Nyamekye Limited is a trading company making up its accounts regularly to 31 December each year. At 1 January 2017 the following balances existed in the records of Nyamekye Limited GHȼ000 Freehold land -cost 1,000 Freehold buildings- cost 500 Accumulated depreciation provided on building to 31/12/2016 210 Office equipment- cost 40 Accumulated depreciation provided on office equipment to 31/12/2016 24 The company’s depreciation policies are as follows: Freehold land- no depreciation Freehold buildings- depreciation provided at 2% per annum on cost on the straight line basis. Office equipment- depreciation provided at 12½% per annum on the straight line basis. 6 A full year’s depreciation is charged in the year of acquisition of all assets and none in the year of disposal. During the two years to 31 December 2018 the following transactions took place. (1) Year ended 31 December 2017 (i) 10 June: Office equipment purchased for GHȼ16,000. This equipment was to replace some old items which were given in part exchange. Their agreed part exchange value was GHȼ4,000. They had originally cost GHȼ8,000 and their carrying amount was GHȼ1,000. The company paid the balance of GHȼ12,000 in cash. (ii) 8 October: An extension was made to the building at a cost of GHȼ50,000. (2) Year ended 31 December 2018 (i) Office equipment which had cost GHȼ8,000 and with a carrying amount of GHȼ2,000 was sold for GHȼ3,000. In preparing the financial statements at 31 December 2018 it was decided to revalue land upwards by GHȼ200,000 to reflect a recent survey. Required Write up the necessary ledger accounts to record these transactions for the two years ended 31 December 2018. Cost and accumulated depreciation accounts are required. (You should not combine cost and depreciation in a single account).
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Nyamekye Limited is a trading company making up its accounts regularly to 31 December each year.
At 1 January 2017 the following balances existed in the records of Nyamekye Limited
GHȼ000
Freehold land -cost
1,000
Freehold buildings- cost
500
210
Office equipment- cost
40
Accumulated depreciation provided on office equipment to 31/12/2016
24
The company’s depreciation policies are as follows:
Freehold land- no depreciation
Freehold buildings- depreciation provided at 2% per annum on cost on the straight line basis.
Office equipment- depreciation provided at 12½% per annum on the straight line basis.
6
A full year’s depreciation is charged in the year of acquisition of all assets and none in the year of disposal. During the two years to 31 December 2018 the following transactions took place.
(1) Year ended 31 December 2017
(i) 10 June: Office equipment purchased for GHȼ16,000. This equipment was to replace some old items which were given in part exchange. Their agreed part exchange value was GHȼ4,000. They had originally cost GHȼ8,000 and their carrying amount was GHȼ1,000. The company paid the balance of GHȼ12,000 in cash.
(ii) 8 October: An extension was made to the building at a cost of GHȼ50,000.
(2) Year ended 31 December 2018
(i) Office equipment which had cost GHȼ8,000 and with a carrying amount of GHȼ2,000 was sold for GHȼ3,000.
In preparing the financial statements at 31 December 2018 it was decided to revalue land upwards by GHȼ200,000 to reflect a recent survey.
Required
Write up the necessary ledger accounts to record these transactions for the two years ended 31 December 2018. Cost and accumulated depreciation accounts are required.
(You should not combine cost and depreciation in a single account).
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