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FINAL ACCOUNT OF COMPANIES

Regulatory Framework
1. Companies Code, 1963 Act 179
2. Accounting Standards
a. IAS 1 - Presentation of Financial Statements
b. IAS 8 - Accounting policies, change in accounting estimates and errors
c. IAS 10 - Events occurring after the balance sheet date
d. IAS 34 - Interim Financial Statements

Overall Considerations

Fair presentation and compliance with IFRSs


Financial statements are required to be presented fairly as set out in the framework and in accordance
with IFRS and are required to comply with all requirements of IFRSs.

Going concern
Financial statements are required to be prepared on a going concern basis and will continue in operation
for the foreseeable future (unless entity is in liquidation or has ceased trading or there is an indication
that the entity is not a going concern).

Accrual basis of accounting


Entities are required to use accrual basis of accounting except for cash flow information.

Presentation consistency
An entity is required to retain presentation and classification from one period to the next.

Materiality and aggregation


Each material class of similar assets and items of dissimilar nature or function is to be presented
separately.

Offsetting
Offsetting of assets and liabilities or income and expenses is not permitted unless required by other IFRSs.

Comparative information
At least 1 year of comparative information is required. The disclosure is require both on the face of the
financial statements and in the notes, unless another Standard requires otherwise.

Components of Financial Statements

A complete set of financial statements comprises:


 Statement of financial position
 Statement of profit or loss and other comprehensive income
 Statement of changes in equity
 Statement of cash flows
 Notes, comprising a summary of significant accounting policies and other explanatory notes
 Comparative information prescribed by the standard.

All statements are required to be presented with equal prominence.

Final Account of Companies paulampadu@gmail.com pg. 1


Structure and Content

Identification of the Financial Statements


Financial statements must be clearly identified and distinguished from other information in the same
published document, and must identify:
 Name of the reporting entity
 Whether the financial statements cover the individual entity or a group of entities
 The statement of financial position date (or the period covered)
 The presentation currency
 The level of rounding used.

Statement of Profit or Loss and Other Comprehensive Income


Profit or loss is defined as "the total of income less expenses, excluding the components of other
comprehensive income". Other comprehensive income is defined as comprising "items of income and
expense (including reclassification adjustments) that are not recognised in profit or loss as required or
permitted by other IFRSs".
Total comprehensive income is defined as "the change in equity during a period resulting from
transactions and other events, other than those changes resulting from transactions with owners in their
capacity as owners".
Comprehensive income for the period = Profit or loss + other comprehensive income

Format for Merchandise Business

State of Profit or Loss and Other Comprehensive Income for the year
ended 31st Dec 20XX
GH¢
Revenue XXX
Cost of sales (XXX)
Gross profit XXX
Other income XXX
Selling and Distribution costs (XXX)
Administrative expenses (XXX)
Other expenses (XXX)
Finance costs (XXX)
Profit before tax XXX
Income tax expense (XXX)
Profit for the year from continuing operations XXX
Loss for the year from discontinued operations (XXX)
PROFIT FOR THE YEAR XXX

Other comprehensive income


Exchange differences on translating foreign operations XXX
Gains on property revaluation XXX
Loss on property revaluation (XXX)
Write-downs of inventories to net realisable value or of property (XXX)
Litigation settlements (XXX)
Other comprehensive income for the year, net of tax XXX

TOTAL COMPREHENSIVE INCOME FOR THE YEAR XXX

Final Account of Companies paulampadu@gmail.com pg. 2


Statement of Changes in Equity
Information required to be presented:
 Total comprehensive income for the period, showing separately attributable to owners or the parent
and non-controlling interest
 For each component of equity, the effects of retrospective application/restatement recognised in
accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
 Amount of dividends recognised as distributions to owners during the period (can alternatively be
disclosed in the notes)
 For each component in equity a reconciliation between the carrying amount at the beginning and end
of the period, separately disclosing each change
- profit or loss
- other comprehensive income*
- transactions with owners, showing separately contributions by and distributions to owners and
changes in ownership interests in subsidiaries that do not result in a loss of control

Statement of Financial Position (Balance Sheet)


 Present current and non-current items separately; or
 Present items in order of liquidity.

Current assets Current liabilities


 Expected to be realised in, or is intended for  Expected to be settled in the entity’s normal
sale or consumption in the entity’s normal operating cycle
operating cycle  Held primarily for trading
 Held primarily for trading  Due to be settled within 12 months
 Expected to be realised within 12 months  The entity does not have an unconditional right
 Cash or cash equivalents. to defer settlement of the liability for at least
12 months.
All other assets are required to be classified as
non-current. All other liabilities are required to be classified as
non-current.

Statement of Financial Position as at 31st Dec, 20XX


Assets GH¢

Non-current assets
Property, plant and equipment XXX
Investment property XXX
Intangible assets XXX
Financial assets XXX
Biological assets XXX
Deferred tax assets XXX
Total non-current assets XXX

Current assets
Inventories XXX
Trade and other receivables XXX
Current tax assets XXX
Cash and cash equivalents XXX
Total current assets XXX

Final Account of Companies paulampadu@gmail.com pg. 3


Total assets XXX

Equity and liabilities

Capital and reserves


Issued capital XXX
Other reserves XXX
Retained earnings XXX
Total equity XXX

Non-current liabilities
Financial liabilities XXX
Deferred tax liabilities XXX
Total non-current liabilities XXX

Current liabilities
Trade and other payables XXX
Current tax liabilities XXX
Provisions XXX
Deferred revenue XXX
Total current liabilities XXX

Total liabilities XXX

Total equity and liabilities XXX

Notes to the Financial Statements


Statement of compliance with IFRSs
 Significant accounting policies, estimates, assumptions, and judgements must be disclosed
 Additional information useful to users understanding/ decision making to be presented
 Information that enables users to evaluate the entity’s objectives, policies and processes for managing
capital.

ILLUSTRATION

(MAY 2014 Q3)


Asetrapa Ltd is a listed company reporting under IFRS. During the year ended 31 st December, 2012, the
company changed its accounting policy with respect to property valuation. There are also a number of
other issues that need to be finalized before the financial statement can be published.

Asetrapa Ltd’s trial balance from the general ledger at 31st December, 2012 showed the following
balances:
GH¢'m GH¢'m
Revenue 2,648.00
Loan note interest paid 3.00
Purchases 1,669.00
Distribution cost 514.00
Administrative expenses 345.00
Interim dividend paid 6.00

Final Account of Companies paulampadu@gmail.com pg. 4


Inventories at 1st January, 2012 444.00
Trade receivable 545.00
Trade payable 434.00
Cash and cash equivalent 28.00
Stated capital (ordinary shares issued at 50p) 100.00
Capital surplus 314.00
Retained earnings at 1st January, 2012 849.00
4% loan note repayable 2018 (issued 2010) 150.00
Land and buildings: cost (including GHC120m land) 380.00
Accumulated depreciation at 1st January, 2012 64.00
Plant and equipment: cost 258.00
Accumulated depreciation at 1st January, 2012 126.00
Investment property at 1st January, 2012 548.00
Rental income 48.00
Proceeds from sale of equipment 7.00
4,740.00 4,740.00
Further information to be taken into account:
(a) Closing inventories were counted and amounted to GHC388m at cost. However, shortly after the year
end out-of-date inventories with a cost of GHC15m were sold for GHC8m.
(b) The company decided to change its accounting policy with respect to its 10 year old land and buildings
from the cost model to the revaluation model. The revaluation amounts at 1st January, 2012 were
GHC800m (including GHC100m for the land). No further revaluation was necessary at 31st December,
2012. The company wishes to treat the revaluation surplus as being realized over the life of the assets.
(c) Due to a change in the company’s product portfolio plans, an item of plant with a carrying value
GHC22m at 31st December, 2011 (after adjusting for depreciation for the year) may be impaired due
to change in use. An impairment test conducted at 31st December, 2012, revealed its fair value less
costs to sell to be GHC16m. The asset is now expected to generate an annual net income stream of
GHC3.8m for the next 5 years at which point the asset would be disposed for GHC4.2m. An
appropriate discount rate is 8%. 5 year discount factors at 8% are:
Simple Cumulative
0.677 3.993
(d) The income tax liability for the year is estimated at GHC27m. Ignore deferred tax.
(e) An interim dividend of 3p per share was paid on 30th June, 2012. A final dividend of 1.5p per share
was declared by the directors on 28th January, 2013.
(f) During the year, Asetrapa Co. disposed of some malfunctioning equipment for GHC7m. The
equipment had cost GHC15m and had accumulated depreciation brought forward at 1st January 2012
of GHC3m.
There were no other additions or disposal to property, plant and equipment in the year.
(g) The company treats depreciation on plant and equipment as a cost of sale and on land and buildings
as an administration cost. Depreciation rates as per the company’s accounting policy notes are as
follows:
Buildings Straight line over 50 years
Plant and equipment 20% reducing balance
Asetrapa Ltd’s accounting policy is to charge a full years depreciation in the year of an asset’s
purchase and none in the year of disposal.

Final Account of Companies paulampadu@gmail.com pg. 5


(h) On 1st July 2012, Asetrapa Ltd made a bonus issue of 1 share for every 4 held capitalizing its retained
earnings. This transaction has not yet been accounted for. The fair value of the company’s shares on
the date of the bonus issue was GHC7.50 each.
(i) Asetrapa Ltd uses the fair value model of IAS 40. The fair value of the investment property at 31st
December, 2012 was GHC586m.

Required:
(a) Prepare Statement of profit or loss and other comprehensive income for the year ended 31st
December 2012;
(b) Prepare Statement of changes in equity for the year ended 31st December 2012
(c) Prepare Statement of financial position as at 31st December 2012
(Work to nearest 1 million Ghana Cedis) (20 marks)

Solution

Asetrapa Ltd
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2012
GH¢'m
Sales Revenue 2,648.00
Cost of sales (1,756.00)
Gross Profit 892.00
Distribution cost (514.00)
Admin expenses [345+18( depreciation of buildings)] (363.00)
Loss on disposal of PPE [12-7] (5.00)
Net Operating Profit 10.00
Other Income: Rental Income 48.00
Fair valuation gain on Investment Property 38.00
Profit before interest and tax [PBIT] 96.00
Finance costs [Interest on loan note] (6.00)
Profit before tax 90.00
Taxation (27.00)
Profit for the year 63.00
Other comprehensive income:
Revaluation surplus on land and buildings 484.00
Total comprehensive income 547.00

Statement of changes in equity for the year ended 31 Dec, 2012


Stated Capital Retained
Capital Surplus earnings Total
GH¢'m GH¢'m GH¢'m GH¢'m
Balance as at 1 January 2012 100.00 314.00 849.00 1,263.00
Bonus issue 375.00 (375.00) -
Total comprehensive income 484.00 63.00 547.00
Transfer : Real revaluation surplus (13.00) 13.00 -
Dividend (6.00) (6.00)
Balance as at 31 December 475.00 785.00 544.00 1,804.00

Final Account of Companies paulampadu@gmail.com pg. 6


Statement of financial position as at 31 December 2012
GH¢'m
ASSETS
Non-current assets
Property, plant and equipment 878.00
Investment property 586.00
1,464.00
Current assets
Inventory 381.00
Trade receivable 545.00
Cash 28.00
954.00

Total assets 2,418.00

EQUITY AND LIABILITIES


Equity
Stated capital 475.00
Capital surplus 785.00
Retained earnings 544.00
1,804.00
Non-current liability
Loan note 150.00
150.00
Current liabilities
Trade payables 434.00
Current tax payable 27.00
Loan interest accrued 3.00
464.00

Equity and liabilities 2,418.00

Workings

a. Cost of Sales
GH¢’m
Opening inventory 444.00
Purchases 1,669.00
Closing inventory (381.00)
Cost of goods sold 1,732.00
Depreciation of plant 24.00
Cost of sales 1,756.00

b. Closing Inventories - GH¢388m – [GH¢15m – GH¢8] = GH¢381m

Final Account of Companies paulampadu@gmail.com pg. 7


c. Real Revaluation Surplus
When assets are revalued we charge depreciation on the revalued amount and further that we
transfer an amount equal to the incremental depreciation from revaluation reserve to retained
earnings.

The entry is made to smooth the retained earnings figure and to facilitate comparison year by year..

= ([380-120]/50) – ([800-100]/40) = 13

d. Plant, Property and Equipment Schedule


Plant and
Land Building equipment Total
Cost GH¢'m GH¢'m GH¢'m GH¢'m
Balance 1/1/12 120.00 260.00 258.00 638.00
Revaluation Surplus (20.00) 504.00 484.00
Disposal (15.00) (15.00)
Depreciation Adjustment (64.00) (64.00)
Balance 31/12/12 100.00 700.00 243.00 1,043.00

Depreciation
Balance 1/1/12 64.00 126.00 190.00
Depreciation Adjustment (64.00) (64.00)
Disposal (3.00) (3.00)
Charger for the year 18.00 24.00 42.00
- 18.00 147.00 165.00

NBV 100.00 682.00 96.00 878.00

e. Note: The plant referred to in note (c) is not impaired. Please check below:

Impairment of assets – IAS 36


The basic principle of impairment is that an asset may not be carried on the balance sheet above its
recoverable amount.

Recoverable amount is defined as the higher of the asset’s fair value less costs of disposal and its
value in use.

Fair value less costs of disposal is the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date, less costs of disposal.

Value in use requires management to estimate the future pre-tax cash flows to be derived from the
asset and discount them using a pre-tax market rate that reflects current assessments of the time
value of money and the risks specific to the asset.

GH¢
Carrying value at 31 December 2011 22.00
Depreciation for 2012 [20%of 22] 4.40
Carrying value at 31 December 2012 17.60

Fair value less cost to sell at 31 Dec 2012 16.00

Final Account of Companies paulampadu@gmail.com pg. 8


Value in use at 31 December 2012:
3.8 x 3.993 15.20
4.2 x 0.667 2.80
18.00

f. Dividend – Only dividend paid is considered in the financial statement, however, if an entity declares
dividends after the reporting period, the entity shall not recognise those dividends as a liability at the
end of the reporting period. That is a non-adjusting event.

g. Bonus Issue – (¼ x 200m shares) x GH¢7.50 = GH¢375m

(May 2011)
The trial balance of Anidaso Company Ltd (ACL) as at 31 December 2010 is as follows:
GH¢’000 GH¢’000
Sales Revenue (note ii) 12,420.00
Income from investment property 192.00
Proceeds from sale of motor vehicles (note vi) 32.00
Debenture interest paid 60.00
Purchases (note ii) 7,728.00
VAT Service 560.00
Provision for deferred tax (1 January 2010) (note iv) 10.00
Administration and Distribution costs 3,436.00
Interim dividend paid (note v) 24.00
Inventories at 1 January 2010 1,776.00
Trade receivables 2,180.00
Trade payables 1,678.00
Cash and cash equivalents 112.00
Ordinary shares (issued at GHS1 per share) 400.00
Income surplus (1 January 2010) (note vii) 4,480.00
20% Debenture Stocks (2009-2013) 600.00
Buildings: Cost (note iii) 1,520.00
Acc depreciation at 1 January 2010 304.00
Motor Vehicles: Cost (note vi) 1,032.00
Acc. depreciation at 1 Jan 2010 504.00
Investment Property at (1 January 2010) (note viii) 2,192.00
20,620.00 20,620.00

Further examination of the financial records revealed the following:

i) Closing inventories at 31 December 2010 were valued at cost as GH¢1,624,000.However, some slow
moving products included in the inventory at a cost of GH¢40,000 had estimated realizable value
GH¢16,000.

ii) The sales figure and the purchases figure in the trial balance included output VAT and input VAT
respectively at the standard rate of 15%. The VAT figure in the trial balance represents the total net
payments made to VAT Service during the year.

Final Account of Companies paulampadu@gmail.com pg. 9


iii) The company decided to change its accounting policy with respect to its buildings from the "cost
model" to the "revaluation model”. The revalued amount at 1 January 2010 was GH¢2,400,000. The
original estimated useful life of 50 years (on the date of initial recognition on 1 January 2000)
remained unchanged, thus estimated remaining useful life at the date of revaluation was 40 years.
No further revaluation was necessary at 31 December 2010.

iv) The income tax liability for the year is estimated at GH¢100,000. The deferred tax provision at 31
December 2010 is to be adjusted to GH¢30,000 in line with movement in the temporary timing
differences.

v) An interim dividend of 6 pesewas per share was paid on 30 June 2010. No further dividend is
proposed at the end of the year.

vi) In January 2010, Anidaso Ltd disposed of some old motor vehicles for GH¢32,000. The vehicles had
cost GH¢40,000 and had accumulated depreciation brought forward at 1 January 2010 of
GH¢32,000. There were no other additions or disposal to motor vehicles in the year. Motor vehicles
are depreciated at 25% per annum on cost.

Depreciation on buildings and motor vehicles are charged to selling and administration expenses.

vii) On 1 October 2010, Anidaso Ltd made a bonus issue of 1 share for any 4 shares held, capitalizing its
income surplus. This transaction had not yet been accounted for. The fair value of the company's
shares on the date of the bonus issue was GH¢5 each.

viii) Anidaso Ltd uses the fair value model of IAS 40. The fair value of the investment property at 31
December 2010 was GH¢2,320,000

Required:
a) Prepare a statement of comprehensive income and statement of changes in equity for Anidaso
Limited for the year ended 31 December 2010. (10 marks)

b) Prepare a statement of financial position as at 31 December 2010 (10 marks)

c) State any two (2) bases of preparation and three (3) accounting policies applied in preparing the
financial statements. (5 marks)
(25 marks)
Solution

Workings
a) Sales = GH¢12,420,000 X 100/115 = GH¢10,800,000

b) Purchases = GH¢7,728,000 X 100/115 = GH¢6,720,000

c) Cost of sales GH¢’000 d) Other Income GH¢’000


Open inventory 1,776 Profit on sale of motor veh. (32- 8) 24
Purchases 6,720 Income from inv property 192
Closing inventory (1624-(40-16) (1,600) Fair valuation surplus of inv property 128
6,896 344

f) PPE Schedule
Building Motor Vehicle Total

Final Account of Companies paulampadu@gmail.com pg. 10


GH¢’000 GH¢’000 GH¢’000
Balance at 1 Dec 2010 1,520 1,032 2,552
Revaluation surplus 1,184 1,184
Depreciation adjustment (304) (304)
Disposal _____ (40) (40)
Balance as at 31 Dec 2010 2,400 992 3,392

Accumulated Depreciation
Balance as at 1 Dec 2010 304 504 808
Charge for the year 60 248 308
Revaluation adjustment (304) (304)
Disposal ____ (32) (32)
Balance as at 31 Dec 2010 60 720 780

NBV at 31 December 2010 2,340 272 2,612

g) VAT Services
Output VAT 1,620
Input VAT (1,008)
Balance (560)
52

Anidaso Company Ltd


Statement of Comprehensive Income for the year ended 31 December 2010
Notes Gh¢’000
Sales Revenue 10,800.00
Cost of sales (6,896.00)
Gross Profit 3,904.00
Administration and selling expenses (3,436 + 308) (3,744.00)
Net operating profit 160.00
Other Income 344.00
Net Profit before interest and tax 504.00
Finance charge (20% of 600) (120.00)
Net Profit before taxation 384.00
Taxation (100+ 30 – 10) (120.00)
Net Profit for the period 264.00
Other Comprehensive Income (Revaluation surplus) 1,184.00
Total Comprehensive Income 1,448.00

Statement of Changes in Equity for the year ended 31 December 2010


Stated Revaluation Income Total
Capital Surplus Surplus
GH¢’000 GH¢’000 GH¢’000 GH¢’000
Balance as at 1 December 2010 400.00 4,480.00 4,880.00
Bonus Issue 500.00 (500.00) 0.00
Statement of Comprehensive
264.00
Income 1,184.00 1,448.00
Dividend (24.00) (24.00)
Balance as at 31 December 2010 900.00 1,184.00 4,220.00 6,304.00

Final Account of Companies paulampadu@gmail.com pg. 11


Statement of Financial Position as at 31 December 2010
Notes GH¢’000
Assets

Non-Current Assets
Property, Plant and Equipment 2,612.00
Investment Property 2,320.00
4,932.00
Current Assets
Inventories 1,600.00
Trade Receivables 2,180.00
Cash and cash receivables 112.00
3,892.00

Total Assets 8,824.00

Equity and Liabilities

Equity
Stated capital 900.00
Revaluation surplus 1,184.00
Income Surplus 4,220.00
6,304.00
Non-Current Liabilities
20% Debentures 600.00
Deferred tax provision 30.00
630.00
Current Liabilities
Trade payables 1,678.00
VAT payable 52.00
Loan interest payable 60.00
Tax 100.00
1,890.00

Equity and Liabilities 8,824.00

Notes to the financial statements


1. Bases of Preparation

a) Statement of Compliance
The financial statements of Anidaso Ltd have been prepared in accordance with International
Financial Reporting Standards (IFRS) issued by IASB and adopted by ICAG.

b) Basis of Measurement
The financial statements have been prepared under the historical cost convention as modified to
include the fair valuation of certain items of PPE and investment property.

c) Use of Estimates and Judgement


The preparation of financial statements in conformity with IFRS requires management to make
judgement, estimates and assumptions that affect the application of policies and reported
Final Account of Companies paulampadu@gmail.com pg. 12
amounts of assets, liabilities, income and expenses. The estimates and the associated
assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgement
about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.

d) Functional and Presentation Currency


The financial statements are presented in Ghana Cedis (GH¢), which is the company’s functional
and presentational currency.

2. Significant Accounting Policies


The significant accounting policies adopted by the company which have been used in preparing these
financial statements include the following:

a) Depreciation
Properties, plant and equipment are depreciated over their estimated useful lives. The rates
applicable are as follows:
Buildings 2% on cost
Motor vehicles 25% on cost

b) Deferred Tax
The company accounts for deferred tax under the liability method as applied to all temporary
timing differences

c) Inventory
Inventories are valued on a ‘first in first out’ basis at the lower of cost and net realizable value.
Cost includes all direct expenses incurred in bringing the stocks to their current state under
normal operating conditions.

d) Trade receivables
Debtors are stated after making provision for debts considered to be doubtful

e) Investment Properties
The company adopts the fair value model in measuring the value of investment properties
subsequent to initial recognition and any fair valuation surplus or deficit is dealt with in the
Statement of Comprehensive Income.

f) Revenue
Sales revenue is stated net of discounts, allowances and Value Added Tax

Final Account of Companies paulampadu@gmail.com pg. 13


Format for Financial Institutions

State of Profit or Loss and Other Comprehensive Income for the year ended 31st Dec 20XX
Notes GH¢
Interest Income XXX
Interest Expense (XXX)
Net Interest Income XXX

Commission and Fees Income XXX


Commission and Fees Expenses (XXX)
Net Commission and Fees Income XXX

Net Forex Trading Income XXX


Other Income XXX
Other Operating Income XXX

Total Income XXX

Impairment Losses of Loans and Advances (XXX)


Operating Expenses (XXX)
Profit before Tax XXX
Tax Provision (XXX)
National Fiscal Stabilization Levy (XXX)
Profit for the year XXX

Other comprehensive income


Property revaluation surplus/Loss XXX
Litigation settlements (XXX)
Other comprehensive income for the year, net of tax XXX

TOTAL COMPREHENSIVE INCOME FOR THE YEAR XXX

Statement of Financial Position as at 31st December, 20XX


Note
Assets
Cash and Balance with the Central Bank XXX
Government Securities XXX
Due from other Banks and Financial Institutions XXX
Loans and Advances to Customers XXX
Investments XXX
Other Assets XXX
Deferred Tax Assets XXX
Property, Plant and Equipment XXX
Intangible Assets XXX
Total assets XXX

Final Account of Companies paulampadu@gmail.com pg. 14


Liabilities
Customers Deposit XXX
Due to other Banks and Financial Institutions XXX
Interest Payable and other Liabilities XXX
Tax Payable XXX
Deferred Tax Liability XXX
Borrowings XXX
Total Liabilities XXX

Shareholders' Fund
Stated Capital XXX
Income Surplus XXX
Capital Surplus XXX
Share Deals XXX
Statutory Reserve Funds XXX
Other Reserve XXX
XXX

Liabilities and Shareholders' Fund XXX

ILLUSTRATION

ICA NOV 2012 Q4


The Faith Rural Bank Ltd has presented the following trial balance for the 2011 financial year:
DR CR
GH¢'000 GH¢'000
Operating Expenses 987.00
Donations 24.00
Staff Cost 2,213.00
Directors remuneration 39.00
Capital work-in-progress 168.00
Motor Vehicles/Accum. Depreciation 327.00 182.00
Equipment & Furniture /Accum. Depreciation 588.00 163.00
Computers/Accum. Depreciation 390.00 133.00
Land and Building/Accum. Depreciation 776.00 83.00
Corporate tax 180.00
Sundry Payables 763.00
Interest from short term funds 243.00
Interest from Government securities 7,137.00
Interest on loans and advances 373.00
Other accounts 789.00
Staff advances 449.00
Loans and Overdrafts granted 8,233.00
Income Surplus 01/01/2011 1,146.00
Allowance for doubtful debts 01/01/2011 614.00
Statutory reserves 01/01/2011 648.00
Share Deals 34.00
Capital Surplus 410.00

Final Account of Companies paulampadu@gmail.com pg. 15


Trade investment 1,343.00
Government Treasury Bills 19,593.00
Interest on customers' deposits 3,515.00
Amounts due to other banks 3,871.00
Deposits with other banks 12,794.00
Cash in hand 1,629.00
Balance with other banks 4,666.00
State Capital 4,823.00
Current Accounts 22,767.00
Fixed/Time deposits 3,582.00
Savings accounts 7,819.00
Profit on foreign exchange transaction 141.00
Dividend from investments 55.00
Miscellaneous income 2,328.00
Commission and fee income 1,388.00
Total 58,703.00 58,703.00

Additional Information
i. Increase allowance for doubtful debts to GH¢851,700.00

ii. Provide for depreciation at the following rates:


Land and buildings 5% on cost
Equipment and furniture 20% on cost
Computers 33½% on cost
Motor vehicles 33½% on cost

iii. Provide for Audit fees of GH¢60,000.00

iv. Transfer 12½ of net profit after tax to Statutory Reserve Fund.

v. The corporate tax provision made in the 2010 financial statements was GH¢200,000.00. This was
agreed with Ghana Revenue Authority at GH¢220,000.00 and fully settled in March 2011. Interim tax
for 2011 based on self-assessment was settled at GH¢160,000.00 Corporate tax applicable to the bank
is 25%.

vi. Directors have agreed to pay end-of-year bonus to staff estimated at GH¢72,000.00. This is yet to be
paid.

vii. The authorised capital is 10,000 equity shares of no par value out of which 6,000 shares have been
issued and fully paid.

Required.
a) Statement of Comprehensive Income for the year ended 31st December, 2011.
b) Statement of changes in equity for the year ended 31st December, 2011.
c) Statement of financial position as at 31st December, 2011

Notes are not required but show all workings. (20 marks)

Solution

Final Account of Companies paulampadu@gmail.com pg. 16


FAITH RURAL BANK LTD
Statement of Comprehensive Income for the year ended 31/12/11
Notes GH¢
Interest Income 7,753.00
Interest Expense (3,515.00)
Net Interest Income 4,238.00

Commission and Fees Income 1,388.00

Profit on foreign exchange 141.00


Other Income 2,383.00
Other Operating Income 2,524.00

Total Income 8,150.00

Impairment Losses of Loans and Advances (238.00)


Operating Expenses (3,793.00)
Profit before Tax 4,119.00
Tax Provision (20 + 1,030) (1,050.00)
Profit for the year 3,069.00

Statement of Changes in Equity for the year ended 31st December, 2011
Stated Share Capital Income Statutory
Capital Deals Surplus Surplus Res. Fund Total
GH¢'000 GH¢'000 GH¢'000 GH¢'000 GH¢'000 GH¢'000
Balance Bfwd 4,823.00 34.00 410.00 1,146.00 648.00 7,061.00
Transfer Income Statement 3,069.00 3,071.00
Transfer Statutory Reserve (384.00) 384.00 -
Balance Cfwd 4,823.00 34.00 410.00 3,831.00 1,032.00 10,130.00

FAITH RURAL BANK LIMITED


Statement of Financial Position as at 31st December, 2011
Notes GH¢'000
Assets:
Cash and Short-Term Funds 6,295.00
Government Securities 19,593.00
Balance due from other Banks 12,794.00
Loans and Advances (8,233 – 852) 7,381.00
Trade Investments 1,343.00
Other Assets 1,238.00
Property, Plant and Equipment 1,290.00
Total assets 49,934.00

Liabilities
Customers Deposit 34,168.00

Final Account of Companies paulampadu@gmail.com pg. 17


Balance due to other Banks 3,871.00
Sundry Creditors 835.00
Taxation 870.00
Accrued Auditors Fees 60.00
39,804.00
Shareholders' Fund
Stated Capital 4,823.00
Capital Surplus 410.00
Share Deals 34.00
Statutory Reserve Funds 1,032.00
Income Surplus 3,831.00
10,130.00

Total shareholders fund & Liabilities 49,934.00

Workings

GH¢'000 GH¢'000
1 Interest Income:
Interest from Short Term Funds 243.00 2 Other Income:
Interest on Gov't Securities 7,137.00 Miscellaneous income 2,328.00
Interest on Loans & Advances 373.00 Dividends from investment 55.00
7,753.00 2,383.00

3 Operating Expenses: 4 Impairment Losses of Loans


Directors Remuneration 39.00 Balance c/fwd 852.00
Staff costs 2,213.00 Less balance b/fwd 614.00
Donations 24.00 Income statement 238.00
Operating expenses 987.00
Audit fees 60.00 5 Cash & Shirt term Funds:
Bonus 72.00 Cash 1,629.00
Depreciation 398.00 Balance with Bank of Ghana 4,666.00
3,793.00 6,295.00

6 Other Assets Account: 7 Customer Deposits: 22,767.00


Other Accounts 789.00 Current Accounts 3,582.00
Staff allowances 449.00 Time Deposits 7,819.00
1,238.00 Savings Accounts 34,168.00

8 Other Liabilities:
Sundry Payables 763.00
bonus 72.00
835.00

Final Account of Companies paulampadu@gmail.com pg. 18


Property, Plant and Equipment Schedule
Equipment
Capital Land and & Motor
Cost WIP buildings furniture Computers vehicles Total
GH¢'000 GH¢'000 GH¢'000 GH¢'000 GH¢'000 GH¢'000
Bal b/f 168.00 776.00 588.00 390.00 327.00 2,249.00
168.00 776.00 588.00 390.00 327.00 2,249.00

Depreciation
Bal b/f 83.00 163.00 133.00 182.00 561.00
Charge for the year 39.00 118.00 131.00 110.00 398.00
- 122.00 281.00 264.00 292.00 959.00

NBV 168.00 654.00 307.00 126.00 35.00 1,290.00

Taxation Schedule
Balance Charge Balance
at for the at
01/01 year Payment 31/12
GH¢'000 GH¢'000 GH¢'000 GH¢'000
For 2010 200.00 (220.00) (20.00)
For 2011 1,050.00 (160.00) 890.00
200.00 1,050.00 (380.00) 870.00

Final Account of Companies paulampadu@gmail.com pg. 19