The trial balance of beta limited as as 31st December,2019 is as follow: Debit Credit GH¢ GH¢ Sales and Purchases 20,000 50,000 Inventory 8,000 Distribution costs 8,000 Administration expenses 15,550 Trade Receivables and Payables 12,400 20,000 Cash and Bank 8,100 Ordinary Shares(Gh¢ 0.50) 52,000 Revaluation reserves 8,000 10% Redeemable Preference shares (GH¢ 1) 9,000 10% Loan Notes 8,000 Property, Plant and Equipment 75,000 Investment Property 10,000 Rental income from investment property 1,000 Retained profits as 1st January, 2019 3,000 Loan note interest 400 Preference dividend 450 Interim ordinary dividend 1,600 Corperate Tax 500 Suspense 8,000 Total 159500 159500 The following is to be taken into account: 1. The inventory at cost on 31st December, 2019 was GH¢14,500and the net realizable value was GH¢12,000. 2. The Property, Plant and Equipment include a building whose net book value is currently GH¢5,000 is to be revalued to GH¢9,000. 3. The balance on the corporation tax account represents an overprovision of tax for the previous year. Tax for the current year is estimated at GH¢3,000. 4. The directors have decided to make an allowance for doubtful debts of 2% of trade receivables. This amount should be charged to administrative expense. 5. Depreciation charges for the year ended 31st December 2019 amounted to GH¢800. This figure should be included in the administrative expense. 6. The investment property was acquired in January, 2019. The rental income from the investment property GH¢1,000 relates to the two-year period ending 31st December, 2020. The company adopts fair value model in subsequent measurement of the investment property and fair value assessment at 31st December, 2019 puts the valuation at GH¢15,000. 7. The suspense account represents the corresponding credit for cash received for a fully subscribed issue of ordinary shares made on 30th December, 2019. The terms of the share issue was 4,000 new ordinary shares were issued at GH¢2.00 each. Required: In compliance with the Companies’ Code provisions and in conformity with relevant International Financial Reporting Standards, prepare for publication; (i) The statement of profit or loss and other comprehensive income for the year ended 31st December, 2019. (ii) The statement of changes in equity for the year ended 31st December, 2019. (iii) The statement of financial position as at 31st December, 2019.
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.
Assignment 1
The
Debit Credit
GH¢ GH¢
Sales and Purchases 20,000 50,000
Inventory 8,000
Distribution costs 8,000
Administration expenses 15,550
Trade Receivables and Payables 12,400 20,000
Cash and Bank 8,100
Ordinary Shares(Gh¢ 0.50) 52,000
Revaluation reserves 8,000
10% Redeemable
10% Loan Notes 8,000
Property, Plant and Equipment 75,000
Investment Property 10,000
Rental income from investment property 1,000
Retained profits as 1st January, 2019 3,000
Loan note interest 400
Preference dividend 450
Interim ordinary dividend 1,600
Corperate Tax 500
Suspense 8,000
Total 159500 159500
The following is to be taken into account:
1. The inventory at cost on 31st December, 2019 was GH¢14,500and the net realizable value was GH¢12,000.
2. The Property, Plant and Equipment include a building whose net book value is currently GH¢5,000 is to be revalued to GH¢9,000.
3. The balance on the corporation tax account represents an overprovision of tax for the previous year. Tax for the current year is estimated at GH¢3,000.
4. The directors have decided to make an allowance for doubtful debts of 2% of trade receivables. This amount should be charged to administrative expense.
5.
6. The investment property was acquired in January, 2019. The rental income from the investment property GH¢1,000 relates to the two-year period ending 31st December, 2020. The company adopts fair value model in subsequent measurement of the investment property and fair value assessment at 31st December, 2019 puts the valuation at GH¢15,000.
7. The suspense account represents the corresponding credit for cash received for a fully subscribed issue of ordinary shares made on 30th December, 2019. The terms of the share issue was 4,000 new ordinary shares were issued at GH¢2.00 each.
Required:
In compliance with the Companies’ Code provisions and in conformity with relevant International Financial Reporting Standards, prepare for publication;
(i) The statement of profit or loss and other comprehensive income for the year ended 31st December, 2019.
(ii) The statement of changes in equity for the year ended 31st December, 2019.
(iii) The statement of financial position as at 31st December, 2019.
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