Question

A

The agreement of the trial balance totals is an indication that all transactions have been properly

recorded in the books of accounts. Do you agree with this statement?

Required:

Outline 4 reasons to justify your response.

B

ABC Ltd started business on 1/1/14, and its financial year ends on 31st December each year.

The following information was extracted from the company’s asset register.

DATE TRANSACTION AMOUNT (GHS)

2016 January, 1 Purchased one motor van 58,500

2016 September, 1 Purchased two motor vans 78,000 each

2018 March, 1 Purchased one motor van 45,200

2018 May, 2 Sold the motor van purchased

in January,2016

18,240

2019 April 1 Purchased three motor vans 62,000 each

Additional Information

The company’s policy is to depreciate Motor vehicles at a rate of 20% per annum on cost.

You are required to prepare:

i) The Motor vehicles account (2016-2019)

ii) Provision for depreciation account (2016-2019)

iii) Disposal account for 2018

iv) Statement of profit or loss extract for 2018 and 2019

v) Statement of financial position extract for 2018 and 2019

Answer 1

A. No, I not agree with this statement. Reason being:

1. Any omission of full entry would also results in agreement of totals in trial balance, Because neither debit nor credit effect would be given as the transaction is omitted to record

2. Any debit or credit or both entry made to incorrect account which also results in agreement of totals in trial balance. This will show incorrect balances in individual account.

3. Any incorrect amount posted in both debit and credit column will also results in agreement of totals in trial balance. This will show incorrect balances in individual account.

4. Any adjustment entry or suspense entry or fictisous entry made to tallied the trial balance can also be made for agreement of totals in trial balance. This could not be identified from the trial balance.

B.

(i)

Motor Vechiles Account
Date	Particulars	Debit	Date	Particulars	Debit
2016, Jan 1	Bank	58500
2016, Sep 1		156000
			2016, Dec 31	Balance C/F	214500
2017, Jan 1	Balance B/F	214500
			2017, Dec 31	Balance C/F	214500
2018, Jan 1	Balance B/F	214500	2018, May 2	Disposal	58500
			2018, Dec 31	Balance C/F	156000
2019, Jan 1	Balance B/F	156000
2019, Apr 1	Bank	186000
			2019, Dec 31	Balance C/F	342000

(ii)

Provision for Depreciation A/c
Date	Particulars	Debit	Date	Particulars	Debit
			2016, Dec 31	Depreciation A/c	22100
2016, Dec 31	Balance C/F	22100
			2017, Jan 1	Balance B/F	22100
			2017, Dec 31	Depreciation A/c	42900
2017, Dec 31	Balance C/F	65000
			2018 Jan 1	Balance B/F	65000
2018, May 2	Disposal A/c	28275	2018, Dec 31	Depreciation A/c	36075
2018, Dec 31	Balance C/F	72800
			2019 Jan 1	Balance B/F	72800
			2019, Dec 31	Depreciation A/c	59100
2018, Dec 31	Balance C/F	131900

(iii)

Disposal A/c
Date	Particulars	Debit	Date	Particulars	Debit
2018, May 2	Motor Vechile A/c	58500	2018, May 2	Provision for Depreciation A/c	28275
				Loss on Disposal	30225

(iv)

Ecxtract of Statement of Profit and Loss
Particulars	2018	2019
Depreciation	36075	72800
Loss on Disposal	30225	0

(V)

Extract of Balance Sheet
Asset	2018	2019
Motor Vechile	156000	342000
Liabiity
Provision for Depreciation A/c	72800	131900

Please feel free to ask any clarity or any query on any point.