wellington Boots .................................................................................. 37

Question 35: Borllar Waste Kitchen Accessories .......................................................................... 40

Question 36: Jonny Wood Garden Seats ....................................................................................... 42

Question 37: Sir Johayes Importers ............................................................................................... 43

Question 38: Akasanoma Vision Ltd Manufacturers .................................................................... 44

CHAPTER 4: PARTNERSHIP ACCOUNTS .............................................................................. 45

Question 39: Aba, Borbor and Chochoo Partnership .................................................................... 45

Question 40: Aba, Borbor and Chochoo Partnership II ................................................................. 45



iv



Question 41: Jonny, Jimmy and Jerry Business Ventures ............................................................. 45

Question 42: Messers George and Cyril Akpanaway Consultants ................................................ 46

Question 43: Azi, Nefi and Agoneh Traders ................................................................................. 46

Question 44: Piper, Dom and Jerry Trading Ventures .................................................................. 48

Question 45: Antie and Dede Chemists ......................................................................................... 49

Question 46: Olando, Jay and Simpson Confectioneries............................................................... 50

Question 47: Wawa and Mahoganey Furniture Producers ............................................................ 51

CHAPTER 5 COMPANY ACCOUNTS ..................................................................................... 54

Question 48: Amankwah Company Ltd ........................................................................................ 54

Question 49: Alluwako Company Ltd ........................................................................................... 55

Question 50: Biafra Bambara Company Ltd ................................................................................. 56

Question 51: Olusegun International Plc ....................................................................................... 57

Question 52: New Generation Hoteliers Ltd ................................................................................. 58

Question 53: Alhaji Lankan Ltd .................................................................................................... 58

Question 54: Alfa and Omega Company Ltd ................................................................................ 59

Question 55: Egue Kportufe Garages Ltd ..................................................................................... 60

Question 56: ZoomVultures Ltd, Developers of Cleaning Products ............................................. 61

Question 57: Motorway Jumpers Transportations ......................................................................... 62Question 58: Amazing Freddy Company Ltd ................................................................................ 64

Question 59: Cazmil Public Limited Company (Plc) .................................................................... 65

Question 60: Suleman Garibah Company Ltd ............................................................................... 66

Question 61: Gasu Quofie Plc Farm Equipments .......................................................................... 67

CHAPTER 6 FUNDAMENTAL ACCOUNTING CONCEPTS ................................................ 69

Question 62: Nature and Purpose of SSAPs .................................................................................. 69Question 63: Fundamental Accounting Concepts ......................................................................... 69

Question 64: Freddys Conner, Bepos and Jargoos....................................................................... 69

Question 65: Needs of Accounts Users ......................................................................................... 69

Question 66: Atongo, The Science Student ................................................................................... 69Question 67: Jorgbenue Gee Plc .................................................................................................... 70

Question 68: Principles of SSAP 9 ................................................................................................ 70

Question 69: Monallissa Ltd, A Processing Company .................................................................. 71

Question 70: Logba Young Plc...................................................................................................... 71

Question 71: Suzzy Selase Gee Study Notes ................................................................................. 71

Question 72: Accounting Terminologies as per SSAP2 ................................................................ 72

Question 73: Benjamin K Onimangbori Queries........................................................................... 72

Question 74: Fundamental Accounting Concepts SSAP2 ............................................................. 73

CHAPTER 7 CASH FLOW STATEMENTS ............................................................................. 74

Question 75: Darryl Amfic Company Ltd ..................................................................................... 74Question 76: GBEBSUK Ltd......................................................................................................... 75

Question 77: Kojo Agyeman Motor Component Plc .................................................................... 76

Question 78: Selikem Garibah Plc ................................................................................................. 77

Question 79: Nzinga Chipolopolo Plc ........................................................................................... 79

Question 80: June July Engineering Business ............................................................................... 80



v



CHAPTER 8 FINANCIAL STATEMENTS ANALYSIS AND INTERPRETATION ............. 83

Question 81: Divine Nooque Voluntaries Ltd ............................................................................... 83

Question 82: Gloria Suleman Ltd .................................................................................................. 85

Question 83: GeeBee Fashionable Trading Company Ltd ............................................................ 85

Question 84: Brad Pitts Business Ventures.................................................................................. 86

Question 85: Kantamanto Scrap Metal Merchants ........................................................................ 87

Question 86: Richard Branson Ltd ................................................................................................ 88

Question 87: Dansoman Control Ltd ............................................................................................. 89Question 88: Kafui Akpoblu Diamonds Retailers ......................................................................... 90

Question 89: Gee Marketing Ltd ................................................................................................... 92

Question 90: GBEWAA & Co Architectural Engineers ............................................................... 93

REVISION QUESTIONS ................................................................................................................. 97

Question 91: Bamboozer Ltd, Wholesale Groceries ..................................................................... 97

Question 92: JAK WAWAA and JJR BOOM Veterinary Services .............................................. 98

Question 93: Suame Magazine International Garages Conglomerate ......................................... 100

Question 94: Logba Angry Lions Plc, Wholesaler of Alcoholic Beverages ............................... 101

Question 95: GeeMarketing & Co, Partners in Furniture & Equipment ..................................... 104

Question 96: Desmond and Tootoo Dental Practices .................................................................. 105Question 97: Confidence Foofoos Restaurateurs....................................................................... 107

Question 98: KINGDOM Furniture Assemblies ......................................................................... 109

Question 99: Alongays Double Glazing..................................................................................... 111

Question 100: Amfic Yingors Garages ...................................................................................... 112



Financial Accounting (Practical Questions): Ghanaian Perspective

Page1 2011GeeConsult, Contact: Email [email protected]: +233 249529947 George Ekegey Ekeha


CHAPTER 1 BASIC BOOKKEEPING AND ACCOUNTING PRINCIPLES

Quest ion 1 Atong o Sole Business

Atongo started a grocery business on 1 January 2005 with capital of GH2,000 in cash. He rented

premises for GH600 per annum, payable quarterly in arrears, the first payment being due on 31

March 2005. Also on 1 January, he borrowed GH600 from a friend, Waakye, at the rate of 12%per annum.

The following were the transactions of the business for the three months ended 31 March 2005.

6 January Purchased a second-hand Ford van for GH1,300 cash

9 January Purchased goods on credit from CFC Ghana Ltd GH350

16 January Paid wages GH24

20 January Purchased goods for cash GH18024 January Sold goods on credit to Gladys Tawiah GH210

30 January Paid wages GH20

4 February Sold goods on credit to Mrs. Agbenyegah GH1006 February Paid CFC Ghana Ltd GH300 cash on account

9 February Gladys Tawiah paid GH210

13 February Paid wages GH2518 February Purchased goods on credit from Chipolopolo GH1,120

25 February Sold goods for cash GH60

26 February Received GH70 from Mrs. Agbenyegah

27 February Paid wages GH251 March Returned defective goods to Chipolopolo and was credited GH40

4 March Sold goods on credit to Gladys Tawiah GH350

12 March Paid wages GH3014 March Received payment on account from Gladys Tawiah GH200

15 March Sold goods for cash GH160

18 March Gladys Tawiah paid GH125 on account

Sold goods on credit to Gladys Tawiah GH68026 March Paid wages GH40

Paid Chipolopolo in full settlement

29 March Drew GH200 from the business

31 March Paid rent GH15031 March Paid quarterly loan interest

At 31 March 2005 closing stock amounted to GH750.

Requirements

(a) Write up the ledger accounts for three months.(b) Extract a trial balance at 31 March 2005

(c) Prepare a trading and profit and loss account for the three months ended 31 March 2005 and

a balance sheet at that date.






Quest ion 2 FA Manyame Bus iness Ventures

FA Manyame has been meaning to start a business for some time, but never seems to have the

energy to make any direct purchases or sales. He has some business premises but simply rents themout to a friend, Nyamenaye. Recently, he gathered the courage and the following information is

available in respect of FA Manyames sundry expenditure and income for the year ended 31

December 2004.

(a) FA Manyame paid rent of GH1,500 during the year for the fifteen month period ending on

31 March 2005.

(b) FA Manyame had paid for electricity up to date at 1 January 2004. During the year he paidGH420 to cover charges from 1 January 2004 to 31 July 2004. He received further bills but

never got round to paying them. Assume that charges accrue evenly over the year.

(c) In December 2004 FA Manyame had a rush of blood to the head and paid GH500 to the

Gas Board. Gas consumed during 2004 amounted to only GH275.(d) Bank interest has been charged to the bank account as follows.

Up to 31 May 2004 (no overdraft) GHNil

1 June to 31 August 2004 GH14

1 September to 30 November 2004 GH35The bank statements shows that GH51 was charged to the account on 28 February 2005 in

respect of the three months ended on that date.(e) Business rates

In December 2003 FA Manyame paid GH2,400 for the six months ended 31 March 2004.

During June 2004 He paid GH2,800 to cover the six months ended 30 September 2004.In February 2005 he paid GH3,300 in respect of the six months ended 31 March 2005.

(f) In March 2004 FA Manyame received GH2,500 from Nyamenaye for rent of the premises

in respect of the six months ended 31 March 2004.

As from 1 April 2004 FA Manyame increased the rent to GH6,000 per annum; during2004 Nyamenaye paid the full amount for the year ended 31 March 2005.

Requirement

Write up the ledger accounts for each of the above items, showing all relevant balances andtransactions.

Quest ion 3 Bazzers Bombers Car Services

Bazzers Bombers operates a down-market car hire service. On 31 December 2005 the balance on

the motor vehicles account was GH75,400 and the provision for depreciation account wasGH36,300.

When preparing the accounts for the year the following discrepancies were found.

(a) A Skoda (cost GH4,000) had been bought on hire purchase. The terms of the agreement

included a deposit of GH500 and this was paid on 10 December 2005. The only entrieswhich had been made were to credit the cash book and debit the motor vehicles account in

respect of the deposit.

(b) A Fiat, which was purchased in June 2002 for GH3,200, was scrapped. There were no

proceeds and no entries had been made in relation to the disposal.






(c) A Lada, which was purchased in March 2003 for GH4,400, was sold in August 2005 for

GH2,500. The only entry made in respect of the disposal was to debit cash and credit the

motor vehicles account with the proceeds.(d) No depreciation had yet been charged for the year 2005. The company charges depreciation

at 25% per annum on the cost of motor vehicles held at the year-end.

Requirement

Write up the motor vehicles account, provision for depreciation account, depreciation expensesaccount and disposals account for the year ended 31 December 2005.

Quest ion 4: Geepropert ies Rentals

Geeproperties owns a block of flats, and earns a living by rental income and general dealing. On 1

January 2006 his ledger included the following balances.

Debtors account GH75,000Provision for doubtful debts account GH2,235

The balance on the provision account consisted of the following.

GHSpecific provision of 100% against the debt of Charles Sulemana, a tenant 1,500

General provision of 1% against remaining debts 735

2,235

During the year ended 31 December 2006 the following occurred.

(a) Charles Sulemana paid Geeproperties GH150 and then vanished without trace to a new

world, leaving no assets.(b) Another tenant, Antonio Banderas, who owed GH900, fell into a river and was also found

to have died penniless.

(c) Azuma Nickson returned from total obscurity and an amount of GH450 which

Geeproperties had written off in 2003.(d) Credit sales for the year amounted to GH167,400 and cash received from debtors (other

than Sulemana and Azuma) totaled GH150,000

(e) At 31 December 2006 Geeproperties decided to provide in full against a disputed debt ofGH1,200 owed by Kwesi Otoo Pratt, and to maintain the 1% general provision on other

debtors.

RequirementWrite up Geepropertiess debtors account, provision for doubtful debts account and bad debts

expense account for the year ended 31 December 2006.






Quest ion 5: Jenni fer Aguel iyah Bou t ique

Jennifer Agueliyah is a dealer in fancy goods. At 1 January 2007 his ledger included the following

balances.GH

Debtors 17,349

Provision for doubtful debts 2,850

Creditors 16,593The debtors at 1 January 2007 were as follows:

GH

S Mahama 5,700J Baafi 5,823

The Miklin Executive Hotels 5,826

The creditors at 1 January 2007 were as follows.

GHM Normenyo 5,481

James Nkomode 5,553

Obraku Sarpong 5,559

During January 2007 Agueliyas books of prime entry showed the following.

GH GHPurchases day book Sales day book

Normenyo 2,850 Mahama 150

James Nkomode 2,055 Baafi 5,280Obraku Sarpong 3,360 Miklin Executive Hotels 4,995

8,265 10,425

GH GHCash payments book Cash receipts book

Normenyo 2,700 Baafi 5,700James Nkomode 150 Miklin Executive Hotels 5,826

Obraku Sarpong 2,4695,319 11,526

The flowing information is relevant.(1) The opening provision for doubtful debts consisted of a 50% provision against Mahamas

debt. During January Mahama was run over by an invalid car in Kasoa and was found to

have died penniless.

(2) Baafi argued about GH123 of her outstanding balance, saying that the goods concernedwere of the wrong design. Agueliya decided to provide for this amount as a specific

provision.

RequirementsWrite up for the month of January 2007

(a) Individual debtors and creditors accounts(b) Sales and purchases accounts

(c) Debtors and creditors ledger control accounts

(d) Provision for doubtful debts and bad debt expense accounts

(e) The individual debtors and creditors listings


http:///reader/full/financial-accounting-in-practice-practical-questions-in-the-ghana




Quest ion 6: Gi f ty Adams Show ers Ltd

Gifty Adams Showers Ltd sells bathroom fittings on credit to most of its customers. In order to

control its debt collection system, the company maintains a debtors ledger control account. Inpreparing the accounts for the year to 30 October 2003 the accountant discovers that the total of all

the personal balances disclosed a balance of GH12,802, whereas the debtors ledger control

account balance disclosed a balance of GH12,550.

Upon investigating the following errors were discovered.

(1) Sales for the week ending 27 March 2003 amounting to GH850 had been omitted from the

control account.(2) A debtors account balance of GH300 had not been included in the list of balances.

(3) Cash received of GH750 had been entered in a personal account as GH570.

(4) Discounts allowed totalling GH100 had not been entered in the control account.

(5) A personal account balance had been undercast by GH200.(6) A contra item of GH400 with the creditors ledger had not been entered in the control

account.

(7) A bad debt of GH500 had not been entered in the control account.(8) Cash received of GH250 had been debited to a personal account.

(9) Discounts received of GH50 had been debited to Adamsdebtors ledger account.

(10) Returns inwards valued at GH200 had not been included in the control account.

(11) Cash received for GH80 had been credited to a personal account as GH8.(12) A cheque for GH300 received from a customer had been dishonoured by the bank, but no

adjustment had been made in the control account.

Requirements(a) Prepare a corrected debtors account, bringing down the amended balance at 30 October

2003.

(b) Prepare a statement showing the adjustments that are necessary to the list of personalaccount balances so that it reconciles with the amended debtors ledger control account

balance.

Quest ion 7: Big Br ight B usiness Ventures

Big Bright, a sole trader does not maintain a set of ledgers to record his accounting transactions.

Instead, he relies on details of cash receipts/payments, bank statements and files of invoices. Hestarted business on 1 July 2007 with private capital of GH5,000 which comprised a second-handvan valued at GH1,500 and GH3,500 cash which he deposited in a business bank account on that

date. He has not prepared any accounts since he commenced trading and you have agreed to preparehis first set of accounts for him in respect of the eighteen months ended 31 December 2008. You

have discovered the following.






(1) A summary of his cash transactions from his cash book for the period was

GH GH

ReceiptsCapital introduced 3,500

Cash sale receipts 21,250

Sale of motor van 850

25,600

PaymentsCash paid to bank 21,350

Cash purchases 2,160Postage and stationery 474

Motor expenses 919 (24,903)

Cash in hand at 31 December 2008 697

(2) A summary of his bank statement shows

GH GHReceipts

Cash paid into bank 21,350Bank loan 4,500Credit sale receipts 1,955 27,805

Payments

Purchase of goods 7,315

Office equipment 1,280Motor van 4,000

Drawings 5,400

Rent and rates 1,850

Light and heat 923 (20,768)Balance are 31 December 2008 7,037

(3) The office equipment was purchased on 1 October 2007.(4) The new motor van was purchased on 1 April 2008 to replace the original second-hand van

which was sold on the same date. Depreciation charges for the year on the second-hand van

can be ignored.(5) Big Bright expects the office equipment to last five years but to have no value at the end of

its life. The motor van bought on 1 April 2008 is expected to be used for three years and to

be sold for GH700 at the end of that time.

(6) The cost of goods unsold on 31 December 2008 was GH1,425. Big Bright thought hewould sell these for GH2,650, with no item being sold for less than its original cost.

(7) On 31 December 2008 Big Bright owed GH749 for goods bought on credit and was owed

GH431 for goods sold on credit. Of these amounts GH189 was due from/to HarryGovernor who is both a customer and supplier of Big Bright. A contra settlement

arrangement has been agreed by both Big Bright and Harry Governor.

(8) Rent and rates paid includes an invoice for GH1,200 for the rates due for the year to 31

March 2009.(9) No invoice was received for light and heat in respect of November and December 2008 until

25 February 2009. This showed that the amount due for the three months ended 31 January

2009 was GH114.






(10) The bank loan was received on 1 January 2008. Interest is charged at 10% per annum on the

amount outstanding.

RequirementPrepare Big Brights trading and profit and lass account for the period ended 31 December 2008

and his balance sheet at that date.

Question 8: Reggis Amevors Bank Reconciliation

Reggis Amevor, a well-rounded gentleman, prides himself on keeping a positive cash balance at the

bank all the times. He becomes apoplectic on discovering that the statement of his account at the

Stanbic Bank at 31 December 2002 shows an overdraft of GH44. He wishes you as his accountantto resolve the matter.

Reggis banks all receipts, and all his payments are made by cheque.

The bank statement at 31 December 2002 is as follows.

STANBIC BANK PLC

South Kaneshi Branch

Account 71239581R Amevor EsqPayments Receipts Balance

2002 GH GH GH

1 Dec Balance b/f 734 Cr8 Dec Credits 318 1,052 Cr

15 Dec Credits 1,174

15 Dec 343842 684 1,542 Cr19 Dec Credits 86

19 Dec 343844 925 703 Cr

27 Dec Credits 623 1,326 Cr

30 Dec 343846 76230 Dec Charges 69

30 Dec Cheque returned 623

30 Dec Amount paid in by NLM 84 44 Dr

Reggis cash account for December 2002 is as follows.

2002 GH 2002 GH1 Dec Balance b/f 50 5 Dec GP Ltd 905

3 Dec P 140 19 Dec TP Ltd 762

5 Dec T Ltd 178 28 Dec SR Ltd 1876 Dec M & Co 695 28 Dec Q 43

10 Dec KD Ltd 479 28 Dec AB 236

17 Dec J Ltd 86

24 Dec S Ltd 62330 Dec MN Ltd 768

31 Dec TNT & Co 85 31 Dec Balance b/f 971

3,104 3,104






The cheque issued to GP Ltd on 5 December 2002 for GH925 was entered into the cash book as

GH905 in error.

Requirement

Make any necessary adjustment to the cash account and prepare a bank reconciliation statement at

31 December 2002.

Quest ion 9: Chick en Joh n Eater ies and Drinker ies

You are given the following balance sheet: Chicken JohnBalance sheet as at 30 September

2003Cost Depn NBV

GH GH GH

Fixed assetsPlant 150.000 60,000 90,000

Vehicles 20,000 10,000 10.000

170,000 70,000 100,000Current assets

Stock 10,000

Trade debtor 20,000

Bank 50030,500

Less Current liability

Trade creditors (12,000)18,500

118,500

Financed by

Capital 20,000Net profit for the year 53,600

Suspense account 44,900

118,500Upon investigation you discover the following errors.

(1) The balance on the bad debts provision account at 1 October 2002 had been credited to the

profit and loss account. The balance of the account at that date was GH1,800.

(2) The bad debts provision account should have been made equal to 10% of trade debtors at 30September 2003.

(3) Depreciation is charged on plant at a rate of 20% pa on cost, and on vehicles at a rate of

50% pa on the reduced balance. The depreciation for the year to 30 September 2003 hasbeen correctly charged to the profit and loss account for that year, but no adjustments have

been made elsewhere.

(4) The closing stock amounted to GH12,000, but the amount shown on the balance sheet was

the opening stock.(5) A transposition error had understated sales by GH900.

(6) A new motor vehicles costing GH5,000 had been included in motor expenses. It is the

companys policy not to charge any depreciation in the year of acquisition.(7) Drawings amounted to GH10,000 had been debited to the profit and loss account.






(8) Discounts allowed of GH1,000 had been credited to the profit and loss account, and

discounts received amounting to GH1,500 had been debited to the profit and loss account.

(9) A loan of GH5,000 had been credited to the profit and loss account.(10) Trade creditors had been understated by GH10,000.

Requirement

Prepare Chicken Johns corrected balance sheet at September 2003. A working showing how thesuspense account is cleared should be included.

Note: Chicken John does notmaintain control accounts.

Quest ion 10: Suzzy and Daryl Ventures

The bookkeeper has prepared a preliminary trial balance of Suzzy and Daryl for the year ended 31

December as follows.GH GH

Capital account 110,000

Profit and loss account at 1 January 50,000Bank loan 30,458

Debtors and creditors 77,240 60,260

Cash in hand and bank overdraft 1,000 5,036

Stocks and work in progress at 1 January 108,000Fixed assets at cost and depreciation provision at 31 December 161,879 60,943

Depreciation for the year 15,000

Purchased and sales 300,297 400,000Returns 4,370 4,630

Discounts allowed and received 9,760 6,740

Wages and salaries (net) 12,146

Payments of PAYE income tax 5,988Payments of National Insurance 4,766

Creditors for PAYE at 1 January 900

Proceeds of sale of fixed assets 2,000Rent, rates and insurance 18,036

Postage, telephone and stationery 3,009

Repairs and maintenance 2,124

Advertising 4,876Packaging materials 924

Motor expenses 2,000

Sundry expenses 1,000Loan interest 4,000

Accrued expenses 6,478

Suspense account 1,030

737,445 737,445

When the bookkeeper discovered that the preliminary trial balance did not balance he made it do so

by opening a suspense account and entering the amount on the appropriate side. A subsequentinvestigation shows the following mistakes have been made.






(1) A loan to the business of GH10,000 from the owners brother, Amfic, has been added to

capital.(2) Accrued interest on the bank loan of GH458 has been credited to the bank loan account

instead of being treated as a current liability.

(3) Bank charges of GH1,000 have been completely omitted from the books.

(4) Fixed assets with an original cost of GH11,879 and accumulated depreciation of

GH10,943 have been sold for GH2,000. This amount is shown as a separate item in thetrial balance, and no entry has been made in the assets or provision for depreciation

accounts. Any surplus or deficit on sale should be shown in a separate account.(5) Deduction of GH6,088 for PAYE income tax and GH1,766 for National Insurance,

graduated pensions, etc, were made from employees wages and salaries during the year.

The companys contribution for National Insurance amounted to GH3,000. No entries have

been made for these items.(6) In addition to allowing discount of GH240 and receiving discount of GH260, various

debtors and creditors accounts amounting to GH10,000 were set off by contra. No

entries have been made in respect of these items.(7) Debtors amounting to GH2,000 are bad and need to be written off.

(8) A debt of GH1,000 written off as bad in a previous year has been recovered in full. Theamount has been credited to the debtors account and deducted from the total of the otherdebtors.

(9) Goods returned from a debtor of GH630 have been correctly entered into the debtors

account but by mistake were entered in the returns outwards journal.

(10) A payment for stationery of GH234 was correctly entered in the cash book but debited inthe ledger as GH243.

(11) A payment of GH76 for packing materials has been correctly entered in the cash book, but

no other entry has been made.

(12) A payment of GH124 for advertising has been debited to repairs and maintenance.(13) A cheque payment of GH26 for insurance has been recorded in all accounts as GH62.

(14) A page in the purchase account correctly totalled GH125,124 was carried forward to thetop of the next page as GH125,421.All entries other than those given above are to be assumed to have been made correctly.

Requirements(a) Show the correcting entries in journal form (i.e. showing accounts and amounts debited and

credited but no supporting narrative is required) in respect of each of the mistakes

mentioned above.

(b) Show the trial balance of the company at 31 December after these corrections have beenmade.

A working, showing how the suspense account is cleared, should be included.

Note Control accounts are not maintained.






Quest ion 11: Amaglagla Bus iness Ventures

James Bernerman, the bookkeeper of Amaglaglasbusiness has made his usual mess of things and

produced the following attempts at a trial balance for the year ended 30 April 2002, after preparinga draft profit and loss account.

Fixed assets GH GH

At cost 60,000

Provision for depreciation 31,000Capital at 1 May 2001 35,000

Profit and loss account 12,300

Stock in trade, at cost 14,000Debtors ledger control account 9,600

Creditors ledger control account 6,500

Balance at bank 1,640

85,240 85,240

As chief accountant you discovered the following during an cross checking.

(1) A rent payment of GH350 in March 2002 have been debited in the debtors ledger control

account.(2) Although instructed to do so, Bernerman had not set a debt from Walter of GH1,560 in the

debtors ledger control account against an amount due to him in the creditors ledger controlaccount.

(3) Discounts allowed of GH 500 during the year ended 30 April 2002 had not been recorded

in the books although correctly included the cash received book.(4) No entry had been made for the refund of GH2,620 made by cheque to Richard in March

2002, in respect of defective goods returned to Amaglagla. Richard returned the goods on

28 February 2002.

(5) The purchases day book for February 2002 had been undercast by GH300.(6) A payment of GH1,000 to Boboo in January 2002 for cash purchases had been debited in

the creditors ledger control account. (Note that Amaglagla does notmaintain a creditaccount with Boboo.)

(7) No entries had been made in the books of the business for cash sales of GH2,450 on 30April 2002 and banked on that date.

(8) No entries had been made in the books of the business for bank charges of GH910 debited

in the companys bank account in December 2001.(9) The cash control account (debit column) had been overcast by GH1,900 in March 2002.

(10) The purchase of new fixtures and fittings for GH8,640 cash on 30 April 2002 had not been

recorded in the books.

(11) The purchase of stationery for GH1,460 cash in June 2001 had not been recorded in theappropriate expense account.

Requirements to Prepare:(a) Journal entries to correct the errors

(b) A suspense account, showing how it is cleared

(c) A statement of adjusting to profit for the year ended 30 April 2002

(d) A corrected balance sheet at 30 April 2002






Quest ion 12: Chuc ker and Zoolo o Car Dealers

Chucker and Zooloo are in business as car dealers. Their draft account for the year ended 31 March

2008 show a net profit of GH9,000. They feel that this figure is lower than expected and ask you astheir accountant to investigate.

You discover the following.

(1)

Discount received in August 2008 of GH210 have been credited, in error, to purchases.(2) A debt of GH300 due from Francis Terrison & Co was written off as irrecoverable in the

December 2007. Since preparing the draft account, Francis Terrison & Co has settled the debt

in full.(3) The companys main warehouse was burgled in June 2007, when goods costing GH20,000

were stolen. This amount has been shown in the draft accounts as an overhead item

Loss due to burglary. Although the insurance company denied liability originally, in the

past day or two that decision has been changed and you have been advised that GH14,000will be paid in settlement.

(4) On1 January2008 a Morris Marina car, which had cost GH1,800, was taken from the

showroom for the use of one of the sales representatives whilst on business. In the

showrooms this car had had a GH2,400 price label. Effects have not been given to thetransfer in the books although the car was not included in the trading stock valuation at 31

March 2008. The business provides for depreciation on motor vehicles at the rate of 25% ofthe cost of vehicles held at the end of each financial year.

(5) An Austin Allegro bought and received from Adjingo on 30 March 2008 at a cost of

GH1,200 was not recorded in the books until early April 2008. Although unsold on 31March 2008, the car in question was not included in the stock valuation at the date.

(6) The business is hoping to market a new car accessory product in July 2008. The new

venture is to be launched with an advertising campaign commencing in April 2008. The cost

of the campaign is GH5,000 and this has been debited in the profit and loss account for theyear ended 31 March 2008 and is included in current liabilities as a provision,

notwithstanding the confident expectation that the new product will be a success.(7) On 31 March 2008 the business paid an insurance premium of GH600, the renewal being

the year beginning 1 April 2008. This premium was included in the insurance charge ofGH1,100 debited in the draft profit and loss account.

RequirementPrepare a settlement of adjustment to profit for the year ended 31 March 2009.






CHAPTER 2 INCOMPLETE RECORDS AND CONTROL ACCOUNTS

Quest ion 13: Prempeh Street Grocer ies

Prempeh is a grocer who had not kept a full set of books. The following was a summary of his bank

statements for the year ended 31 December 2001.

GH GHAmount credited by bank 35,170 Balance 1 January 2001 892

Payments to trade creditors 30,500

Rent and rates 475

Fixtures 100Lighting and heating 210

General expenses 800

Loan interest 120

Drawings 900Customers cheque dishonoured 180

Balance 31 December 2001 993

35,170 35,170

You are given the following information:

(1) Trading receipts consisted partly of cash and partly cheque. During the year Prempeh hadpaid out of his cash takings, wages amounting to GH2,950 and sundry expenditure of

GH140. He retained GH3 a week pocket-money and maintained a balance of GH20 in

the till for change. The balance of his takings, together with cheque amounting to GH250,

which he had cashed out of his takings for the convenience of certain friends, was paid intothe bank.

(2) Cheque drawn payable to trade creditors, but not presented at 1 January 2001, amounted to

GH280, and at 31 December 2001 to GH320.(3) All dishonoured cheque were re-presented and honoured during the year.

(4) The loan interest was paid to Bretwum who had lent Prempeh GH4,000 some years ago at

a rate of interest of 3% per annum. The interest was duly paid half-yearly on 31 March and

30 September, and the loan was still outstanding at the end of the year.(5) Discounts allowed by trade creditors amounted to GH480 and those allowed to debtors

were GH520.

1 Jan 2001 31 Dec 2001

GH GHStocks 4,500 5,800

Trade debtors 2,800 3,200 (including a debt of H200

to be written off)Accrued general expenses 240 190

Rates paid in advance 40 50

Fixtures valued at 2,800 2,550 (including those purchasedDuring year)

Trade creditors 1,800 2,200

Creditors lighting and heating 80 70






Requirements to Prepare:

(a) A statement of Prempehs capital at 1 January 2001

(b) A profit and loss account for the year ended 31 December 2001(c) A balance sheet at that date.

Quest ion 14: Kwaku Agyepong Bus inesses

Kwaku Agyepong received a legacy of GH20,000 on 1 January 2006 and on the same date

purchased a small retail business. The completion statement from the solicitor received the

following.GH

Freehold shop property 10,000

Goodwill 2,000Stock in trade 1,600

Trade debtors 400

Shop fixtures 2,600

Rates in advance to 31 March 2006 10016,700

The legacy was used to discharge the amount due on completion and the balance was paid into anewly opened business bank account.

Kwaku Agyepong had not kept proper records of his business transactions as he felt that time spent

"taping a keyboard was wasted selling time, but was able to supply the following information.

(1) A summary of the cash till rolls showed his shop takings for the year to be GH25,505; thisincludes all cash received from debtors including those at 1 January 2006.

(2) The takings were paid periodically into the bank after payment of the following cash

expenses.GH

Wrapping materials 525

Staff wages and National Insurance 3,423

Purchases for resale 165Petrol and oil 236

(3) Personal cash drawings were estimated at GH20 per week and goods taken for own use at

GH2 per week.(4) A summary of the bank account showed

GH GH

Legacyresidual balance 3,300 Purchases for resale 14,863

Sale of fixtures purchased at Motor expenses 7281January 2006 but not required Delivery van (cost1April 2006) 1,200

(cost GH200; depreciation Nil) 130 General expenses 625

Loan from Robin at 10% pa 2,000 Loan interestCash banked 19,900 (six months to 30 Sept.) 100

Private cheque 1,329

Electricity 228

Rates (year to 31 March 2007) 500Balance per statement at

31 December 2006 5,757

25,330 25,330






A cheque drawn on 28 December 2006 of GH125 for goods purchased was presented to the bank

on January 4, 2007.

(5) During the year bad debts of GH223 arose and were irrecoverable. The trade debtors at 31December 2006 amounted to GH637, of which GH100 is doubtful and for which

provision should be made.

(6) At 31 December 2006 there were

GH

Stock in trade 2,360Stock of wrapping materials 53

Trade creditorspurchases 358Electricity accrued 50

Accountancy fees accrued 100

Cash float in till 180

(7) The difference arising on the cash account was discussed with Kwaku Agyepong butremained unexplained and was dealt with in an appropriate manner.

(8) Depreciation is to be provided at the rate of 10% per annum on the fixtures and at the rate of

20% on the van.

Requirement

Prepare a trading and profit and loss account for the year ended 31 December 2006 and a balancesheet at the date.

Quest ion 15: Vol ta Star Grocery Shops

Volta Star runs a retail grocery shop, but many of his accounting records were lost when coffee was

spilt over the back-up diskettes. On examining Volta Stars books you find that his recorded assets

and liabilities on 31 December 2006 wereGH

Shop fittings 500

Van 400

Stock 3,627Trade debtors 1,960

Trade creditors 1,508

An analysis of his bank pass book gives the following information.

GH GH

Balance at 1 January 2007 479 Payments to trade creditors 16,594

Receipts from debtors 1,006 Purchase of new van onCash banked 15,537 30 September 2007 1,000

Sale of van on 30 September Rent, nine months to

2007 300 30 September 2007 225Rates, eighteen months to

31 March 2008 360

Sundry expenses 446

Van expenses 60Advertising 219

Balance at 31 December 2007 1,674 Drawings 92

18,996 18,996






An analysis of his cash transactions printout gives the following information.

GH GHBalance at 1 January 2007 21 Wages and salaries 1,524

Cash sales 16,419 paid into bank 15,537

Receipt from debtors 2,317 Van expenses 168

Proceeds of surrender of life Advertising 84

Insurance policy (private) 142 Drawings 1,351Sundry expenses 119

Payments to creditors 104Balance at 31 December 2007 12

18,899 18,899

You are informed of the following in addition to the above.(1) On 31 December 2007 stock at cost was GH4,651, debtors were GH2,000 and creditors

were GH1,543. There was also an unpaid account of GH41 for sundry expenses.

(2) There was an unpaid account of GH37 for sundry expenses outstanding on 31 December2006.

(3) Depreciation is to be provided on shop fittings at 10% reducing balance, and on motor vansat 20% reducing balance, on closing balances.

(4) During 2007 Volta Star has taken groceries from the shop costing GH156 for his own use.

He has not paid for these.

(5) A provision for doubtful debts should be raised (at the beginning and end of the year) of 5%

of the debtors. During the year bad debts amounting to GH42 have been written off, andare not included in the figure of debtors on 31 December 2007.

Requirements

(a) Prepare a statement of affairs at 31 December 2007.(b) Prepare a trading and profit and loss account for the year ended 31 December 2007 and a

balance sheet at the date.

Quest ion 16: Blow Bambaloo Retai l ing Ventures

Blow Bambaloo, a retailer, adds 25% of the cost of all goods purchased for resale to arrive at his

selling prices.

His financial position at 30 June 2005 was as follows.

Assets GHPlant and machinery (NBV) 5,000

Stock 3,825

Debtors 7,175Cash at bank 2,200

Liabilities

Creditors 3,000

Loan from Z (interest free) 2,000During the year ended 30 June 2006 the following transactions took place.

(1) Paid GH11,675 for goods for resale (cheque).

(2) Repaid GH500 of the loan from Z (cheque).(3) Purchased a van for GH700 (cheque) on the last day of the year.






(4) Withdrew from the bank GH80 per month for personal expenses.

(5) Paid into the bank a legacy of GH300.

(6) Paid by cheque income tax of GH600 (treat as drawings).(7) Withdrew an unspecified amount of cash from takings prior to banking.

At 30 June 2006 stocks at cost was GH4,000, debtors totalled GH7,000 and creditors were

GH3,500; the balance at bank amounted to GH1,950. Depreciation of plant was 10% per annum

on the reducing balance. No depreciation is to be provided on the van.

RequirementPrepare a trading and profit and loss account for the year ended 30 June 2006 and a balance sheet at

that date.

Quest ion 17: Kokompeh Spare Parts Ventur e

Kokompeh was a sole trader in a retail business, all sales being made for cash. His balance sheet at31 March 2003 was as follows.

GH GH GH

Capital account 6,180 Fixtures and fittings 1,750Creditors Stock at cost 4,200

Trade 380 Balance at bank 760

Expenses 170 cash in hand 20

5506,730 6,730

Exactly ten weeks later, on the night of 9 June 2003, a fire occurred which completely destroyed allhis stock, fixtures and fittings, and accounts computer, leaving only a file of unpaid invoices which

he had retained at home.

He had not insured against loss of profits but his fire insurance policy included cover of his stock,

at cost, not exceeding GH5,000, cash up to GH50, and fixtures and fittings at agreed figure ofGH1,500.

The cash in hand on 31 March 2003 and all takings up to the close of business on 9 June 2003 had

been banked with the exception of(1) GH20 per week paid to an assistant as wages

(2) GH25 per week drawn by Kokompeh for personal expenses

(3) GH10 retained as a cash float and which had been lost in the fire.

All payments for goods and business expenses, other than wages, were made by cheque.

The selling price of his goods was obtained by adding 40% to the cost price.

Duplicate bank statements were obtained from the bank and an analysis of the ten week periodended 9 June 2003 showed the following.

GH

Receipts

Cash banked 4,600Payments

Creditors for goods 3,200

Expenses 480Unpaid invoices on 9 June 2003 amounted to GH320 for goods and GH60 for expenses.






Requirements

(a) Prepare a statement setting out the claim for loss of stock.(b) Prepare a profit and loss account for the ten weeks ended 9 June 2003 and a balance sheet at

that date, assuming that the claims for loss of stock, cash and fixtures and fittings are

admitted.

Quest ion 18: Ko f i Ghetto Ltd Bank Recon ci l iat ion

The enthusiastic young accountant of Kofi Ghetto Ltd has closed off the books for the year ended

31 December 2007 and prepared draft accounts before receiving the December bank statements

which have been delayed by computerization.

The net profit for the year before taxation is shown as GH58,616 and cash at bank appears asGH12,208.

The bank statements for December, showing a credit balance ofGH13,528 have now been receivedand checked with the cash book, and the draft accounts have been checked by the accountants

assistant.

The points set out below have arisen as a result of the checking procedures.

(1) Cheques drawn entered in the cash book in December but not presented for payment by 31

December totalled GH1,879.

(2) Amounts received from customers and banked in December but not credited on the bankstatements by 31 December totalled GH684.

(3) Bank charges of GH197 debited on the bank statements in December had not been entered

in the cash book.(4) The bank had wrongly credited the companys accounts in December with a cheque for

GH1,102 drawn in favour of Kofi Ghetto Building Components Ltd, an entirely different

company.(5) A cheque for GH1,500 received from a customer and paid into the bank in December was

not honoured on presentation and was debited on the bank statements. The fact that it had

been returned was not known to the person writing up the cash book. It is agreed that the

GH1,500 must be regarded as irrecoverable.(6) A balance of GH2,400 due from a customer at 31 December and included in debtors is

now reported by the companys solicitors to be a bad deb. In preparing the draft accounts, a

bad debt provision was created equivalent to 5% of debtors.

(7) A cheque paid for rates in respect of six months ending 31 March 2008 had been enteredwrongly in cash book as GH2,912 and posed to the debit of rates account in the nominal

ledger. The correct amount as debited on the bank statement is GH2,192.

(8) Goods costing GH2,400 have been invoiced to an agent and included in sales and debtorsat an amount which includes a 20% profit margin on sales value. The agent still held the

goods in a saleable condition at 31 December 2007.

(9) The discount column on the debit side of the cash book for December has been totalled to afigure which exceeds the correct figure by GH1,977. This error has not prevented the

balancing of the books due to the fact that in the ledger account of a supplier the credit






balance has been arrived after including an amount ofGH1,977 in the addition of the credit

side of the account, which was in fact the account number.

Requirements

(a) Produce a bank reconciliation at 31 December 2007.

(b) Prepare statements showing the necessary adjustments to

(i) the cash book for the ended 31 December 2007(ii) the profit and loss account for the year ended 31 December 2007

(iii) assets, liabilities and shareholders funds in the balance sheet at 31 December 2007.

(The balance sheet statement should show a reconciliation of the adjustments made.)

Quest ion 19: Norr is Wal ter Ltd Contro l A ccou nts

Norris Walter Ltd is a company which advertises wines and spirits through the mail and deliversdirect to customers.

For the year ended 31 December 2001 the balances have been extracted from the companys

debtors ledgers and the aggregate net figure of debtors amounts to GH78,615.

However, the debtors ledger control account for the year shows a balance of GH79,604. The sales

ledger has not yet been integrated with the computerized nominal ledger, and hence is not

simultaneously updated.

A thorough investigation reveals the matters set out below:

(1) A consignment of wines sent to an agent on a sale or return basis, and which remained

unsold at the year-end has been included in the sales daybook for November 2001 at the

pro-forma invoice value, but the amount has not been posted to the debtors ledger. The pro-

forma invoice value included a mark-up of GH275 representing 33 1/3% on cost.

(2) Wines are quoted at a price which includes delivery, but in the case of some October 2001invoices delivery costs totalling GH325 have been added in error to the quoted prices, and

these invoices have passed through the sales records in the normal manner.(3) Cash of GH115 paid to a customer to settle a credit balance owing to him has been

correctly posted to the relevant debtors ledger account but has been analysed incorrectly in

the cash book with the result that it has been included in the total of creditors ledgerpayments.

(4) A special discount of GH19 allowed to a customer has been correctly entered in the

discounts column of cash book but posted to the debtors ledger account as GH91.

(5) A customer was issued with credit note of GH54 for wines returned by him in September.He subsequently asked for a copy of this credit note. Both the original and the copy have

been entered in the sales returns book but only one credit entry has been made in thecustomers ledger account.

(6) A credit balance of GH86 standing on the account of a customer has been listed as a debitbalance of GH68 in extracting the list of debtors ledger balances.

(7) The debtors ledger account of one customer contains credit entries in fact totalling

GH1,840. As a result of a casting error, this total was originally shown as GH1,890 butthen carried forward to the next page of the account as GH1,980.






Requirements

(a) Prepare the corrected debtors ledger control account.(b) Set out an amended total of the list of debtors ledger balances.

Quest ion 20: Ronaldo Movete Ltd Contro l AccountsRonaldo and Movete plc is a company specialized in the manufacturing and sale of securitysystems. The accounts for the year ended 30 September 2004 are in the course of preparation. The

debtors total account controlling sales in the South Western area of the country has been prepared

on a microcomputer accounts packages by an inexperience assistant in the form set out below.GH GH

Debtors at 1 October 2003 (agreed Cash received 632,429

with the total list of balances Transfer to creditors ledger 2,010

extracted from the ledger) 94,202 Sales returns VAT inclusive figure 14,260Sales invoiced for the year 556,780 Bad debts 1,955

Discounts allowed 5,840 Debtors at 30 September 2004 6,168

656,822 656,822

The total of the balances as extracted and listed from the South Western area ledger is GH83,310.

Investigation brings out the facts given below.

Note Points (a) to (e) relate to the control accounts only.

(a) SalesThe following is a summary of the sales sheets for the year.

GH

Sales exclusive of VAT 556,780Value added tax 83,517

640,297

(b) Sales returnsFor the last month of the year, returns were GH1,950 but there is a mistake in the addition

of the total column of one sheet resulting in a total which is GH420 lower than the correct

figure. Moreover, including in the total of GH14,260 representing returns for the year, thefigure of GH1,950 was taken as GH1,590.

(c) Transfer

The transfer ofGH2,010 to the creditors ledger is in respect of cash received from a

supplier for an overpayment to him.

(d) Bad debtsThe figure of GH1,955 as shown in the bad debts account is made up as follows.

GHBad debts written out of the debtors ledger in 2003/04 2,500

Less Bad debts recovered in respect of a debt written out of the

Ledger in 2001/02 (2,045)

455

General bad debt provision against debts remaining on the ledger 1,500

1,955






(e) Cash received

The total of GH632,429 includes the bad debt recovered, and also a cheque for GH1,685which was first received from a customer in September 2003 and entered in the records in

that month. In October 2003 it was dishonoured and debited on the bank statement. It was

presented again and duly honoured. It therefore appeared on both sides of the cashbook inOctober 2003.

(f) List of balancesThe total of GH83,310 includes a debit balance of GH540 standing on an account in the

name of a director. It is agreed that this will not be paid but should be transferred to thedirectors emoluments accounts.

A ledger sheet relating to the North Eastern area has been mis-filed in the South Western

area at the time when the balances were extracted. It shows a credit balance of GH1,120.

Requirement

Prepare an amended debtors ledger control account relating to the South Western area for the yearended 30 September 2004 showing the reconciliation of the debtors figure with the totals list

extracted from the ledger.

Quest ion 21: Jorgbenue Ltd Reconci l ia tion Ac coun ts

The bookkeeper of Jorgbenue Ltd, Mr Mawusi, prepares a monthly bank reconciliation statement

together with reconciliation of the lists of debtors and creditors ledger balances with the debtorsand creditors ledger control account balances.

On 30 June 2001 the various reconciliation disclosed the following positions.

(i) Bank reconciliation

Balance per cash book GH1,952 (in hand)

Balance per bank statement GH6,536 (in hand)

(ii) Debtors

Balance per list of balances GH743,206

Balance on debtors ledger control account GH736,747

(iii) Creditors

Balance per list of balances GH698,741

Balance on creditors ledger control account GH702,946

Mr. Mawusi cannot reconcile the differences, and requests you to investigate further. He also has to

present the monthly management accounts to his superior, Mrs. Apenor. These accounts show a

profit for the month of GH17,257 and Mrs Apenor urgently requires a revised profit figure, if anychanges arise as a result of your investigation.






You discover the following

(1) Interest and bank charges amounting to GH1,137 were debited by the bank on 30 June2001, but no entries had been made in the cash book. When you inform Mr Mawusi, he is

incensed at the figure and telephones the bank which agrees to a reduction of GH837 and

this is credited on 17 July 2001.(2) Cheques received totalling GH2,736 from credit customers had been correctly entered in

the cash book on 28 June 2001. No entry had been made in the individual ledger accounts,and the lodgement did not appear on the bank statement until 7 July 2001.

(3) Cheques payable to suppliers amounting to GH7,257 had been correctly entered in the cash

account on 27 June 2001. The cheques did not appear on the bank statement until 8 July

2001, whilst you discover that only GH2,557 thereof had been entered in the individualledger accounts.

(4) A dividend receipts of GH1,200 on the bank statement had not been entered anywhere in

the books of account.

(5) Debit balances of GH1,200 in the debtors ledger had been included as credit balances inthe creditors ledger, whilst credit balances of GH348 in the creditors ledger had been

included as debit balances in the debtors ledger.

(6) A bad debt of GH75 owed by Westham had been correctly written off in his individualledger account, but no entry had been made in the debtors ledger control account.

(7) Discounts allowed by a supplier, James Nuque Ltd, had been correctly recorded in its

individual ledger account, but had been credited to the creditors ledger control account and

debited to the discounts allowed account. These discounts amounted to GH737.(8) The sales day book had been undercast by GH4,750 and the purchase day book overcast by

GH3,250.

(9) The total of the debtors ledger balances had been overcast by GH72 and the total of the

creditors ledger balances undercast by GH363.(10) A sales invoice to Barbara amounting to GH182 had been recorded incorrectly in the sales

day book as GH128. The wrong amount had been entered twice in the ledger account of

Barbara.(11) A purchase invoice for GH4,500 had been debited to Whitechapel Ltds creditors ledger

account, but no entry had been made elsewhere.

(12) Contras of GH747 between the debtors ledger and the creditors ledger had beenincorrectly entered in the control accounts as GH447.

(13) A cheque paid to Martin amounting to GH65 had bee correctly entered in the cash account,

but incorrectly credited to the creditors ledger account of Martini ltd.

Requirements

(a) Calculate the corrected balance per the cash account and prepare a statement which

reconciles it with the balance per the bank statement.(b) Reconcile the balance per the list of debtors ledger balanceswith the debtors ledger

control account.

(c) Reconcile the balances per the list of creditors ledger balances with the creditors ledgercontrol account.

(d) Calculate the revised profit figure for the monthly management accounts for Mr Mawusi to

present to Mrs Apenor.






Quest ion 22: Akos ombo Fabr ics Suspense Acco unts

The books of account for Akosombo Fabrics are handwritten with great care by a small team of

bookkeepers under the eagle eye of the office manager.

This redoubtable person has, however, recently taken extended leave to visit relations abroad, with

unfortunate results, since the month-end trial balance will not balance, there being a difference of

credits exceeding debits by GH318.

You are asked to help and, after inspection of the ledgers, discover the following errors.

(1) A balance of GH48 on a debtors account had been omitted from the schedule of debtors,the total of which was entered as debtors in the trial balance.

(2) A small piece of machinery purchased for GH800 had been written off to repairs.

(3) The receipt side of the cash book had been undercast by GH300.

(4) The total of one page of the net sales column in the sales day book had been carried forwardas GH3,092 whereas the correct amount was GH3,902.

(5) A credit note for GH120 received from a supplier had been posted to the wrong side of his

account.

(6) An electricity bill in the sum of GH78, not yet accrued for, was discovered in filing basket.(7) Mr Smith, whose past debts to the company had been the subject of provision, at last paid

GH540 to clear his account. His personal account has been credited but the cheque has notyet passed through the cash book.

Note The business does not maintain control accounts

Requirements

(a) Write up the suspense account clearing up the differences(b) State the effect of correcting each error on the accounts.

Quest ion 23: John J asper Shoes

John Jasper, who retails platform shoes, has been so busy since he commenced business on 1 April

2005 that he neglected to keep adequate accounting records. His opening capital consisted of

GH15,000 which he used to open a business bank account. The transaction in this bank accountduring the year ended 31 March 2006 have been summarised from the bank statements as follows.

Receipts: GH

Loan from John Wawahis friend 10,000

Takings 42,000Payments:

Purchases of goods for resale 26,400

Electricity for period to 31 December 2006 760Rent of premises for fifteen months to 30 June 2006 3,500

Rates of premises for year ended 31 March 2006 1,200

Wages of assistants 14,700

Purchase of van, 1 October 2005 7,600Purchase of large waterbed for his own private use 8,500

Van license and insurance, payments covering a year 250






According to his bank account the balance in hand at 31 March 2006 was GH4,090 in John

Jaspers favour.Whilst the intention was to bank all takings intact, it now transpires that, in

addition to cash drawings, the following payments were made out of taking before banking.Van running expenses GH890

Postages, stationary and other sundry expenses GH355

On 31 March 2006 takings of GH640 awaiting banking;this was done on 1 April 2006. It has now

been discovered that amounts paid into the bank of GH340 on 29 March 2006 were not credited toJohns accounts until 2 April 2006 and a cheque of GH120, drawn on 28 March 2006 for

purchases was not paid until 10 April 2006. The normal rate of gross profit on the goods sold byJohn Jasper is 50%on sales. However, during the year a purchase of glittering suits costing GH600

proved to be unpopular with customers and therefore the entire stock bought had to be sold at cost

price.

Interest at the rate of 5% per annum is payable on each anniversary of the loan from John Wawa on1 January 2006.

Depreciation is to be provided on the van on the straight line basis; it is estimated that the van will

be disposed of after five years use for GH100.The stock of goods for resale at 31 March 2006 has been valued at cost at GH1,900.

Creditors for purchases at 31 March 2006 amounted to GH880 and electricity charges accrued atthat date were GH180.Trade debtors at 31 March 2006 totalled GH2,300.

Requirement

Prepare a trading profit and loss account for the year ended 31 March 2006 and a balance sheet at

that date.

Quest ion 24: Akwapim Botanical Gardeners

Akwapim Botanical is a market gardener who does not keep full records of his businesstransactions.

An analysis of the business bank account for the year ended 30 June 2008 shows the following.

GH GHBalance 30 June 2007 640

Add Deposits 4,942

5,582

Less Withdrawals:Seeds and fertilizers 1,697

Boxes and packaging materials 715Repairs to greenhouse 49

Tractor and machinery expenses 396Crop-spraying 279

Rent and rates 416

School fees (Akwapim Botanicals son) 225Hire purchase instalments 9 x GH20 180

(3,957)






Balance 30 June 2008 1,625

You also obtain the following information.

(1) Akwapim Botanical sells crops entirely for cash and banks the balance remaining afterpaying certain items recorded in a notebook. A summary of the notebook for the year ended

30 June 2008 shows:

GH

Wages, National Insurance 1,130

Electricity 114Sundry business expenses 47

Own drawings 856(2) Bank deposits include the proceeds of an endowment assurance policy which matured in the

year amounting to GH525.

(3) The hire purchase instalments are for a new tractor purchased during the year for GH850.

The trade-up allowance on the old tractor was GH450 and the balance, including hirepurchase interest of GH80, is payable in twenty-four monthly instalments of GH20 each.

The hire purchase interest is to be deemed to accrue evenly over the period of payment. The

old tractor was stated at GH500 in the balance sheet at 30 June 2007 and the new tractor isto be written down to GH750.

(4) On 30 June 2007 greenhouse were stated in the balance sheet at GH800 and machinery atGH600. They are to be written down to GH700 and GH525 respectively.

(5) Outstanding amounts on 30 June were:

2007 2008

Electricity GH41 GH16

(6) Stocks on hand on 30 June have been valued as follows.2007 2008

GH GH

Growing crops, produce and fertilizers 2,100 2,060Boxes and packaging materials 250 260

Requirement

Prepare a trading and profit and loss account for the year ended 30 June 2008 and a balance

sheet at that date.

Quest ion 25: Ablode Tomefa Trading Company

Ablode Tomefa is trader who does not keep a full record of all his transactions. He has asked you toprepare his accounts for the year ended 31 March 2002 and has given you the following

information.

(1) He banks his takings periodically after payment of the following amounts.

Wages GH25 per week

Cleanings and sundries GH5 per week

Drawings for self GH40 per week






His cash in hand at the beginning of the year was GH150 and at the end of the year GH125.

(2) His summarised bank statements for the year show the following.

GH GH

Balance at 1 April 2001 1,216 Payments to creditors 39,720

Deposits 44,700 Purchase of new van 5,000

Telephone 181

Rent, rates and insurance 457Repairs 310

Balance at 31 March 2002 372 Cash withdrawn for self 620

46,288 46,288

The banking included GH950 received from the sale of his van on 1 April 2001 when the net book

value of the van was GH1,200.(3) Other assets and liabilities were as follows.

31 March

2002 2001GH GH

Stock 7,200 5,300Trade debtors 3,900 3,140Trade creditors 5,450 4,100

Accrualtelephone 38 26

Prepaymentrent, rates and insurance 145 120

(4) Tomefa estimates that his gross profit percentage is 20%.

(5) Depreciation is provided on the van at 25% per annum on cost on the straight lines basis.

(6) Tomefa also informs you that he does not keep a record of goods which he has taken for hisown use. He tells you that his previous accountant used to work the figure out and then

charge the cost of the goods to his drawings account.

(7) All sales and purchases are on credit terms.Requirements

(a) Prepare a trading and profit and loss account for the year ended 31 March 2002 and abalance sheet at that date.

(b) State two factors which could cause the estimates of goods drawn for him to be incorrect.

Quest ion 26: Mandela Amewu Ice-cream Vendor s

Mandela Amewu carries on the business as a self-employed ice-cream vendor. The business isseasonal and all the

Documents

Financial Accounting in Practice - Practical Questions in the Ghanaian Perspective