LANCASTER UNIVERSITY - GHANA

GHAcF 100 INTRODUCTION TO FINANCIAL ACCOUNTING

TUTORIAL SET 1

Question 1

i. Explain four of the characteristics of good financial statements

ii. List the main components of financial statements

iii. What are accounting concepts?

iv. In preparing the accounts of your company for the year ended 30th November, 2015,
you were faced with the following problems.

a. A debtor who is heavily indebted to the company was rumoured to be going bankrupt

b. At 30th November, 2015, an amount was due but unpaid for electricity and water that have
been consumed during the accounting year.

c. During the year, the company purchased GHS 3500 worth of rubber bands. These were all
issued from stock to the cashier and were still being used by him even at the end of the year

d. The company is defending in a court, an action for damages due to alleged breach of
contract. The company is likely to suffer pecuniary damages arising out of the action.

e. The company’s chief executive wishes that the extremely cordial relationship existing
between management and the local union should be reflected in the accounts.

f. Due to prevailing factors, including economic, management realizes that the long run
prospects of the company are uncertain.

g. Motor vehicles purchased by the company now cost more than when they were initially
bought.

h. The chief executive, who is also a minority shareholder in the company has invested his
earnings in a recreational facility and has asked this to be recognised in the accounts of the
company.
i. The company has a poor trading year and management believes that operational results
could be better presented if the reducing balance method of depreciation were adopted,
instead of the straight-line method which is the stated policy of the company.

Required:

Identity and explain the accounting concepts that should be followed in dealing with each of
the problems above.

Question 2

The following summary of transactions was extracted from the books of Makosah Enterprise.

2016

July 1 Started in business with GHC 10,500 cash

July 2 Put GHC 9,000 of the cash into a bank account

July 3 Bought goods for cash GHC 500

July 4 Bought goods on credit from: Nyame GHC 800; Takyiwa GHC 930; Ofori GHC
160; Effah GHC 510

July 5 Bought stationery on credit from Buttons Ltd GHC 89

July 6 Sold goods on credit to: Aidoo GHC 170; Fish GHC 240; Babayaro GHC 326;
Ahovie GHC 204

July 8 Paid rent by cheque GHC 220

July 10 Bought fixtures on credit from Pinqui Enterprise GHC 610

July 11 Paid salaries in cash GHC 790

July 14 Returned goods to; Takyiwa GHC 30; Ofori GHC 42

July 15 Bought van by cheque GHC 6,500

July 16 Received loan from B Stancha by cheque GHC 2,000

July 18 Goods returned to us by: Aidoo GHC 5; Babayaro GHC 20

July 21 Cash sales GHC 145

July 24 Sold goods on credit to: Fish GHC 130, Ahovie GHC 410; Pleat GHC 158

July 26 We paid the following by cheque: Takyiwa GHC 900; Ofori GHC 118

July 29 Received cheques from: Pleat GHC 158; Fish GHC 370

July 30 Received a further loan from B Stancha by cash GHC 500

July 30 Received GHC 614 cash from Ahovie

Required:

A. Record the following transactions for the month of July for Makosah Enterprise. Enter
the double entry accounts and balance off the accounts.

B. What is a Trial Balance? Extract a trial balance as at 31 July, 2016.

Question 3 - Self Try

Simpson commenced business on 1st January, 2018 but did not keep proper books of
accounts. On 31st December, 2018, his assets and liabilities were as follows:

GH¢

Equipment 12,000

Furniture 7,200

Debtors; Aba 1,200

Mensah 2,400

Stock-in-trade 5,400

Bank overdraft 3,000

Creditors; Judith 1,500

Kofitse 900

Cash 2,400
The following transactions took place in January 2019;

Jan-01 Sold goods on credit to Braima GH¢3,600

2 Received cheque of GH¢1,800 from Mensah

8 Paid rent GH¢1,200 by cheque

10 Braima paid his account in full by cheque GH¢3,360

12 Sold goods for cash GH¢1,500

12 Paid cash of GH¢900 into the bank account

13 Cash purchase GH¢300

15 Credit purchases from Judith GH¢1,100

17 Paid wages by cheque GH¢300

18 Paid Judith by cheque the balance due her, less 10%discount

22 Paid Kofitse by cash in full, less 20% cash discount

27 Cash sales paid direct into bank GH¢1,200

28 Credit purchases from Judith GH¢1,500

31 Paid wages by cheque GH¢90

You are required to:

a) Enter the above transactions in the appropriate subsidiary books

b) Post to the relevant ledgers

c) Extract a Trial balance

Question 4

Golden Arc Ltd undertook the following transactions in March, 2018

2016 Day Transaction

March 1 Balances brought forward: Cash GHS 230; Bank GHS 4756

2 The following paid their accounts by cheque, in each case deducting

5% cash discounts: R. Boateng GHS 140; E. Takyi GHS 220; R.
Henaku GHS 300 ( All amounts are pre-discount)
 4 Paid rent by cheque GHS 120

6 J. Quarshie lent Golden Arc Ltd GHS 1000 by cheque

8 Golden Arc paid the following accounts by cheque in each case

deducting 2.5% cash discount: N. Badu GHS 360; P. Tawiah GHS 480;
C. Hinson GHS 800; (All amounts are pre-discount)

10 Golden Arc paid motor expenses in cash GHS 44

12 H. Hammond pays his account of GHS 77 by cheque, deducting GHS 3

cash discount

15 Golden Arc paid wages in cash GHS 160

18 The following paid their accounts by cheques in each case deducting

5% cash discount: C. Awuakye GHS 260; Winner Ltd GHS 340; H.
Manu GHS 460 (All amounts are pre-discount)

21 Cash withdrawn from the bank GHS 350 for business use

24 Cash drawings GHS 120

25 Golden Arc paid T. Sowah his account of GHS 140, by cash GHS 133,
having deducted GHS 7 cash discount

29 Bought fixtures paying by cheque, GHS 650

31 Received commission by cheque GHS 88

Required:

Prepare a three-column cash book for Golden Arc Ltd, balancing it on 31st March 2018