SD DOMBO UNIVERSITY OF BUSINESS AND INTEGRATED

DEVELOPMENT STUDIES

SCHOOL OF EDUCATION AND LIFE LONG LEARNING

DEPARTMENT OF BUSINESS EDUCATION

Question 1.

Beneath is the profit and Loss account of Florence Ofori Limited, a manufacturing company in
Accra for the year ended 31/08/21 submitted to the commissioner of internal revenue on
19/12/21.

Details GH⸿ GH⸿

Gross operating profit (⸿) 1,880,000,000
Profit in sales of assets 95,000,000
Less General and Administrative Expenses:
Salaries and wages 1,000,000,000
Rent 60,000,000
Insurance 54,000,000
Acquisition of trade mark 30,000,000
R & D Expenditure (Note 1) 59,000,000
Painting of premises 56,000,000
Loans to staff written off 53,850,000
Advertisement (Note 2) 49,000,000
Staff welfare (Note 3) 103,000,000
Travelling and Transport 80,000,000
Donation & Subscription (Note 4) 65,200,000
Bad Debt (Note 5) 40,000,000
Depreciation 81,500,000 1,732,650,000
Net Profit 242,350,000
The following information match with the Account.
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1. Research and Development

⸿
Acquisition of new machinery 28,500,000
Staff training cost 31,000,000
59,500,000

2. Advertisement

⸿
Cost of neon sign 20,500,000
Media adverts 28,500,000
49,000,000

3. Staff welfare:

⸿
Refund of staff medical bills 51,650,000
Safety wear and acquired for staff 17,550,000
Cost of canteen equipment 33,800,000
103,000,000

4. Donation and subscription

⸿
Donation to the Ghana heart foundation 40,000,000
Goods given to gratis to custom officials 13,200,000
Subscription to Ghana Manufacturing Assoc. 12,000,000
65,200,000

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 5. Bad debt

⸿
General provision 25,000,000
Specific bad debt 15,000,000
40,000,000

The company exported goods worth ⸿12,000,000 and at the time of preparation of the
account only ⸿80,000,000 of the amount had been paid. This is reflected in the accounts.
Capital Allowance is agreed at ⸿65, 240,000.

Required
a. State the importance of the Auditor’s Certificate to the Examination of Account.
b. Calculate the chargeable income of the company for the 2021 Year of
Assessment.

Question 2.

The Executive Officer of ThinkPad Limited, manufacturers of the Alata Local Soap for the
Ghanaian market returned from the Tax seminar organized by the Institute of Chartered
Accountants, Ghana (ICAG) and called you, the tax manager of ThinkPad into his office and
stated “ThinkPad Company Limited has been short changed over the years on account of tax
losses”. He said that carry-over of losses an incentives was discussed at length in the tax seminar.
The Chief Executive Officer continue add that ThinkPad Limited has not carried over its tax
losses as provided for in the tax law. He states “Tax Manager, please act now by writing to GRA
to recognize the tax losses of ThinkPad Limited since the losses are within the five years, in
order to help reduce the taxes of the company now that the company is making profits”, he
ended.

Required:

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Clearly explain the provisions of the tax laws on carry-over of losses and to what extent you
agree with the position of the Chief Executive Officer of ThinkPad Limited.

Question 3.

The account of Red and Yellow Ltd for the year ended 31/08/2022 illustrate the following
details.

Details GH⸿ GH⸿

Gross profit b/f 3,354,068
Rent received 80,000
Dividend 44,000
Total income 3,478,068
Less Expenses
Director fees 16,000
Salaries and wages 640,000
Repairs and maintenance 260,800
Subscription and donations 48,500
Utilities 1,420
Audit fees 500
Legal expenses 1,100
Registration and licensing 400
Rent 6,300
Depreciation 124,000
Travelling and transport 39,320
Net profit 2,339,728

3,478,068 3,478,068

Notes to the accounts:

1. Repairs and maintenance: this includes,

a. Repairs on a second-hand excavator purchased for use in the business (GH⸿
3,200)
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 b. General repairs of all plant and machinery (GH⸿130,000)
c. Loss on sale of obsolete plant and machinery (GH⸿27,600)
2. Subscription and Donations:
a. Scholarship awards to the needy but brilliant children from the area (GH⸿10,000)
b. KVIP facility for townsfolk (GH⸿15,000)
c. Donation towards celebration of Kumawu festival of the people of the area (GH⸿
2,000).
d. Christmas gifts to the chief and his elders (GH⸿ 1,500)
3. Legal expenses was in defense of a charge of assault against security officer of the
company.
4. Travelling and transport
a) Overseas travelling expenses for kwasi Marfo, the Chief Accountant and his
family while attending a seminar on mining operations in South Africa (GH⸿
13,800).
b) Passage expenses for Dean, an expatriate, on termination of his employment (GH
⸿5,520).
5. Capital allowance for the year amounted to GH⸿278,928 and unutilized capital
allowance brought forward also amounted to GH⸿40,000
6. Loss brought forward was GH⸿210,000.

You are required to determine the year of assessment and compute the chargeable income.

Question 4.

a) Outline the rules under section 12 of the income Tax Act, 2015 (Act 896), relating to
repairs and improvements.
b) Nii-boye Ltd incurred expenses on repairs and improvement of GH ⸿120, 500.00 on the
company’s building which was destroyed by fire in 2019. The cause was realized to be
the result of failure of the company not to adhere to the fire safety advice given by the
National Fire Service and Insurance Company. The company could therefore not claim
any refund from the Insurance and therefore had to bear the cost of repairs. Nii-boye Ltd

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 however, announced a profit of GH⸿240,000.00 for the 2020 year of assessment. The
written down amount of the building was GH⸿160,000.00.

REQUIRED.

a. To determine the deductible amount for repairs and improvement.

b. To determine the excess amount of repairs and improvement to be added to the
appropriate pool.

Question 5

Mr. George Gyamfi, a self-employed single parent with two children attending a private
university in Ghana trades as George Gyamfi Enterprise. He started business on 1st January, 2018
and presented the below extracts of his financial statement for year 2018.

Datails GH⸿ GH⸿

Gross profit b/d 20,240
Interest on savings account 2,020
Gifts received 1,500
Interest on treasury bills 790
Auditor’s fee 800
Depreciation of Assets 1,200
Computers purchased 2,500
PAYE paid on his salary 450
Employee social security contribution (other staff) 396
Office rent 2,400
Personal salary (net) 7,200
Other staff wages 4,300
Stationary 852
Vehicle purchased for the CEO personal use 18,000
Transport 1,300
Net loss 14,668

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Total 24,730 24,730

REQUIRED;

a. Calculate the chargeable income of Mr. George Gyamfi for the 2018 year of assessment.
b. Back your computation with relevant explanation.
c. Calculate all tax payable.