QUESTION 1

Kasabrunu Enterprise is a business operating in the second-hand clothing in Kwadaso. Mr.

Bruni the owner of Kasabrunu Enterprise (KE) employed Mr. Ojidomi a BSc. Accounting
graduate as the Accountant. Business is booming and KE is expected to be in operation for a
long time. Mr. Odjidomi has been with the business for 5 years and has assured Mr. Bruni that
profits declared will not be deceptive since the same method will be continuously used for the
accounting treatment of similar items until Mr. Bruni decides to change from dealing in second
hand clothing to the purchase and sale of spare parts which they discussed. As part of the policy
adopted by the business, the Accountant records only transactions that can be valued in
monetary terms in the books of account and produces financial information at regular period
for the perusal of Mr. Bruni.
On reaching home, Sefakor Ojidomi, the daughter of Mr. Ojidomi who is pursuing an
accounting programme in Owusuwusu College of Accountancy asked his father to guide her
with an assignment.
Sikadanka, the Chairman and CEO of Defenders Ltd recently confronted the Chief Accountant
of the company over the way and manner the financial statements were presented for the 2019
financial year. The following points are summaries of the CEO’s reservations about the
financial statements:

a. He argued that the values of the company’s assets be shown at current market values
since these values will provide a better view of the company’s value. The Chief
Accountant is still insisting that the assets should be stated at original cost.
b. He expressed shock when the financial statements did not show a value for the
company’s efficient staff. He argued that the company’s beautiful and handsome sales
personnel are valuable assets used to attract customers and therefore insisted that this
“power of attraction” should be recognised in the books of accounts and reflected on
the face of the financial statement.
c. He was worried when a potential sale of millions of Ghana cedis to a certain buyer from
whom purchase orders have been received have not been recognized in the books of
accounts as sales. The Chief Accountant argued that these potential customers have
only been sent pro-forma invoices and so are not obliged to pay the company.
d. The CEO recently bought a saloon car for his son out of company funds. The Chief
Accountant recorded this on a current account for the CEO. This resulted in an intense
argument. The CEO threatened to dismiss the Chief Accountant should he refuse to
recognize the purchase of the saloon car as a transaction of the company.
e. The CEO insisted that the value of expired inventory should be maintained in the books
of accounts and not written off.

Sefakor presented the assignment and scored a 100% for the 1st time.

On the 27th of March, 2019, Mr. Ogboro, the purchasing officer of KE prepared documents to
purchase on credit 1,500 bales of second-hand clothing from Osimeyo and brothers (OB.). O.B
delivered the goods to KE 4 (four) days after the order was placed with all appropriate
documents. KE only deals in male second-hand clothing but included in the goods delivered
were 15 bales of ladies second-hand clothing which Mr. Ogboro returned to OB as it did not
meet the description provided. Customers purchased the goods either on credit or outright
payment with cash or cheque. Documents showing evidence of payment were given to these

1
customers. All customers who purchased on credit paid through their bankers by transfers made
directly to the bank accounts of KE. KE is later advised accordingly by her bankers.
Mr. Odjidomi prepares bank reconciliation statements quarterly. He made a request on the 15th
of March 2019 for a bank statement from Obidibi commercial bank. Upon receipt of the bank
statement, he compared the balance with that of the Cash book and it did not agree. The
Accountant’s friend, Oyeni Bawabawat, an accounts officer at Oshikishiki Enterprise requested
for reasons for the disagreement. He confessed his inability to grasp these reasons during his
studies. After an in-depth explanation, Mr. Odjidomi, the Accountant asked his friend to assist
him prepare a bank reconciliation statement as he had to urgently attend an important meeting.
The Accountant provided his friend with the information below:

The cash book, bank column of Kasabrunu Enterprise showed a credit balance of
GHS578,000 while the bank statement for the period showed a debit balance of GH¢338,000
on 31st March,2019. A thorough investigation revealed the following:

i. Cheques drawn amounting to GHS195,0000 had not been presented to the bank for
payment.
ii. A cash deposit into the bank of GHS97,800 was recorded as GHS79,800 in the cash
book.
iii. Bank charges of GHS10,900 and standing order payment of GHS12,100 relating to
telephone bills entered on the bank statement had not been recorded in the cash book.
iv. A cheque of GHS245,000 drawn by the firm had been charged by the bank in error to
another customer’s account.
v. A dividend of GHS15,000 paid directly to the bank had not been entered in the cash
book.
vi. A cheque for GHS20,000 paid into bank had been dishonoured and shown as such by
the bank but no entry of the dishonour had been made in the cash book.
vii. The following cheques and cash deposits entered in the cash book and paid to the
bank have not been credited by the bank: cash deposits GHS76,500; cheques receipts:
Maame Dakona GH¢54,500; Ntekuma Ananse GHS34,000.
viii. A cheque drawn for GHS32,000 had been entered in the cash book in the error
GHS23,000.
ix. A cheque for GHS16,000 drawn by another customer of the same name had been
charged to the firm’s bank account in error.

After adjusting the cash book balance, Oyeni Bawabawat prepared the bank reconciliation
statement. After waiting for 3 hours, he was informed that Mr. Odjidomi will be in the
meeting for 6 hours. Oyeni then left for his office.

Required:
A
i) Identify and explain two (2) accounting policies adopted by Kasabrunu Enterprise (1mark)
ii) State the accounting concept in each of the CEO’s reservation in Sefakor’s assignment.
Explain your reason for choosing the concept.
NB: Present your answer in a tabular form as illustrated below
Concept/Principle Definition/Explanation Reason
(5 marks)

2
B. Identify and explain the use of three (3) source documents in the transaction to purchase
and sell 1,500 bales of second-hand clothing. (4.5 marks)

C. i) State and explain six (6) reasons Mr. Odjidomi will give to his friend for the
disagreement in the cash book and bank statement balances. (3 marks)
i) Imagine you are Oyeni Bawabawat. Show the appropriate adjustments to be made in
the cash book (4.5 marks)
ii) Prepare a Bank Reconciliation Statement for Mr. Odjidomi. (2 marks)
(Total 20 marks)

QUESTION 2

Halibatu, a sole trader, deals in phones and computer accessories at the Ohiamankwa
Enterprise. The following Trial Balance was extracted from her books at 31st December, 2019

DR. CR.
GHS’000 GHS’000
Drawings & Capital 2,128 18,043
Receivables & Payables 7,689 5,462
Purchases & Sales 62,101 122,242
Rent & Rates 900
Gas &Electricity 246
Carriage 200
Salaries & Wages 8,268
Bad debts 247
Allowance for receivables 326
Inventory (1/1/2019) 9,274
Insurance 172
Discounts 150 350
Advertising 933
Cash at bank & on hand 2,142
Investment in 91-Day Treasury Bills 740
Interest on investment received 56
Motor Vans at cost 16,000
Computers (cost GH¢5million) 3,600
Provision for depreciation: Motor Vans 8,600
Motor Expenses 861
Returns 232 54
Rent received 750
Freehold premises at cost 40,000
155,883 155,883

3
Additional information:
a) Inventory as at 31st December, 2019 was GHS 9,884,000
b) Rent & Rates paid covered the period 1st January, 2019 to 31st March, 2020.
c) Some tenants have not yet paid their rent to Ohiamankwa Enterprise. The amount
involved was GHS 250,000.
d) Electricity bill of GHS 85,000 for December, 2019 has just been received. Halibatu
intends to pay within the third week of January, 2020. No record has been made in the
books.
e) GHS 80,000 out of total carriage of GHS 200,000 relates to carriage on purchases made
f) Allowance for receivables is adjusted to 5% of total receivables at the end of the year.
g) An amount of GHS 202,000 was spent on the personal vehicle of Halibatu. This was
included in the motor expenses.
h) Depreciation is to be charged on vans at annual rate of 20% on cost. Computers are to
be depreciated at the rate of 25% using the reducing balance method.

You are required to prepare:

i) Income statement for the year ended 31st December, 2019 (10 marks)
ii) Statement of financial position as at 31st December, 2019 (10 marks)
(Total 20 marks)

QUESTION 3
A
The agreement of the trial balance totals is an indication that all transactions have been properly
recorded in the books of accounts. Do you agree with this statement?

Required:
Outline 4 reasons to justify your response. (8 marks)

B
ABC Ltd started business on 1/1/14, and its financial year ends on 31st December each year.
The following information was extracted from the company’s asset register.
DATE TRANSACTION AMOUNT (GHS)
2016 January, 1 Purchased one motor van 58,500
2016 September, 1 Purchased two motor vans 78,000 each
2018 March, 1 Purchased one motor van 45,200
2018 May, 2 Sold the motor van purchased 18,240
in January,2016
2019 April 1 Purchased three motor vans 62,000 each

Additional Information
The company’s policy is to depreciate Motor vehicles at a rate of 20% per annum on cost.
You are required to prepare:
i) The Motor vehicles account (2016-2019) (4 marks)
ii) Provision for depreciation account (2016-2019) (4 marks)
iii) Disposal account for 2018 (2 marks)
iv) Statement of profit or loss extract for 2018 and 2019 (1 mark)
v) Statement of financial position extract for 2018 and 2019 (1 mark)
(Total 20 marks)

4
 END OF PAPER
Examiner: Ivy Eklemet

Online Submission Instructions

1. Login to UPSA-Virtual at https://join.upsavirtual.site
2. Locate your course
3. Scroll down to the bottom of the course where you can see examination week
4. Click on “End of 2nd Semester Take-Home Examination”
5. Click on “Add Submission” Button
6. Click on “Save Changes” Button
7. Click on “Submit Assignment”
8. The system will prompt you with the message “Are you sure you want to submit your
work for grading? You will not be able to make any more changes”
9. Click on “Continue” Button
10. Submit status should read “submitted for grading” That means your submission is 100%
complete. Ensure you see the status before you log out or close your browser.