Professional Documents
Culture Documents
Regulatory Framework
1. Companies Code, 1963 Act 179
2. Accounting Standards
a. IAS 1 - Presentation of Financial Statements
b. IAS 8 - Accounting policies, change in accounting estimates and errors
c. IAS 10 - Events occurring after the balance sheet date
d. IAS 34 - Interim Financial Statements
Overall Considerations
Going concern
Financial statements are required to be prepared on a going concern basis and will continue in operation
for the foreseeable future (unless entity is in liquidation or has ceased trading or there is an indication
that the entity is not a going concern).
Presentation consistency
An entity is required to retain presentation and classification from one period to the next.
Offsetting
Offsetting of assets and liabilities or income and expenses is not permitted unless required by other IFRSs.
Comparative information
At least 1 year of comparative information is required. The disclosure is require both on the face of the
financial statements and in the notes, unless another Standard requires otherwise.
State of Profit or Loss and Other Comprehensive Income for the year
ended 31st Dec 20XX
GH¢
Revenue XXX
Cost of sales (XXX)
Gross profit XXX
Other income XXX
Selling and Distribution costs (XXX)
Administrative expenses (XXX)
Other expenses (XXX)
Finance costs (XXX)
Profit before tax XXX
Income tax expense (XXX)
Profit for the year from continuing operations XXX
Loss for the year from discontinued operations (XXX)
PROFIT FOR THE YEAR XXX
Non-current assets
Property, plant and equipment XXX
Investment property XXX
Intangible assets XXX
Financial assets XXX
Biological assets XXX
Deferred tax assets XXX
Total non-current assets XXX
Current assets
Inventories XXX
Trade and other receivables XXX
Current tax assets XXX
Cash and cash equivalents XXX
Total current assets XXX
Non-current liabilities
Financial liabilities XXX
Deferred tax liabilities XXX
Total non-current liabilities XXX
Current liabilities
Trade and other payables XXX
Current tax liabilities XXX
Provisions XXX
Deferred revenue XXX
Total current liabilities XXX
ILLUSTRATION
Asetrapa Ltd’s trial balance from the general ledger at 31st December, 2012 showed the following
balances:
GH¢'m GH¢'m
Revenue 2,648.00
Loan note interest paid 3.00
Purchases 1,669.00
Distribution cost 514.00
Administrative expenses 345.00
Interim dividend paid 6.00
Required:
(a) Prepare Statement of profit or loss and other comprehensive income for the year ended 31st
December 2012;
(b) Prepare Statement of changes in equity for the year ended 31st December 2012
(c) Prepare Statement of financial position as at 31st December 2012
(Work to nearest 1 million Ghana Cedis) (20 marks)
Solution
Asetrapa Ltd
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2012
GH¢'m
Sales Revenue 2,648.00
Cost of sales (1,756.00)
Gross Profit 892.00
Distribution cost (514.00)
Admin expenses [345+18( depreciation of buildings)] (363.00)
Loss on disposal of PPE [12-7] (5.00)
Net Operating Profit 10.00
Other Income: Rental Income 48.00
Fair valuation gain on Investment Property 38.00
Profit before interest and tax [PBIT] 96.00
Finance costs [Interest on loan note] (6.00)
Profit before tax 90.00
Taxation (27.00)
Profit for the year 63.00
Other comprehensive income:
Revaluation surplus on land and buildings 484.00
Total comprehensive income 547.00
Workings
a. Cost of Sales
GH¢’m
Opening inventory 444.00
Purchases 1,669.00
Closing inventory (381.00)
Cost of goods sold 1,732.00
Depreciation of plant 24.00
Cost of sales 1,756.00
The entry is made to smooth the retained earnings figure and to facilitate comparison year by year..
= ([380-120]/50) – ([800-100]/40) = 13
Depreciation
Balance 1/1/12 64.00 126.00 190.00
Depreciation Adjustment (64.00) (64.00)
Disposal (3.00) (3.00)
Charger for the year 18.00 24.00 42.00
- 18.00 147.00 165.00
e. Note: The plant referred to in note (c) is not impaired. Please check below:
Recoverable amount is defined as the higher of the asset’s fair value less costs of disposal and its
value in use.
Fair value less costs of disposal is the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date, less costs of disposal.
Value in use requires management to estimate the future pre-tax cash flows to be derived from the
asset and discount them using a pre-tax market rate that reflects current assessments of the time
value of money and the risks specific to the asset.
GH¢
Carrying value at 31 December 2011 22.00
Depreciation for 2012 [20%of 22] 4.40
Carrying value at 31 December 2012 17.60
f. Dividend – Only dividend paid is considered in the financial statement, however, if an entity declares
dividends after the reporting period, the entity shall not recognise those dividends as a liability at the
end of the reporting period. That is a non-adjusting event.
(May 2011)
The trial balance of Anidaso Company Ltd (ACL) as at 31 December 2010 is as follows:
GH¢’000 GH¢’000
Sales Revenue (note ii) 12,420.00
Income from investment property 192.00
Proceeds from sale of motor vehicles (note vi) 32.00
Debenture interest paid 60.00
Purchases (note ii) 7,728.00
VAT Service 560.00
Provision for deferred tax (1 January 2010) (note iv) 10.00
Administration and Distribution costs 3,436.00
Interim dividend paid (note v) 24.00
Inventories at 1 January 2010 1,776.00
Trade receivables 2,180.00
Trade payables 1,678.00
Cash and cash equivalents 112.00
Ordinary shares (issued at GHS1 per share) 400.00
Income surplus (1 January 2010) (note vii) 4,480.00
20% Debenture Stocks (2009-2013) 600.00
Buildings: Cost (note iii) 1,520.00
Acc depreciation at 1 January 2010 304.00
Motor Vehicles: Cost (note vi) 1,032.00
Acc. depreciation at 1 Jan 2010 504.00
Investment Property at (1 January 2010) (note viii) 2,192.00
20,620.00 20,620.00
i) Closing inventories at 31 December 2010 were valued at cost as GH¢1,624,000.However, some slow
moving products included in the inventory at a cost of GH¢40,000 had estimated realizable value
GH¢16,000.
ii) The sales figure and the purchases figure in the trial balance included output VAT and input VAT
respectively at the standard rate of 15%. The VAT figure in the trial balance represents the total net
payments made to VAT Service during the year.
iv) The income tax liability for the year is estimated at GH¢100,000. The deferred tax provision at 31
December 2010 is to be adjusted to GH¢30,000 in line with movement in the temporary timing
differences.
v) An interim dividend of 6 pesewas per share was paid on 30 June 2010. No further dividend is
proposed at the end of the year.
vi) In January 2010, Anidaso Ltd disposed of some old motor vehicles for GH¢32,000. The vehicles had
cost GH¢40,000 and had accumulated depreciation brought forward at 1 January 2010 of
GH¢32,000. There were no other additions or disposal to motor vehicles in the year. Motor vehicles
are depreciated at 25% per annum on cost.
Depreciation on buildings and motor vehicles are charged to selling and administration expenses.
vii) On 1 October 2010, Anidaso Ltd made a bonus issue of 1 share for any 4 shares held, capitalizing its
income surplus. This transaction had not yet been accounted for. The fair value of the company's
shares on the date of the bonus issue was GH¢5 each.
viii) Anidaso Ltd uses the fair value model of IAS 40. The fair value of the investment property at 31
December 2010 was GH¢2,320,000
Required:
a) Prepare a statement of comprehensive income and statement of changes in equity for Anidaso
Limited for the year ended 31 December 2010. (10 marks)
c) State any two (2) bases of preparation and three (3) accounting policies applied in preparing the
financial statements. (5 marks)
(25 marks)
Solution
Workings
a) Sales = GH¢12,420,000 X 100/115 = GH¢10,800,000
f) PPE Schedule
Building Motor Vehicle Total
Accumulated Depreciation
Balance as at 1 Dec 2010 304 504 808
Charge for the year 60 248 308
Revaluation adjustment (304) (304)
Disposal ____ (32) (32)
Balance as at 31 Dec 2010 60 720 780
g) VAT Services
Output VAT 1,620
Input VAT (1,008)
Balance (560)
52
Non-Current Assets
Property, Plant and Equipment 2,612.00
Investment Property 2,320.00
4,932.00
Current Assets
Inventories 1,600.00
Trade Receivables 2,180.00
Cash and cash receivables 112.00
3,892.00
Equity
Stated capital 900.00
Revaluation surplus 1,184.00
Income Surplus 4,220.00
6,304.00
Non-Current Liabilities
20% Debentures 600.00
Deferred tax provision 30.00
630.00
Current Liabilities
Trade payables 1,678.00
VAT payable 52.00
Loan interest payable 60.00
Tax 100.00
1,890.00
a) Statement of Compliance
The financial statements of Anidaso Ltd have been prepared in accordance with International
Financial Reporting Standards (IFRS) issued by IASB and adopted by ICAG.
b) Basis of Measurement
The financial statements have been prepared under the historical cost convention as modified to
include the fair valuation of certain items of PPE and investment property.
a) Depreciation
Properties, plant and equipment are depreciated over their estimated useful lives. The rates
applicable are as follows:
Buildings 2% on cost
Motor vehicles 25% on cost
b) Deferred Tax
The company accounts for deferred tax under the liability method as applied to all temporary
timing differences
c) Inventory
Inventories are valued on a ‘first in first out’ basis at the lower of cost and net realizable value.
Cost includes all direct expenses incurred in bringing the stocks to their current state under
normal operating conditions.
d) Trade receivables
Debtors are stated after making provision for debts considered to be doubtful
e) Investment Properties
The company adopts the fair value model in measuring the value of investment properties
subsequent to initial recognition and any fair valuation surplus or deficit is dealt with in the
Statement of Comprehensive Income.
f) Revenue
Sales revenue is stated net of discounts, allowances and Value Added Tax
State of Profit or Loss and Other Comprehensive Income for the year ended 31st Dec 20XX
Notes GH¢
Interest Income XXX
Interest Expense (XXX)
Net Interest Income XXX
Shareholders' Fund
Stated Capital XXX
Income Surplus XXX
Capital Surplus XXX
Share Deals XXX
Statutory Reserve Funds XXX
Other Reserve XXX
XXX
ILLUSTRATION
Additional Information
i. Increase allowance for doubtful debts to GH¢851,700.00
iv. Transfer 12½ of net profit after tax to Statutory Reserve Fund.
v. The corporate tax provision made in the 2010 financial statements was GH¢200,000.00. This was
agreed with Ghana Revenue Authority at GH¢220,000.00 and fully settled in March 2011. Interim tax
for 2011 based on self-assessment was settled at GH¢160,000.00 Corporate tax applicable to the bank
is 25%.
vi. Directors have agreed to pay end-of-year bonus to staff estimated at GH¢72,000.00. This is yet to be
paid.
vii. The authorised capital is 10,000 equity shares of no par value out of which 6,000 shares have been
issued and fully paid.
Required.
a) Statement of Comprehensive Income for the year ended 31st December, 2011.
b) Statement of changes in equity for the year ended 31st December, 2011.
c) Statement of financial position as at 31st December, 2011
Notes are not required but show all workings. (20 marks)
Solution
Statement of Changes in Equity for the year ended 31st December, 2011
Stated Share Capital Income Statutory
Capital Deals Surplus Surplus Res. Fund Total
GH¢'000 GH¢'000 GH¢'000 GH¢'000 GH¢'000 GH¢'000
Balance Bfwd 4,823.00 34.00 410.00 1,146.00 648.00 7,061.00
Transfer Income Statement 3,069.00 3,071.00
Transfer Statutory Reserve (384.00) 384.00 -
Balance Cfwd 4,823.00 34.00 410.00 3,831.00 1,032.00 10,130.00
Liabilities
Customers Deposit 34,168.00
Workings
GH¢'000 GH¢'000
1 Interest Income:
Interest from Short Term Funds 243.00 2 Other Income:
Interest on Gov't Securities 7,137.00 Miscellaneous income 2,328.00
Interest on Loans & Advances 373.00 Dividends from investment 55.00
7,753.00 2,383.00
8 Other Liabilities:
Sundry Payables 763.00
bonus 72.00
835.00
Depreciation
Bal b/f 83.00 163.00 133.00 182.00 561.00
Charge for the year 39.00 118.00 131.00 110.00 398.00
- 122.00 281.00 264.00 292.00 959.00
Taxation Schedule
Balance Charge Balance
at for the at
01/01 year Payment 31/12
GH¢'000 GH¢'000 GH¢'000 GH¢'000
For 2010 200.00 (220.00) (20.00)
For 2011 1,050.00 (160.00) 890.00
200.00 1,050.00 (380.00) 870.00