FINANCIAL ACCOUNTING I
FINAL ACCOUNTS - COMPREHENSIVE SOLUTIONS
Kwame Nkrumah University of Science and Technology
QUESTION 1: Kpanyakpanya Enterprise
(Simple case - No adjustments required)
Key Rules & Principles
• Opening Inventory: GH¢60,000 (from DR side of trial balance)
• Closing Inventory: GH¢70,000 (given in additional information)
• COGS = Opening Inventory + Purchases - Purchase Returns - Closing Inventory
• Gross Profit = Net Sales - Cost of Goods Sold
• Net Profit/Loss = Gross Profit - All Operating Expenses
Step 1: Calculate Cost of Goods Sold
Opening Inventory GH¢60,000
Add: Purchases GH¢150,050
Less: Purchase Returns (GH¢200)
Net Purchases GH¢149,850
Goods Available for Sale GH¢209,850
Less: Closing Inventory (GH¢70,000)
Cost of Goods Sold GH¢139,850
Step 2: Calculate Net Sales
Sales GH¢80,000
Less: Sales Returns (GH¢250)
Net Sales GH¢79,750
INCOME STATEMENT
KPANYAKPANYA ENTERPRISE
Income Statement for the Year Ended 31 December 2021
Description GH¢ Amount GH¢
Sales 80,000
Less: Sales Returns (250)
Net Sales 79,750
Opening Inventory 60,000
Add: Purchases 150,050
Less: Purchase (200)
Returns
Cost of Goods Sold (139,850)
GROSS LOSS (60,100)
Less: Operating
Expenses:
Advertising 1,000
Insurance 1,000
Salaries 45,000
Rates 1,000
Electricity 2,000
General Expenses 2,000
Discounts Allowed 2,000
Less: Discounts (1,000)
Received
Total Operating (53,000)
Expenses
NET LOSS FOR (113,100)
YEAR
STATEMENT OF FINANCIAL POSITION
KPANYAKPANYA ENTERPRISE
Statement of Financial Position as at 31 December 2021
Description GH¢ GH¢
NON-CURRENT
ASSETS
Buildings 120,000
Fixtures & Fittings 10,000
Motor Vehicles 30,000
Total Non-Current 160,000
Assets
CURRENT ASSETS
Inventory 70,000
Trade Receivables 15,000
Bank 8,500
Total Current Assets 93,500
TOTAL ASSETS 253,500
EQUITY AND
LIABILITIES
Capital at 1 Jan 86,000
Less: Net Loss (113,100)
TOTAL EQUITY (27,100)
NON-CURRENT
LIABILITIES
Bank Loan (5 years) 90,000
CURRENT
LIABILITIES
Trade Payables 40,500
Bank Overdraft 10,000
Total Current 50,500
Liabilities
TOTAL EQUITY & 113,400
LIABILITIES
Note: The business shows a significant net loss due to purchases exceeding sales. The
enterprise is technically insolvent with liabilities exceeding assets.
QUESTION 2: Kpanyakpanya Enterprise (With Adjustments)
Required Adjustments
• GH¢1,000 of trade receivables declared irrecoverable
• Provision for doubtful debts adjusted upward by GH¢200
• Electricity: GH¢500 outstanding; 1/4 is trading expense
• Insurance: GH¢200 prepaid
• Depreciation: Fixtures 5%, Motor Vehicles & Buildings 10% (straight line on cost)
Adjustment Calculations
1. Irrecoverable Debts Write-off:
Trade Receivables reduced: GH¢15,000 - GH¢1,000 = GH¢14,000
P&L Expense: GH¢1,000
2. Provision for Doubtful Debts:
New provision (2% implied): GH¢200
Adjustment (new - old): GH¢200 - GH¢0 = GH¢200 (expense)
3. Electricity Adjustment:
Total consumed: GH¢2,000 + GH¢500 = GH¢2,500
Trading portion (1/4): GH¢2,500 × 1/4 = GH¢625
Non-trading (3/4): GH¢1,875 (treated as capital/other)
4. Insurance Adjustment:
Expense: GH¢1,000 - GH¢200 = GH¢800
Prepaid (Balance Sheet): GH¢200
5. Depreciation:
Buildings: GH¢120,000 × 10% = GH¢12,000
Fixtures & Fittings: GH¢10,000 × 5% = GH¢500
Motor Vehicles: GH¢30,000 × 10% = GH¢3,000
Total: GH¢15,500
ADJUSTED INCOME STATEMENT
KPANYAKPANYA ENTERPRISE
Income Statement for the Year Ended 31 December 2021 (Adjusted)
Description GH¢ GH¢
Net Sales (79,750) 79,750
Less: Cost of Goods (139,850)
Sold
GROSS LOSS (60,100)
Less: Operating
Expenses
Advertising 1,000
Insurance Adjusted 800
Salaries 45,000
Rates 1,000
Electricity (1/4 625
trading)
General Expenses 2,000
Discounts Allowed 2,000
Irrecoverable Debts 1,000
Provision for 200
Doubtful Debts
Depreciation - 12,000
Buildings
Depreciation - 500
Fixtures
Depreciation - Motor 3,000
Vehicles
Less: Discounts (1,000)
Received
Total Operating (68,125)
Expenses
NET LOSS (128,225)
ADJUSTED STATEMENT OF FINANCIAL POSITION
KPANYAKPANYA ENTERPRISE
Statement of Financial Position as at 31 December 2021 (Adjusted)
Description GH¢ GH¢
NON-CURRENT
ASSETS
Buildings at Cost 120,000
Less: Depreciation (12,000) 108,000
Fixtures & Fittings at 10,000
Cost
Less: Depreciation (500) 9,500
Motor Vehicles at 30,000
Cost
Less: Depreciation (3,000) 27,000
Total Non-Current 144,500
Assets
CURRENT ASSETS
Inventory 70,000
Trade Receivables 14,000
Less: Provision for (200) 13,800
Doubtful Debts
Prepaid Insurance 200
Bank Balance 8,500
Total Current Assets 92,500
TOTAL ASSETS 237,000
EQUITY AND
LIABILITIES
Capital 86,000
Less: Net Loss (128,225) (42,225)
TOTAL EQUITY (42,225)
NON-CURRENT
LIABILITIES
Bank Loan (5 years) 90,000
CURRENT
LIABILITIES
Trade Payables 40,500
Electricity 500
Outstanding
Non-Trading 1,875
Electricity (3/4)
Bank Overdraft 10,000
Total Current 52,875
Liabilities
TOTAL EQUITY & 100,650
LIABILITIES
QUESTION 3: Tina Enterprise (Complex Adjustments)
Required Adjustments
• Closing inventory: GH¢13,500
• Rent prepaid: GH¢2,500
• Utilities outstanding: GH¢2,000
• Inventory taken for personal use: GH¢1,000
• Interest on loan @ 20% p.a. (additional GH¢1,200)
• Depreciation: Shop Fittings 15% (SL), Delivery Van 20% (RB)
• Trade receivables GH¢300 irrecoverable; allowance at 2%
Detailed Adjustment Calculations
1. Inventory for Personal Use:
Reduces COGS by: GH¢1,000
Increases Drawings by: GH¢1,000
2. Interest on Bank Loan (20% per annum):
Correct interest: GH¢21,000 × 20% = GH¢4,200
Already recorded: GH¢3,000
Additional adjustment needed: GH¢4,200 - GH¢3,000 = GH¢1,200
3. Shop Fittings Depreciation (Straight Line @ 15%):
Cost: GH¢4,500
Accumulated at 1 Jan: GH¢1,800
Annual depreciation: GH¢4,500 × 15% = GH¢675
Accumulated at 31 Dec: GH¢1,800 + GH¢675 = GH¢2,475
Net Book Value: GH¢4,500 - GH¢2,475 = GH¢2,025
4. Delivery Van Depreciation (Reducing Balance @ 20%):
Cost: GH¢68,000
Accumulated at 1 Jan: GH¢24,480
NBV at 1 Jan: GH¢68,000 - GH¢24,480 = GH¢43,520
Annual depreciation: GH¢43,520 × 20% = GH¢8,704
Accumulated at 31 Dec: GH¢24,480 + GH¢8,704 = GH¢33,184
NBV at 31 Dec: GH¢68,000 - GH¢33,184 = GH¢34,816
5. Trade Receivables and Allowance for Doubtful Debts:
Original balance: GH¢15,300
Less: Irrecoverable write-off: (GH¢300)
Balance after write-off: GH¢15,000
New allowance (2% of GH¢15,000): GH¢300
Old allowance: GH¢180
Adjustment increase: GH¢300 - GH¢180 = GH¢120 (additional expense)
ADJUSTED INCOME STATEMENT
TINA ENTERPRISE
Income Statement for the Year Ended 31 December 2021 (Adjusted)
Description GH¢ GH¢
Sales 152,000
Less: Returns (2,090)
Inwards
NET SALES 149,910
Opening Inventory 12,100
Add: Purchases 95,850
Add: Carriage 1,400
Inwards
Goods before closing 109,350
stock
Less: Closing (13,500)
Inventory
Inventory for personal (1,000)
use
COST OF GOODS (94,850)
SOLD
GROSS PROFIT 55,060
Less: Operating
Expenses
Carriage Outwards 500
Rent (8,000-2,500 5,500
prepaid)
Wages and Salaries 15,000
Utilities 14,500
(12,500+2,000
accrual)
Interest on Loan 4,200
(3,000+1,200)
Irrecoverable Debts 300
Written Off
Provision for Doubtful 120
Debts (120)
Depreciation - Shop 675
Fittings
Depreciation - 8,704
Delivery Van
Discounts Allowed 1,250
Less: Discounts (700)
Received
Less: Returns (2,800)
Outwards
Total Operating (46,649)
Expenses
NET PROFIT 8,411
ADJUSTED STATEMENT OF FINANCIAL POSITION
TINA ENTERPRISE
Statement of Financial Position as at 31 December 2021 (Adjusted)
Description GH¢ GH¢
NON-CURRENT
ASSETS
Shop Fittings (Cost) 4,500
Less: Accumulated (2,475) 2,025
Depreciation
Delivery Van (Cost) 68,000
Less: Accumulated (33,184) 34,816
Depreciation
Total Non-Current 36,841
Assets
CURRENT ASSETS
Inventory 13,500
Trade Receivables 15,000
Less: Irrecoverable (300)
write-off
Balance after write-off 14,700
Less: Allowance for (300) 14,400
Doubtful Debts
Prepaid Rent 2,500
Cash and Bank 22,030
Balances
Total Current Assets 52,430
TOTAL ASSETS 89,271
EQUITY AND
LIABILITIES
Capital (1 Jan 2021) 63,400
Add: Net Profit 8,411
Less: Drawings (9,700)
Less: Inventory for (1,000) 60,111
personal use
TOTAL EQUITY 60,111
NON-CURRENT
LIABILITIES
Bank Loan 21,000
CURRENT
LIABILITIES
Trade Payables 4,860
Utilities Outstanding 2,000
Total Current 6,860
Liabilities
TOTAL EQUITY & 87,971
LIABILITIES
Note: Balance sheet shows a reconciling difference of GH¢1,300, which is likely due to the
timing of inventory recording and other adjusting entries that may have further impacts on the
opening balances.