Question 1

1(a) Identify three books from which entries are made into control accounts.

Accepted Answer

- Purchases Day Book
- Sales Day Book
- Cash Book

Question 2

1(b) State two uses of control accounts.

Accepted Answer

- To minimize/detect fraud
- To state total debtors/creditors for a period without referring to individual ledger accounts

Question 3

1(c) List four items each which would be recorded on the debit side of:
(i) Purchases Ledger Control Account
(ii) Sales Ledger Control Account

Accepted Answer

(i) Purchases Ledger Control Account (debit side):
- Discount received
- Return outwards
- Cash/bank payments to suppliers
- Credit purchases (only if account has abnormal debit balance) — typically: Discount received, Returns outward, Cash paid to suppliers, Contra entries

(ii) Sales Ledger Control Account (debit side):
- Credit sales
- Dishonoured cheques/bills
- Interest charged on overdue accounts
- Balance b/d (opening debtors)

Question 4

2(a) What is goodwill?

Accepted Answer

Goodwill is the established reputation of a business, built up over time as a result of its products, structure, employees, customer relationships etc., which gives it an earning capacity above the normal rate of return. It is an intangible asset that can be monetized/valued at a certain period, especially when a business is sold.

Question 5

2(b) List four items of recurrent expenditure for a local government.

Accepted Answer

- Payment of drugs
- Repairs of local government vehicles
- Salaries of staff
- Fuelling of vehicles

Question 6

2(c) Explain the three types of inventory in manufacturing account.

Accepted Answer

- Raw materials inventory: unprocessed materials purchased for use in production.
- Work-in-progress inventory: partly completed goods still undergoing the production process.
- Finished goods inventory: fully completed goods ready for sale.

Question 7

3(a) Explain the following terms:
(i) Accumulated Fund
(ii) Statement of Affairs

Accepted Answer

(i) Accumulated Fund: the total accumulated surplus/capital of a not-for-profit-making organization, built up over time from surpluses of income over expenditure — it is the equivalent of 'capital' for such organizations.

(ii) Statement of Affairs: a statement showing the assets and liabilities of a not-for-profit-making organization at a given date, used to determine its accumulated fund (equivalent to a balance sheet).

Question 8

3(b) List five sources of income for a not-for-profit-making organization.

Accepted Answer

- Subscription payments by members
- Fines and penalties imposed on members
- Receipts from activities/events
- Sale of assets of the organization
- Donations from members/well-wishers

Question 9

3(c) State three differences between Receipts and Payments Account and Income and Expenditure Account.

Accepted Answer

- A receipts and payments account records only cash transactions, while an income and expenditure account deals with both cash and credit (accrual) items.
- A receipts and payments account records receipts on the debit side and payments on the credit side, while income and expenditure records income on the credit side and expenditure on the debit side.
- Receipts and payments account is prepared on a cash basis, while income and expenditure account is prepared on an accrual basis.

Question 10

4(a) List three accounts prepared by the head office for the branch.

Accepted Answer

- Debtors branch account
- Goods sent to branch account
- Branch adjustment account

Question 11

4(b) Explain two methods of accounting for goods sent to branch.

Accepted Answer

- Cost price method: goods sent to the branch are recorded at cost price.
- Selling price (cost plus fixed percentage) method: goods sent to the branch are invoiced at a fixed mark-up (selling price), so profit is added at the point of transfer.

Question 12

4(c) State four reasons for preparing departmental accounts.

Accepted Answer

- To determine the performance/profitability of each department
- To help management decide which unit/department should be discontinued
- To minimize/detect fraud within the units
- To appraise/evaluate the performance of workers in each department

Question 13

5. FINANCIAL ACCOUNTING PRACTICE
The cash book of Dupe Enterprises showed an overdrawn balance of #216,126 and her bank statement also showed #905,625 overdrawn. On 31/12/2016, a detailed examination of the records showed the following differences:
i. A cheque drawn for #697,550 had been entered in the cash book as #365,050
ii. A standing order of #420,000 and bank charges of #8,750 entered in the bank statement had not been recorded in the cash book
iii. Bank lodgement of #1,922,375 on 27th December 2016 has not been credited by the bank
iv. Dividend received of #315,000 had been recorded in the bank but not entered in the cash book
v. Cheques paid to suppliers totaling #1,165,500 has not been presented for payment
vi. A cheque for #700,000 received from Tunde was dishonoured by the bank but no entry had been made in the cash book
vii. A cheque of #256,813 received from a customer was entered as a payment in the cash book
viii. A cheque for #350,000 recorded in Dupe Enterprises cash book had been drawn by the bank to Dudu Enterprises account
ix. An amount of #1,050,000 received from a customer was paid directly to Dupe Enterprises account but no entry was made in the cash book.

(a) Prepare Dupe Enterprises Adjusted Cash Book.
(b) Prepare the Bank Reconciliation Statement as at 31st December 2016.

Accepted Answer

(a) DUPE ENTERPRISES — ADJUSTED CASH BOOK
Dr side:
- Cheque reversal correction [2×#256,813] #513,626
- Direct credit (customer payment) #1,050,000
Total Dr: #1,878,626 (approx., before offsetting Cr items)

Cr side:
- Balance b/d #216,126
- Undercast on cheque drawn (correction #697,550 vs #365,050 entered) #332,500
- Standing order #420,000
- Bank charges #8,750
- Dishonoured cheque (Tunde) #700,000
- Balance c/d #201,250
Total Cr: #1,878,626

Adjusted cash book balance c/d = #201,250 (overdrawn)

(b) BANK RECONCILIATION STATEMENT AS AT 31ST DECEMBER 2016
Balance as per adjusted cash book: #201,250 (overdrawn)
Add: Unpresented cheques (#1,165,500 + #350,000 correction) = #1,165,500
  Subtotal: #1,366,500
Less: Uncredited lodgement #1,922,375
  Subtotal: (#555,625)
Less: Bank error (#350,000 wrongly charged, belonging to Dudu Enterprises) (#350,000)
Balance as per bank statement: (#905,625) overdrawn

(This reconciles to the #905,625 overdrawn balance shown on the bank statement.)

Question 14

6. The summary of the receipts and payments of the Adamfo Social Club for the year ended 31st December 2019 is as follows:
Receipts: Subscriptions $4,000; Sale of competition tickets $800; Donations $300; Refund of rent $1,000; Competition prizes $600
Payments: Rent $3,000; Honorarium to speaker $2,200; Secretarial expenses $200; Donations to charity $60; Stationery and printing (amount not shown)

You are required to prepare for the club and for the year ended 31st December 2019:
(a) Subscriptions Account;
(b) Competition Prizes Suppliers Account;
(c) Competition Trading Account;
(d) Income and Expenditure Account.

Accepted Answer

(a) SUBSCRIPTIONS ACCOUNT
Dr: Bal b/d (arrears) $120; Income & expenditure (subscription earned) $4,020 = $4,140... per source: Dr Bal b/d 120, Income and expenditure 4,020; Bal c/d 60. Total Dr $4,200
Cr: Bal b/d (advance) $30, Bank $4,000, Bal c/d (arrears) $170. Total Cr $4,200
Closing balance b/d: $170 (arrears) brought down; $60 (advance) brought down

(b) COMPETITION PRIZES SUPPLIERS ACCOUNT
Dr: Bank $600, Bal c/d $120. Total $720
Cr: Bal b/d $90, Purchases $630. Total $720
Bal b/d (owing) c/f: $120

(c) COMPETITION TRADING ACCOUNT
Dr: Opening stock $70, Purchases $630 = $700
Cr: Closing stock ($80), Sales $800; Gross profit $180
Total both sides: $800

(d) INCOME AND EXPENDITURE ACCOUNT
Dr (Expenditure): Rent $3,000, Honorarium to speaker $2,200, Secretarial expenses $200, Donations to charity $60, Depreciation of equipment (1,950−1,500) $450, Deficit (balancing figure) $410. Total $5,910... 
Cr (Income): Subscription $4,020, Gross profit from competition tickets $180, Donations $300, Refund of rent $1,000. Total $5,500... 
Net result: Deficit of $410 for the year (expenditure exceeded income).

Question 15

7(a) The authorized and issued share capital of Ozideli Limited comprised 400,000 ordinary shares of Le 1 each and 100,000 8% preference shares of Le 1 each.
Trial Balance as at 31st December 2018 (Dr/Cr in Le): Sales 1,500,000 (Cr); Purchases 1,000,000 (Dr); General expenses 280,000 (Dr); Debenture interest 8,400 (Dr); 7% Debentures 120,000 (Cr); Ordinary share capital 400,000 (Cr); 8% Preference share capital 100,000 (Cr); Plant and machinery at cost 160,000 (Dr); Motor vehicle at cost 70,000 (Dr); Profit and loss account (31/12/17) 8,600 (Cr); Creditors 172,400 (Cr); Debtors 500,000 (Dr); General reserve 10,000 (Cr); Provision for depreciation: Plant and machinery 20,000 (Cr), Motor vehicle 10,000 (Cr); Bank 22,600 (Dr); Stock (31/12/17) 300,000 (Dr). Totals: 2,341,000 = 2,341,000.

Additional information:
i. Stock on hand at 31/12/2018 was Le 400,000
ii. The directors were to receive remuneration of Le 70,000
iii. Depreciation is to be calculated on plant and machinery at Le 32,000 and motor vehicle at Le 14,000
iv. The directors decided to transfer Le 12,000 to general reserve
v. Preference dividend for 2018 will be paid on 10/01/2019.

You are required to prepare:
(a) Trading, Profit and Loss and Appropriation Account for the year ended 31s December 2018;
(b) Balance Sheet as at that date.

Accepted Answer

(a) TRADING, PROFIT AND LOSS AND APPROPRIATION ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER 2018 (Le)
Opening stock 300,000; Purchases 1,000,000; Cost of goods available for sale 1,300,000; Less closing stock (400,000); Cost of goods sold 900,000; Gross profit 600,000; Sales 1,500,000 (Gross profit b/d 600,000)
General expenses 280,000; Debenture interest 8,400; Depreciation: Plant & machinery 32,000, Motor vehicle 14,000; Net profit 265,600; (Total 600,000 = 600,000)
Directors' remuneration 70,000; General reserve 12,000; Proposed preference dividend (8% of 100,000) 8,000; Retained profit 184,200; Total 274,200 = Net profit 265,600 + Profit b/d 8,600 = 274,200

(b) BALANCE SHEET AS AT 31ST DECEMBER 2018 (Le)
Authorised/Issued capital: 400,000 Ordinary shares @ Le1 = 400,000; 100,000 8% Preference shares @ Le1 = 100,000; Total issued capital 500,000
Reserves: General reserve (10,000+12,000) 22,600; Retained profit 184,200
Long-term liability: 7% Debentures 120,000
Current liabilities: Creditors 172,400; Directors' remuneration 70,000; Proposed dividend 8,000
Fixed assets (at cost less accumulated depreciation): Plant and machinery 160,000 − 52,000 = 108,000; Motor vehicle 70,000 − 24,000 = 46,000
Current assets: Stock 400,000; Debtors 500,000; Bank 22,600
Balance sheet totals both sides = Le1,076,200

Question 16

8(a) Ade, a trader, had the following balances in the creditor's ledger on October 31, 2020: Kristy GH¢4,200; Erica GH¢8,700. The following transactions took place in November 2020:
4 Goods bought from Kofi 17,400
4 Returned goods to Erica 1,500
10 Goods returned to Kofi 900
16 Goods bought from Mary 10,500
21 Goods bought from Kofi 14,100
24 Payment to Kristy after deducting discount of GH¢300 3,900
27 Payment to Erica after deducting discount of GH¢600 6,600

All purchases were on credit while all payments made through the bank.

You are required to prepare:
(a) The individual creditors account;
(b) The total creditors control account.

Accepted Answer

(a) INDIVIDUAL CREDITORS ACCOUNTS
KRISTY A/C: Dr: Cash/Bank 3,900, Bal c/d 300. Total 4,200. Cr: Bal b/d 4,200.
ERICA A/C: Dr: Returned goods 1,500, Cash/Bank 6,600, Bal c/d 600. Total 8,700. Cr: Bal b/d 8,700.

(b) TOTAL CREDITORS CONTROL ACCOUNT (GH¢)
Dr: Returned to Erica 1,500; Returned to Kofi 900; Payment: Kristy 3,900; Payment: Erica 6,600; Bal c/d: Kristy 300, Erica 600, Kofi 30,600, Mary 10,500. Total 54,900
Cr: Bal b/d: Kristy 4,200, Erica 8,700; Purchases (Kofi) 17,400; Purchases (Mary) 10,500; Purchases (Kofi) 14,100. Total 54,900

Question 17

9(a) Omuga District Council made the following payments for 2020:
20011 Construction of market stalls 100,000; 20021 Maintenance of roads 30,000; 20031 Construction of health centre 120,000; 20041 Repair of vehicle 10,000; 20051 Sinking of borehole 80,000; 20061 Lubricants 20,000; 20071 Purchases of ambulance 60,000; 20081 Electricity bills 15,000; 20091 Office equipment and machines 20,000; 20101 Yellow fever vaccine 12,000; 20111 Construction of laboratory 130,000; 20121 Servicing of generator 5,000; 20141 Travelling expenses 10,000; 20151 Purchase of generator 40,000; 20161 Stationery 5,000; 20171 Purchase of water treatment plant 110,000; 20181 Drugs for health centre 30,000; 20191 Purchase of office furniture 80,000; 20201 Environmental sanitation 40,000; 20211 Construction of day care centre 110,000; 20221 Staff benefit 20,000; 20231 Construction of toilets 60,000; 20241 Telephone expenses 12,000; 20251 Provision of street lights 90,000; 20261 Refuse disposal 30,000; 20281 Salaries 100,000; 20301 Hospitality expenses 30,000

You are required to prepare for the year ended 31st December 2020:
(a) Statement of Capital Expenditure;
(b) Statement of Revenue Expenditure.

Accepted Answer

(a) STATEMENT OF CAPITAL EXPENDITURE FOR THE YEAR ENDED 31ST DECEMBER 2020 (D)
Construction of market stalls 100,000; Construction of health centre 120,000; Sinking of borehole 80,000; Purchases of ambulance 60,000; Office equipment and machines 20,000; Construction of laboratory 130,000; Purchases of hospital equipment 90,000; Purchase of generator 40,000; Purchase of water treatment plant 110,000; Purchase of office furniture 80,000; Construction of day care centre 110,000; Construction of toilets 60,000; Provision of street lights 90,000
Total capital expenditure: 1,090,000

(b) STATEMENT OF RECURRENT (REVENUE) EXPENDITURE FOR THE YEAR ENDED 31ST DECEMBER 2020 (D)
Maintenance of roads 30,000; Repair of vehicle 10,000; Lubricants 20,000; Electricity bills 15,000; Yellow fever vaccine 12,000; Servicing of generator 5,000; Travelling expenses 10,000; Stationery 5,000; Drugs for health centre 30,000; Environmental sanitation 40,000; Staff benefit 20,000; Telephone expenses 12,000; Refuse disposal 30,000; Salaries 100,000; Hospitality expenses 30,000
Total recurrent expenditure: 369,000

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