FORMAT FOR FINANCIAL STATEMENT OF SOLE PROPRIETORSHIP

Alhaji Enterprise
Income statement for the year ended 31/12/2021
Gh¢ Gh¢ Gh¢
Sales XXX
Returns (XXX)
Net sales /Turnover XXX
Cost of sales:
Opening inventory XXX
Purchases XXX
Carriage inwards XXX
XXX
Returns outwards (XXX)
Net purchases XXX
COGAS XXX
Closing inventory (XXX)
Cost of goods sold XXX
Wages XXX
Cost of sales (XXX)
Gross profit XXX
Other income:
Rent received XXX
Discount received XXX
Decrease in allowance for receivables XXX
Total income XXX
Expenses
Increase in allowance for receivables XXX
General expenses XXX
Carriage outwards XXX
Salaries XXX
Bad debts XXX
Insurance XXX
Prepaid (XXX) XXX
Discount allowed XXX
Electricity XXX
Owings XXX XXX
Motor expenses XXX
Interest on loan XXX
Depreciation:

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Motor vehicles XXX
Computers XXX (XXX)
Net Profit /(Loss) XXX/(XXX)

Alhaji Enterprise
Statement of financial position for the year ended 31/12/2021
Cost Acc. Depn Net
Non-current assets Gh¢ Gh¢ Gh¢
Freehold Land XXX - XXX
Motor vehicles XXX (XXX) XXX
Computers XXX (XXX) XXX
XXX (XXX) XXX
Current assets
Closing inventory XXX
Receivables XXX
Cash at bank and in hand XXX
Prepaid Expenses XXX
Investment in 91 days Treasury bills XXX
Accrued income XXX XXX
Total assets XXX

Capital + liabilities
Capital XXX
Net profit XXX
XXX
Drawings (XXX)
Owner’s equity XXX
Non-Current Liabilities
10% Loan XXX

Current liabilities
Payables XXX
Prepaid income XXX
Bank overdraft XXX
Accrued Expenses XXX XXX
Total Capital + Liabilities XXX

PRACTICE QUESTIONS

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Question 1
The following Trial Balance was extracted from the books of Amadi Enterprise, a second
-hand bags dealer as at 31st December, 2020
DR CR
GH¢ GH¢
Inventory 180,000
Vehicle (Cost) 225,000
Trade Receivables 120,000
Accumulated Depreciation: Vehicle 45,000
Furniture & Fittings 15,180
Trade Payables 150,000
Drawings 180,000
General Expenses 97,500
Allowance for receivables 3,750
Rate & Rent 42,000
Insurance 7,500
Bad Debt 10,500
Discount Received 37,725
Discount Allowed 22,740
Bank & Cash 247,860
Wages & Salaries 375,000
Sundry Expenses 9,225
Vehicle Running Expenses 23,475
Furniture & Fittings 75,900
Repairs to the shop 9,750
Returns 5,180 18,695

Purchases 970,000
Sales 1,600,000
Capital 731,280
2,601,630 2,601,630

The following additional information are provided:

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i. Allowance for receivables should be adjusted to 5% of trade receivables.
ii. Rate and Rent has been paid in advance by two (2) months. Note that Amadi Enterprise
pays GH¢2,000 each month.
iii. Inventory as at 31st December, 2020 GH¢80,150.
iv. A bill of GH¢6,150 for vehicle running was outstanding as at 31st December, 2020.
v. The Enterprise provide depreciation as following.
 Vehicles 20% per annum on straight line bases.
 Furniture and Fittings 20% per annum on reducing balance basis.
You are required to:
i. Prepare Income statement for the year ending 31st December 2020.
ii. Prepare Statement of Financial Position as at 31st December 2020.

Question 2

Zicco owns a provision shop at Keta. On 31st December, 2020 the following trial balance was
extracted from her books:
Dr. Cr.
GH¢ GH¢
Capital (1/1/2020) 960,000
Motor van(cost) 680,000
Equipment (cost) 320,000
Accumulated depreciation:
Motor van 128,000
Equipment 104,000
Inventory (1/1/2020) 120,000
Purchases and sales 450,000 1520,000
Returns 27,000 12,000
Carriage outwards 48,000
Carriage inwards 20,400
Trade Receivables 290,000
Trade payables 120,000
Allowance for receivables 16,000
Bad debts 60,000
Wages and Salaries 270,000
Discounts 54,000 88,000
Postage and Stationery 132,000
Utility Bills 42,000
10% Loan 160,800
Rent & Rates 128,000

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Sundry expenses 100,000
Cash 40,000
Bank 239,400
Personal drawings 88,000
3,108,800 3,108,800

The following additional information was made available:

i) Inventory at 31st December, 2020 was valued at GH¢ 176,000.
ii) Depreciation at the rate of 40% on cost for Motor Van and 50% on Equipment on
reducing balance method basis.
iii) An amount of GH¢ 28,000 is accrued in respect of Postage and Stationery at 31 st
December, 2020.
iv) Allowance for receivables is to be adjusted to GH¢ 10,000 at 31 st December, 2020 as a
result of improvement in debt recovery efforts.
v) Rent and rates pre-paid amounted to Gh¢25,600.
vi) The loan was contracted on 1st January, 2020. Provision should be made for the interest
on loan.

Required:
a) Prepare the Income statement for the year ended 31st December, 2020
b) Prepare the Statement of financial position as at 31st December, 2020

Question 3
The following is the Trial Balance of Mykel Enterprise, a dealer in Microsoft
Software, as at 31st December,2020
GHS GHS
Capital 684,625
Receivables and Payables 238,500 118,500
Inventory 148,500
Motor Vehicle (cost) 108,750
Accumulated depreciation (31-12-2019) 48,750
Office Equipment (cost) 135,000
Accumulated depreciation (31-12-2019) 45,000
Administration expenses 39,000
Purchases and sales 365,625 490,500
Employee benefits 49,500
Selling expenses 30,000
Plant: (Cost) 187,500
Accumulated depreciation (31-12-2019) 56,250
Discounts 11,250 18,750
Investment income 40,500
Returns 18,000 22,500
Cash and cash equivalents 189,000

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 Allowance for receivables (31-12-2019) 21,500
Bad debts 26,250
1,546,875 1,546,875

Additional information is given below:

(1) The inventory sheet as at 31/12/2020 put the value of inventory at GHS
149,500.
(2) Allowance for receivables is to be increased to GHS 24,080 as at 31 st
December 2020.
(3) An amount of GHS16,000 in respect of rent and rates is included in
administration expenses. This amount relates to 2021 financial year.
(4) All items of property, plant and equipment are depreciated at the rate of 10%
per annum on straight-line basis.
(5) An amount of GHS20,000 incurred in the repair of plant had been debited to
the plant account.
(6) Personal withdrawals of cash amounting to GHS45,000 was made by the
proprietor. This has not been recorded in the financial records.

Required: Prepare
(a) Income statement for the year ended 31st December, 2020.
(b) Statement of financial position as at 31st December, 2020.

Question 4
Kwaku De Traveller owns a provision shop at Madina at 31 st December, 2020 the following
trial balance was extracted from his books:
Dr. Cr.
GH¢ GH¢
Capital (1/1/2020) 480,000
Motor vehicles (cost) 340,000
Furniture and fittings (cost) 160,000
Accumulated depreciation:
Motor vehicle 64,000
Furniture and fittings 52,000
Inventory 60,000
Purchases and sales 225,000 760,000
Returns 13,500 6,000
Carriage outwards 24,000
Carriage inwards 10,200

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Trade Receivables 145,000
Trade payables 60,000
Allowance for receivables 8,000
Bad debts 30,000
Staff cost 135,000
Discounts 27,000 44,000
Advertising 66,000
Electricity & Water Bills 21,000
10% Loan 80,400
Rent & Rates 64,000
Sundry expenses 50,000
Cash 20,000
Bank 119,700
Personal drawings 44,000
1,554,400 1,554,400
The following additional information was made available:

vii) Inventory at 31st December, 2020 was valued at GH¢ 88,000.

viii) Depreciation at the rate of 20% on cost for motor vehicles and 25% on Furniture and
fittings on reducing balance basis.
ix) An amount of GH¢ 14,000 is outstanding in respect of Advertising cost at 31 st
December, 2020.
x) Allowance for receivables is to be adjusted to GH¢ 5,000 at 31 st December, 2017 as a
result of improvement in debt recovery efforts.
xi) Rent and rates was paid for 15 months ending 31st March, 2020.
xii) The loan was contracted on 1st January, 2020. Provision should be made for the interest
on loan.

Required:
Prepare
c) The Income statement for the year ended 31st December, 2020
d) A Statement of financial position as at 31st December, 2020

Question 5
The book keeper of Doris’s Ltd was preparing the reconciliation for the month of July 2020
and noted a difference between the bank statement balance and the balance on the bank account
in the general ledger. The bank statement shows a balance of GH¢4,788 cash at bank. The
balance on the bank account (cash book) in the general ledger was GH¢2,022 (credit).

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The following reasons accounted for the difference:
 Five cheques amounting to GH¢ 66,591 paid to suppliers have not yet been presented at the
bank.
A Cheque issued was incorrectly recorded in the cash book as GH¢8,871. The cheque was
correctly debited to the bank statement on 15 July 2020 as GH¢8,277.
 Bank Charges of GH¢8,043 was debited by the bank on 29 July 2020.
 A customer’s cheque amounting to GH¢6,720 was returned by the bank in July as the
customer had insufficient funds in his account. The book keeper is yet to record the returned
cheque in their books.
 A deposit of GH¢17,850 entered in Doris’s cash book on 30 July 2020 was credited on the
bank statement on 3 August 2020.
 The bank has incorrectly credited Doris’s account with an interest of GH¢4,620. This is
interest on a deposit account held by the Managing Director personally. The bank had not
corrected the error by 31 July 2020.

Required:
a) Prepare Doris’s adjusted cash book including the necessary correcting entries as at
31 July 2020.
b) Prepare a reconciliation of the bank statement balance to agree with the cash book
balance as at 31 July 2020.

Question 6
1. On 30th June, 2021 the bank column of the cash book of Aboagye Ltd showed a debit balance of
GH¢142,100 while the bank statement received for that same month showed a credit balance of
GH¢134,175. An investigation conducted by the cashier revealed the following:
i)
A cheque drawn in favour of Ola Ltd for GH¢5,775 was credited to the cash book as
GH¢57,750.
ii)
As at 30th September 2021, the bank had not yet credited the company’s accounts
with deposits totaling GH¢56,250.
iii)
Cheques drawn amounting to GH¢65,750 had not been presented to the bank for
payment.
iv)
A customer deposited GH¢34,000 to Aboagye Ltd’s account. This has not been
recorded in the cash book.
v)
A cheque drawn for GH¢37,500 in favour of Cyndy Ltd has been dishonoured by the
bank.
vi)
According to the bank statement, the bank charged a commission on turnover of GH
¢5,700.
vii)
A cheque for GH¢31,250 drawn by another customer has been wrongly debited to
Aboagye Ltd’s account by the bank.

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You are required to prepare:
a) Adjusted cash book as at 30th June, 2021.
b) A Bank Reconciliation Statement as at 30th June, 2021.

Question 7

The following is a summary from the cash book of Ato Ltd for July 2020:
GH¢
Opening balance 3,060
Receipts 46,208
Payments (46,010)
Closing balance 3,258

On investigation, it was discovered that:

i) Bank charges of GH¢30 shown on the bank statement have not been entered in
the cash book.
ii) A cheque drawn for GH¢220 to pay a supplier has been entered in the cash
book as a receipt.
iii) A cheque from a customer for GH¢240, which was banked (and included above
in receipts), has been returned by the bank, but this has not been adjusted in the
company’s books.
iv) An error occurred in the opening balance of the cash book. The correct amount
was GH¢2,700.
v) Cheques totalling GH¢528 have been sent by post to suppliers but were not
presented to the company’s bank until August 2020
vi) The last page of a bank account paying-in book shows a deposit of GH¢2,080
which was not credited to the account by the bank until 1st August 2020
vii) The company’s bank statement at 31st July 2020 shows a balance of GH¢636.

Required:
a) Demonstrate any adjustments needed to the company’s accounting records.
b) Prepare a Bank Reconciliation Statement as at 31st July 2020.

Question 8

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Mawunyo Ltd had its total debits exceeding the total credits in the trial balance as at 31 st
December 2021 by GH₵6,500. The following were revealed during investigations:
(a) Sales had been overcast by GH₵5,000
(b) Sales Returns had been understated by GH₵1,000
(c) Purchase Account had been overstated by GH₵2,500
(d) Returns Outwards of GH₵6,132 to Elikplim has been wrongly debited to Elikem’s
account.
(e) A payment by a debtor of GH₵10,000 by a direct bank transfer had not been entered in
the debtor’s account.
(f) Salary of GH₵2,000 had been recorded in Sundry Expenses Account
Required:
(a) Show the necessary journal entries to correct the above errors
(b) Prepare the Suspense account, duly balanced as it would appear after the correction of the
above errors.

Question 9
Princess Enterprise is not computerised and 31st December 2021 the bookkeeper is unable to
balance the trial balance. The trial balance totals were:
Debit - GH₵120,000
Credit - GH₵199,000
That notwithstanding, he proceeded to prepare draft financial statements, using the difference as
a balancing figure in the statement of financial position. The draft statement of profit or loss
showed a profit of GH₵14,000 for the year ended 31 December 2021.
He found the following errors and omissions after critical checks:
1. The balance of ₵35,000 on the Utilities account had been omitted from the trial balance.
2. Insurance prepaid of GH₵5000 at 31 December 2020 had not been brought down as an
opening balance.
3. The purchase of plant of GH₵12,000 on 1 November 2021 had been debited to plant
repairs account. Depreciation on plant is charged at 20% per annum on a straight-line
basis, with proportional depreciation in the year of purchase.
4. The total of the sales returns book, GH₵ 20,000 for December 2021, had been credited to
the purchases returns account.
5. No ledger accounts were opened for Discount allowed of GH₵8,000 and Discount
Received of GH₵9,000 for the year 2021, hence the balances omitted from the trial
balance.
Required:

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 i. Make journal entries to correct the errors
ii. Prepare the suspense account

Question 10
Kangaroo Ghana Enterprise extracted its trial balance and discovered a difference of
GH₵ 2,060 at the credit side. A review of the ledgers revealed the following errors
 An item of computer purchased for GH₵ 1,920 was debited to office equipment
repairs.
 A sum of GH₵240 on a creditors account was omitted from the balance of
creditors.
 The total of one page of the sales journal has been carried forward as GH₵ 4,308
whereas the correct amount was GH₵ 5,028
 The payment side of the cash account had been overcast by GH₵1,300
 A debt of GH₵ 1,040 assumed bad and earlier written off was recovered during
the year. The customer’s personal account was credited but no corresponding
entry was made.
 A debit note of GH₵ 840 received from a customer had been posted to the wrong
side of his account.
You are required to
a) Prepare the journal entries to correct the errors
b) Write up the suspense account

Question 11
Good News Company Limited acquired two motor vehicles on 1st January 2018 for Gh
¢240,000 each. On 1st July, of the same year, a third motor vehicle was purchased for Gh
¢280,000. On 30th June, 2020. The third motor vehicle was disposed of for Gh¢168,000.
Another motor vehicle was acquired on 30 th September, 2020 for Gh¢360,000 to replace
the one that has been disposed of.
The company prepares accounts to 31 December each year and charges depreciation on its
vehicles at 25% per annum. Depreciation is charged using the straight-line method and on a
yearly basis. Full-year depreciation is charged in the year of purchase and no

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 depreciation is charged in the year of disposal.

Required:
a) Motor Vehicles Accounts (up to 31/12/2020)
b) Provision for Depreciation (up to 31/12/2020)
c) Disposal of Motor Vehicles Accounts.

Question 12
Anidaso Company Ltd maintains its Tangible non- current assets at cost. Depreciation
provision account is prepared using 25% per annum on straight line method for
machinery and for each proportion of the year. The following transactions took place
during the year:
2018: 1st January, Bought machinery ¢250,000
1st January, Bought machinery ¢300,000
st
2019: 1 October, Bought machinery ¢420,000
2020: 1st December, 2020 sold the machinery bought on 1st January 2018 for ¢80,000
31sst August, bought a new machine to replace the disposed item for ¢600,000

You are required to prepare:

i. The machinery account (2018-2020)
ii. The provision for depreciation (2018-2020)
iii. The disposal accounts

Question 13
ABC Ltd started business on 1/1/14, and its financial year ends on 31 December each year.
It had the following Machinery as at December 2018.
GH¢
 2015 June 30, bought one machine costing 480,000
 2015 October 1, bought two machines costing 540,000 each
 2017 April 1, bought one machine costing 620,000
 2017 July 1, disposed the machine bought in 2014 for125,000
 2018 March 1, bought two machines costing 850,000 each
The company’s policy is to depreciate assets at a rate of 20% per annum on a straight line
basis proportionate to the date of purchase.

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Required: Prepare:
a) The assets accounts (2015-2018)
b) Provision for depreciation account (2015-2018)
c) Disposal account

Question 14

a. Briefly explain Business Entity Concept and indicate its relevance in the
determination of profit for the business organisation.

b. List any 5 subsidiary books and indicate the function of each of the books listed.

c. Explain the going concern concept

Question 15
a) Identify any two Users of accounting information and state their needs.

b) State and explain any two factors influencing depreciation charge per year.
c) Outline two differences between capital expenditure and revenue expenditure.

Question 16
a.) Distinguish between the Prudence concept and the Accrual concept. Are they
related in any way?
b.) Outline any two differences between capital receipt and revenue receipt.

Question 17
a) Explain the double entry system of recording transactions and state two benefits
associated with the system.
b) Define the following elements of financial statements and state their double entry rules
i. Assets
ii. Liabilities
iii. Expenses

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 c) What is the distinction between the sales ledger and the purchases ledger?

Question 18
a) Outline three (3) reasons of depreciation charge in the financial statements.
b) A bank reconciliation statement matches the cash balance on a company’s cash book to
the corresponding amount on its bank statement. Identify two (2) benefits of preparing
bank reconciliation statement.
c) Explain the following adjustments;
i) Accrued expenses
ii) Accrued revenue
iii) Prepaid expenses

Question 19
a) Justify the relevance of separating the business activities of an accounting entity from the
personal activities of its owners.
b) Distinguish between depreciation and amortization
c) Briefly explain the main books of accounts. (Ledger and journal).
d) List any three items found in the Asset Register.

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