ICAG SCHOOL

TRIAL QUESTIONS
NOVEMBER 2024 SITTING

PAPER 2.5 PUBLIC SECTOR ACCOUNTING AND FINANCE

INSTRUCTION:
ATTEMPT ALL FIVE QUESTION

TIME ALLOWED: 3 HOURS 30 MINUTES

(15 MINUTES READING TIME; 3 HOURS EXAM TIME; 15 MINUTE SCANING AND
POSTING TIME)

START: SUNDAY 20th OCTOBER -6 am

END : SUNDAY 20TH OCTOBER - 9.30 AM

No submission is allowed after 9.30 am

QUESTION 1
a) The Trial Balance of Consolidated Fund of Republic Ghana and the associated
additional information are provided below.
Trial Balance as at 31st December 2023
Debit Credit
GHc'm GHc'm
Company taxes 30,000
Personal income taxes 42,000
Miscellaneous taxes on capital gains and other transactions 4,000
Taxes on goods and services 52,000
Taxes on imports and exports 67,000
Other indirect taxes 6,000
Sale of goods and Services 17,000
Fines penalties and forfeits 2,500
Other revenues from non-exchange transactions 1,350
Grants 3,400 10,800
Interest 76,000 600
Subsidies 5,000
Social benefits 1,800
Established post salaries 69,000
Non- established post salaries 35,000
Salary related allowances 28,000
Office expenses 16,800
Travel and transport 17,200
Seminars, training and workshops 10,400
Cleaning 2,100
Other Expenses 9,000
Motor Vehicles (Cost and consumption) 47,000 9,400
Equipment (Cost and consumption) 35,000 13,000
Furniture and fixtures (cost and consumption) 22,000 6,800
Integrated platform (cost/ amortization) 12,000 4,200
Cash and cash equivalents 6,800
Loans and Advances 3,000
Investment in equity and other securities 10,000
Domestic debt 89,000
External Debt 134,000
Sundry payables 45,000
Other liabilities 13,500
Accumulated fund 138,560
548,150 548,150
Additional information for consideration in the preparation and presentation of financial
statements:

i) The financial statements of the Consolidated Fund are prepared and presented in
compliance with the International Public Sector Accounting Standards (IPSAS), the
Public Financial Management Act of 2016 (Act 921), the Public Financial
Management Regulations of 2019 (L.I. 2378), and the Chart of Accounts of Ghana.

ii) As of January 1, 2023, the external debt stood at $26,800,000,000, with the
exchange rate at $1 to GH¢5. During the year, no additional external debt was
contracted. By the end of the year, the exchange rate had shifted to $1 to GH¢10.
Any resulting exchange differences are accounted for in accordance with IPSAS 4:
The Effects of Changes in Foreign Exchange Rates, and are classified as other
expenses.

iii) Domestic debt holders have forgiven GH¢30,000,000,000 of Ghana’s debt in

response to the country's severe economic conditions. This debt cancellation should
be accounted for in accordance with IPSAS 23: Revenue from Non-Exchange
Transactions and classified as other revenue for the government.

iv) Included in office expenses is an inventory of office consumables with a cost of

GH¢2,000,000,000, a replacement cost of GH¢1,800,000,000, and a net realizable
value of GH¢2,100,000,000. The inventory is accounted for in accordance with
IPSAS 12: Inventories.

v) As part of the Free Senior High School Programme, the government owes
GH¢10,000,000,000 in allowances to teachers, with a commitment to settle this
amount by the end of the first quarter of 2024. Additionally, GH¢3,000,000,000 in
salary advances have been provided to staff, and these advances are included within
the established post salaries.

vi) Tax revenues amounting to GH¢6,000,000,000 remain uncollected. In line with

government policy, an allowance of 5% is made for uncollectible taxes during the
year.

vii) The government’s policy is to charge depreciation on fixed assets and amortization
of intangible assets using the straight-line method. The applicable rates are as
follows: Motor Vehicles - 5 years
Equipment - 4 years
Furniture and fixtures - 5 years
Integrated platform – 10 years
Required:
Prepare for the Consolidated Fund of Ghana:
i) A Statement of Financial Position as at 31st December 2023;
ii) A Statement of Financial Performance for the year ended 31st December 2023;
iii) A Statement of Changes in Net Asset for the year ended 31st December 2023;
iv) Notes to the financial statement.
(16 marks)

b) Discuss TWO circumstances under which a controlling entity is not required to prepare a
consolidated financial statements under IPSAS35: Consolidated Financial Statements.
(4 marks)
(Total: 20 marks)
QUESTION 2
a) A hospital has purchased the following items for stock during the year:
GHc
Medical consumable 10,000
Office consumables 5,000
Food stuff 20,000

In addition, pharmaceuticals worth fair value of GHc15,000 was donated to the hospital
by Happy Aid, a non-governmental agency. In a press statement Happy Aid indicated
that the donation to the hospital cost GHc25,000.

On 31st December 2023, the following inventories were recorded:

Inventory type Cost Current Net selling Fair value
GHC replacement cost price
GHC GHC GHC
Medical 2000 2,100 - 2,600
consumable
Office 1,000 900 700 -
consumable
Food stuff 4,000 3,900 4,200 -
Pharmaceutical 5,000 5,100 4,800 3,500

Required:
Explain how inventory should be accounted for and show the extracts of the relevant
financial statements. (6 marks)

b) The government spent GHc100,000,000 in construction of the X-corridor road. This

was financed 40% from tax revenues and 60% from d borrowed. During the year,
government borrowed a total of G100,000,000 from two sources at the weighted
average cost of capital of 10%. Due to a month delay is the architectural design, the
portion of the debt demarked for the road was invested and earned interest of
 GHc500,000 for the month. The projects will last for 3 years, starting from January 1
2024 to December 31st 2026.
Required:
Compute the borrowing cost to the capitalised as part of the road and show extract of
the financial statements for the year ended of as of the year ended 31st December 2024.
(5 marks)

c) The Ghana Tourism Boad has successfully acquired a new technology that will
transform the landscape of business registration in Ghana and make Ghana a preferred
destination for business. The cost of the technology is GHc375 million. Professional
advisers charged GHc5 million for providing advice in the acquisition of the technology
which was estimated to have a useful life of 20 years effective from 1 January 2020.
Delay for the construction of the supporting infrastructure meant that the new
technology could not be deployed until 1 January 2021.

Required
Show extracts of the financial statements of the Ghana Tourism Board for the years
ending 31st December, 2020 and 2021. (5 marks)

d) Adentan Municipal Assembly leased Earth Moving Equipment for reshaping all the
road networks in the municipality. The Assemblies agrees to GHc2,000,000 per annum
at the end of each year for four years, starting from 1st January 2022.The asset is current
sold at the market at the cash price of GHc5, 710,000. The implicit interest rate in the
lease is 15% and the useful life of the equipment is 10 years.

Required:
Show how the Assembly would account for the lease transaction in the financial
statements for 2022 (4 marks)
Question 3
a) Public financial management is critical to the development of any nation. Thus,
government invest a lot of resources into improving the public financial management
of the country. However, experts believe the investment is not yielding much result due
to lack of appreciation of the phases of public management cycle of the country.

Required:
i) Explain two benefits a nation will derive from effective public financial management
system. (2 marks)
ii) Explain the five phases of the public financial management cycle of Ghana and explain
one major challenge of each phase you have identified. (8 marks)

b) In building an open and orderly public financial management system, attention should
be paid to its pillars. You have been appointed as consultant of the World Bank
 responsible for establishing an effective public financial management in Ghana based
on the Public Expenditure and Financial Accountability Framework.

Required:
Explain two policy interventions each you would make to improve any five pillars of
public financial management in Ghana. (10 marks)

Question 4
Below is the statement of financial position of the Consolidated Fund
Consolidated Fund of Ghana
Statement of Financial Position as at 31 December,
2021 2020
ASSETS GH¢’million GH¢’million GH¢’million GH¢’million
Non-Current Asset
Property, Plant and 88,191 78,220
Equipment
Financial Assets 27,124 27,289
Total Non-Current Assets 115,315 105,509
Current Asset
Inventory 3,207 1,903
Cash and Cash Equivalents 16,106 14,007
19,313 15,910
Current liabilities
Payables 12,154 4,581
Deposits and Trust Monies 11,054 10,909
Total Current Liabilities 23,208 (3,895) 15,490 420
Net Asset 111,420 105,929

FINANCED BY:
Accumulated Fund 20,481 19,312
Non-Current Liabilities
Domestic Debt 45,924 44,791
External Debt 45,015 41,826
111,420 105,929

Required:

i) Prepare Common Size Statement of Financial Position for the year ended 31 December
2021and 2020. (10 marks)

ii) Based on the Common Size Statement of Financial Position prepared in i) above, write a
report analysing the financial position in and discuss two limitation of the technique you
have adopted for your analysis. (10 marks)
Question 5
a) Discuss any three measurement basis of liability. (6 marks)

b) Outline four functions of the Office of the Special Prosecutor ( 4 marks)

c) You are appointed the technical advisor on IPSAS implementation in Ghana and your
initial assessment reveals that lack of effective stakeholder analysis is the cause of the
poor status of IPSAS implementation in Ghana

Required:
Explain three benefits of stakeholder analysis to IPSAS implementation in Ghana.
(6 marks)

d) Accountants in the public sector are found between the “devil and the blue deep see”
because of the interplay of politics and professional ethics. However, the puzzle
becomes easier when the accountant adopts the principles of public life.

Required:
As a public sector accountant, discuss two principles of public life you would endear
yourself to. (4 marks)

End