INSTITUTE OF PUBLIC ADMINISTRATION AND MANAGEMENT

(IPAM)
University of Sierra Leone

LECTURE 1 - 2024/2025

CONCEPTUAL FRAMEWORK

INTRODUCTION
This lecture considers two documents issued by the International Accounting Standards Board
(the Board) that underpin a range of IFRS and IAS Standards:
1. The Conceptual Framework for Financial Reporting – used by the Board when developing or
revising an IFRS or IAS Standard, and by preparers of financial statements when no relevant
IFRS or IAS Standard exists, and
2. IFRS 13 Fair Value Measurement – used by preparers of financial statements when an IFRS or
IAS Standard requires or allows the use of a fair value measurement (with some exceptions).

THE IMPORTANCE OF A CONCEPTUAL FRAMEWORK

A conceptual framework is a set of theoretical principles and concepts that underlie the preparation
and presentation of financial statements. If no conceptual framework existed, then accounting
standards would be produced on a haphazard basis as particular issues and circumstances
arose. These accounting standards might be inconsistent with one another, or perhaps even
contradictory. A strong conceptual framework means that there are principles in place from which
all future accounting standards draw. It also acts as a reference point for the preparers of financial
statements if no accounting standard governs a particular transaction (although this will be
extremely rare).

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THE PURPOSE OF THE CONCEPTUAL FRAMEWORK
The purpose of the Conceptual Framework is to assist:
1. The Board when developing new IFRS Standards, helping to ensure that these are based on
consistent concepts
2. Preparers of financial statements when no IFRS Standard applies to a particular transaction,
or when an IFRS Standard offers a choice of accounting policy
3. All parties when understanding and interpreting IFRS Standards. The Conceptual Framework
is not an accounting standard. It does not override the requirements in a particular IFRS
Standard.

THE OBJECTIVE OF FINANCIAL REPORTING

The Conceptual Framework states that the purpose of financial reporting is to provide
information to current and potential investors, lenders and other creditors that will enable
them to make decisions about providing economic resources to an entity.

If investors, lenders and creditors are going to make these decisions then they require information
that will help them to assess:
❖ An entity’s potential future cash flows, and
❖ Management’s stewardship of the entity’s economic resources.

To assess an entity’s future cash flows, users need information about:

❖ Economic resources of the entity e.g. assets
❖ Economic claims against the entity e.g. liabilities and equity
❖ Changes in economic resources and claims e.g. income and expenses.

QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION FUNDAMENTAL

CHARACTERISTICS
FUNDAMENTAL QUALITATIVE CHARACTERISTICS
The Conceptual Framework states that financial information is only useful if it is:
❖ Relevant
❖ a faithful representation of an entity’s transactions.

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Relevance and faithful representation are the fundamental characteristics of useful financial
information.
1. Relevance: Relevant information will make an impact on the decisions made by users of the
financial statements. Relevance requires management to consider materiality.
An item is material if omitting, misstating or obscuring it would influence the economic
decisions of users.
2. Faithful representation: A faithful representation of a transaction would represent its economic
substance rather than its legal form. A perfectly faithful representation would be:
➢ Complete
➢ Neutral
➢ Free from error.

The Board note that this is not fully achievable, but that these qualities should be maximised.
When preparing financial reports, preparers should exercise prudence.
Prudence means that assets and income are not overstated and liabilities and expenses are
not understated. However, this does not mean that assets and income should be purposefully
understated, or liabilities and expenses purposefully overstated. Such intentional misstatements
are not neutral.

ENHANCING CHARACTERISTICS
In addition to the two fundamental qualitative characteristics, there are four enhancing
qualitative characteristics of useful financial information:
3. Comparability – investors should be able to compare an entity’s financial information year-
on-year, and one entity’s financial information with another.
4. Timeliness – older information is less useful.
5. Verifiability – knowledgeable users should be able to agree that a particular depiction of a
transaction offers a faithful representation.
6. Understandability – information should be presented as clearly and concisely as possible.

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FINANCIAL STATEMENTS AND THE REPORTING ENTITY FINANCIAL STATEMENTS
The Conceptual Framework notes that financial statements are a particular type of financial report.
The purpose of financial statements is to provide information to users about an entity’s:
➢ Assets
➢ Liabilities
➢ Equity
➢ Income
➢ Expenses.
This information is provided in:
➢ a statement of financial position
➢ statements of financial performance
➢ Other statements, such as statements of cash flows and notes.
Financial statements are prepared on the assumption that the entity is a going concern. This means
that it will continue to operate for the foreseeable future. If this assumption is not accurate, then
the financial statements should be prepared on a break-up basis.

THE REPORTING ENTITY

A reporting entity is one that prepares financial statements (either through choice, or as a result of
legal requirements). Financial statements produced for two or more entities that are not
parent/subsidiaries are called ‘combined financial statements’. It can be difficult in these
circumstances to determine the boundary of the reporting entity.
Note that the Conceptual Framework does not stipulate how or when to prepare combined financial
statements, although the Board may develop a standard on this issue in the future.
Financial statements produced for a reporting entity that comprises a parent company and its
subsidiaries are called ‘consolidated financial statements’. These financial statements show the
parent and its subsidiaries as a single economic entity. This information is important for
investors in the parent because their economic returns are dependent on distributions from the
subsidiary to the parent.
Unconsolidated financial statements also provide useful information to investors in a parent
company (for example, about the level of distributable reserves) but they are not a substitute for
information provided in consolidated financial statements.

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 THE ELEMENTS OF FINANCIAL STATEMENTS
The elements are the building blocks of financial statements:
❖ statements of financial position report assets, liabilities and equity
❖ Statements of financial performance report income and expenses.

Economic Resource Asset ‘A present economic resource controlled by an entity as a result

of a past event’ (para 4.3).
Economic Claim Liability ‘A present obligation of the entity to transfer an economic
resource as a result of a past event’ (para 4.26).
Equity The residual interest in the net assets of an entity. Changes in
economic resources and claims as a result of financial
performance
Changes in economic Income Income increases in assets or decreases in liabilities that result in
resources and claims as an increase to equity (excluding contributions from equity
a result of financial holders).
performance Expenses Expenses decreases in assets or increases in liabilities that result
in decreases to equity (excluding distributions to equity holders).

An economic resource is a ‘right that has the potential to produce economic benefits’ (para
4.4).

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RECOGNITION AND DERECOGNITION

RECOGNITION
Items are only recognised in the financial statements if they meet the definition of one of the
elements.
However, not all items meeting these definitions are recognised. Elements are recognised if
recognition provides users with useful financial information. In other words recognition must
provide:
❖ relevant information
❖ a faithful representation of the asset or liability, and resulting income, expenses or equity
movements.

Recognition might not provide relevant information if there is uncertainty over the existence of
the element or if there is a low probability of an inflow or outflow of economic resources.
Recognition of an element might not provide a faithful representation if there is a very high degree
of measurement uncertainty. Judgement is required in deciding if recognition of an element is
appropriate.
This is why specific recognition criteria vary from one IFRS Standard to another. If an asset or
liability is not recognised, disclosures may be required to ensure users fully understand the
reporting entity’s economic transactions and the implications that these may have on future
earnings and future cash flows.

DERECOGNITION
Derecognition is the removal of some or all of an asset or liability from the statement of financial
position. This normally occurs when the entity:
❖ Loses control of the asset, or
❖ Has no present obligation for the liability.

Accounting for derecognition should faithfully represent the changes in an entity’s net assets, as
well as any assets or liabilities retained. This is achieved by:
❖ Derecognising any transferred, expired or consumed component
❖ Recognising a gain or loss on the above, and
❖ Recognising any retained component.

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Sometimes an entity might appear to have transferred an asset or liability. However, derecognition
would not be appropriate if exposure to variations in the element’s economic benefits is retained.

Measurement
When recognised in the financial statements, elements must be quantified in monetary terms.
The Conceptual Framework outlines two broad measurement bases:
❖ Historical cost
❖ Current value (this includes fair value, value-in-use, and current cost).

PRESENTATION AND DISCLOSURE

EFFECTIVE PRESENTATION AND DISCLOSURE

Effective presentation and disclosure is a balance between allowing entities to flexibly report
relevant information about their financial performance and position, and requiring information that
enables comparisons to be drawn year-on-year and with other entities.
The Board believes that:
❖ Entity specific information is more useful than standardised descriptions
❖ Duplication makes financial information less understandable.

CLASSIFICATION
Classification of an asset or liability into separate components may provide relevant information
if the components have different characteristics.

AGGREGATION
Aggregation refers to the adding together of items that have shared characteristics. Aggregation is
useful because it summarizes information that would otherwise be too detailed. However, too
much aggregation obscures relevant information.
Different levels of aggregation will be required throughout the financial statements. For example,
the statement of profit or loss may be heavily aggregated, but accompanying disclosure notes will
disaggregate the information.

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PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
The Conceptual Framework states that the statement of profit or loss is the primary source of
information about an entity’s financial performance. As such, income and expenses should
normally be recognised in this statement. When developing or revising standards, the Board notes
that it might require an income or expense to be presented in other comprehensive income if it
results from premeasuring an item to current value and if this means that:
❖ Profit or loss provides more relevant information, or
❖ A more faithful representation is provided of an entity’s performance.

Income and expenditure included in other comprehensive income should be reclassified to profit
or loss when doing so results in profit or loss providing more relevant information. However, the
Board may decide that reclassification is not appropriate if there is no clear basis for identifying
the amount or timing of the reclassification.

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 COMPANY ACCOUNT

INTRODUCTION
Because of the peculiar nature of companies whereby shareholders have no direct role in the day-
to-day management of their enterprise, the company’s final accounts are regulated by the
companies Act. The companies act requires the board of directors of a limited liability company
to communicate a wide range of financial information to its shareholders in a general meeting at
the end of each financial year. The company must also submit returns to the registrar of companies
which will include final accounts. The following are items shown in the final accounts that do
appear in neither the proprietor’s accounts nor the partnership account.

(a) Director’ salaries and fees expenses

The day-to-day management of the company is done by the board of directors on behalf of
the shareholders. Salaries and fees paid to them are charged in the profit and loss account
as an operating expense.

(b) Auditors’ fees and expenses

It is mandatory to have the accounts of a company audited every year. The annual returns
must include the auditor’s report. Fees and expenses for the audit are shown in the period’s
profit and loss account as an operating expense.

(c) Debenture interest

While a company raises the bulk of its capital by issuing shares, the share capital may not
be sufficient to finance all its financial activities and operations. The company may have
to borrow from outside. An example of such source of borrowing is debentures.

A debenture is a legal instrument which evidences that a company has borrowed a specified
sum of money from a person named on its face, and undertakes to pay a fixed rate of interest
per annum for the loan. Unlike shareholders, debenture-holders are creditors to the
company and consequently, interest chargeable is a periodic charge to the company in the
profit and loss account. The principal sum on the debentures not yet repaid in the balance
sheet is shown as a non-current liability.

(d) Dividends
A dividend is the gain or profit which a shareholder earns on his investment in shares.
Dividends paid during the year before ascertaining profits are called interim dividends.
Those paid at the end of the year are called final dividends. The proposed dividends not
paid by the end of the financial period are shown in the balance sheet under current
liabilities.

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 (e) Corporation tax
A company is a legal entity in its own right and therefore pays corporation tax on its profits
as is provided for under the tax laws, of the land. The tax paid must be computed according
to the prevailing tax rate, against net profits made for the year. It is set aside as a provision
if the exact amount has not yet been agreed upon with tax authorities. Once the exact figure
is finally decided, the amount is subsequently paid.

(f) Share capital structure

In the balance sheet under capital and reserves, the following should be shown distinctly
for each and every class of shares:

i. Authorized share capital

ii. Issued share capital if different from authorized share capital
iii. Reserves, clearly distinguishing between capital reserve, e.g. the premium account
balance and revenue reserves such as the general reserves and the profit and loss
account balance.

(g) Provision for depreciation

It is mandatory for companies to show in their profit and loss account the amount charged
to revenue as provision for depreciation.

INCOME STATEMENT (TRADING, PROFIT AND LOSS ACCOUNT)

This is the usual income statement in which:

❖ Total revenue generated during the year (turnover) is matched against expenditures directly
incurred to earn the said revenue (cost of goods sold), in order to ascertain gross profit on
operations. The gross profit is calculated in the trading account.
❖ Gross profit is matched against operating expenditure for the period to determine the net
profit for the period. The net profit is calculated in the profit and loss account.

These are compiled in the usual manner similar to the sole proprietorships and the partnerships.
However, the profit and loss account will have charges in respect of auditor’s fee and expense,
interest on debentures if any, directors’ fees and salaries interest earned on investments if any,
corporation tax, etc.

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 PROFIT AND LOSS APPROPRIATION ACCOUNT
After the company has determined its net profit (or net loss) on operations and after deducting the
year’s charge for corporation tax, the profit/loss after tax is transferred to the profit and loss
appropriation account for appropriations by the shareholders, in a general meeting acting on the
recommendations of the board of directors. The appropriations may consist of:
i. Transfer to reserves
ii. Writing off capital expenses such as preliminary expenses
iii. Dividends

The amount of profit (or loss) on the profit and loss appropriation account not allocated is carried
forward to the next accounting period as un-appropriated profits or retained earnings.
The profit and loss appropriation account is therefore a permanent account in the books of the
company to which is posted net profit/loss after tax for the year. The credit balance on the account
is shown in the balance sheet in the shareholders equity section as revenue reserve.

STATEMENT OF FINANCIAL POSITION (THE BALANCE SHEET)

A company must present a balance sheet to its members in the general meeting every year. Every
balance sheet so presented should give a true and fair view of the state of affairs of the company
at the end of its financial year. Assets, liabilities and the owner’s interests are shown. However,
company assets may include intangible assets such as goodwill; capitalized expenditure such as
discount on shares; and preliminary expenses. The liabilities may include long-term debts such as
debentures, and short term debts/liabilities such as interest on debentures payable, dividends
payable and taxes payable.

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PRACTICAL QUESTIONS AND ANSWERS ON COMPANY ACCOUNTS

Q1. You have been asked to help prepare the financial statements of JEMILEX Ltd
for the year ended 31 October 2021. The company’s trial balance as at 31 October
2021 is shown below.

JEMILEX Ltd Trial balance as at 31 October 2021

Debit Credit
Le000 Le000
Share capital 18,000
Accruals 292
Property, plant and equipment – cost 79,760
Accumulated depreciation at 31 October 2021 43,560
Returns outwards 446
Returns inwards 688
Trade and other receivables 4,468
Trade and other payables 2,694
8% bank loan repayable 2018 28,000
Cash at bank 19,308
Retained earnings at 1st November 2020 6,930
Sales 93,554
Purchases 65,552
Distribution costs 4,900
Administrative expenses 6,888
Interest 1,120
Inventories at 1 November 2020 8,932
Final dividend for year ended 31 October 2021 1,080
193,476 193,476

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Additional data:
1. The share capital of the company consists of ordinary shares with a nominal value of
Le1.
2. The inventories at the close of business on 31 October 2021 were valued at Le9,
974,000.
3. The company paid Le1, 024,000 for one year’s insurance on 1 February 2021; this is
due to expire on 31 January 2010 (i.e. next year).
4. The company hired vehicles to distribute finished goods locally. It was able to negotiate
a deal with a local company for the period 1 September to 30 November 2021 at a cost
of £198,000. This was invoiced on 6 November 2021 and paid, in full, on 1 December
2021. No entry has been made in the accounts.
5. Interest on the bank loan for the last six months of the year has not been included in the
accounts in the trial balance.
6. The company made a bonus issue of 2,500,000 ordinary shares out of retained earnings
but has not made any accounting entries for this.
7. The tax charge for the year has been calculated as Le1, 960,000.

(a) Draft the statement of profit or loss and other comprehensive income for ABC Ltd
for the year ended 31 October 2021.
(b) Draft the statement of financial position for ABC Ltd as at the 31 October 2021.
(c) Draft the statement of changes in equity for ABC Ltd for the year ended 31 October
2021.
Note: Additional notes and disclosures are not required

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Q2. The following trial balance was extracted from the books of JOSHUA & Co Ltd on 31
December 2021
Dr. Cr.

Le Le

Goodwill at cost 420,000

Buildings at cost 1,680,000

Equipment at cost 1,118,200

Motor vehicle at cost 1,242,000

Provision for depreciation 1.1.2021 - Equipment 90,000

- Motor vehicle 109,280

10% preference share capital 800,000

Ordinary share capital 1,600,000

Trade Receivables 210,080

Trade Payables 186,400

Bank 160,780

10% debenture (repayable 2023) 600,000

Inventory 1.1 2019 281,440

Sales 1,189,380

Purchases 160,280

Carriage inwards 21,500

Salaries and wages 46,000

Directors remunerations 20,000

Motor expenses 15,000

Rates and insurances 14,100

General expenses 16,600

Debenture interest 50,000

General reserve 100,000

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 Share premium account 280,000

Interim ordinary dividend paid 41,000

Profit and loss account 31.12.2021 541,920

5,496,980 5,496,980

The following adjustments are needed:

i. Inventory at 31.12.2021 was Le 560,000
ii. Depreciation motors Le 40,000
iii. Accrue debenture interest Le 20,000
iv. Provide for preference dividend Le 100,000 and final ordinary dividend of 10 percent
v. Transfer Le 100,000 to general reserve
vi. Write off goodwill Le 160,000
vii. Authorized share capital is Le 1,600,000 in preference shares and Le 4,000,000 in ordinary
shares
viii. Provide for corporation tax Le 20,000

Required: Income Statement and a Statement of Financial Position as at December 2021

Q2. SOLUTION
JOSHUA & Co Ltd Income Statement for the year ended 31st December, 2021

Le Le Le
Sales 2,378,760
Less: Cost of Sales (w1) (366,440)
Gross Profit 2,012,320
Administrative Expenses (w2) (353,400)
Selling & Distribution Expenses (w3) (110,000)
Financial Charges (w4) (120,000)
Profit before Tax 1,428,920
Corporation Tax (20,000)
Profit after tax 1,408,920
Add profit for the year B/Fwd 1,083,840
2,492,760

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Less
Dividend proposed: Preference Dividend 100,000
Ordinary Dividend (0.10*800,000) 320,000
Interim Ordinary Dividend paid 82,000
Transfer general reserves 100,000
(602,000)
Retained earnings as at 31st December, 2021 1,890,760

JOSHUA & Co Ltd Statement of Financial Position as at 31st December, 2021

Le Le Le
Non-Current Assets
Tangible Assets
Building, Equipment & Motor Vehicles (w6) 3,800,920

Intangible Assets
Goodwill (w5) 340,000
Current Assets
Inventory 280,000
Receivables 210,080
Bank balance 160,780
650,860
Total Assets 4,791,780

Equity & Liabilities

Authorized Shares Capital
2,000,000 Ordinary Shares @ Le1 each 2,000,000
10% 800,000 Preference Shares @ Le1 each 800,000
2,800,000

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 Issued Shares Capital
1,600,000 Ordinary Shares @ Le1 each 1,600,000
10% 800,00 Preference Shares @ Le1 each 800,000
2,400,000
Reserves
Share premium 280,000
Retained earnings 945,380
General reserves (100,000 + 50,000) 150,000
1,375,380

Non-Current Liability
10% Debentures 600,000
Current Liabilities
Trade Payables 186,400
Accrued Debenture Interest 10,000
Taxation 10,000
Proposed Ordinary dividend 160,000
Proposed Preference dividend 50,000
416,400
Total Equity & Liabilities 4,791,780

Workings
W1 Cost of Sales Le Le
Opening inventory 281,440
Add Purchases 160,280
Carriage Inwards 21,500
181,780
463,220
Less Closing Inventory (280,000)
Gross Profit 183,220

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W2 Administrative Expenses Le
Salaries & Wages 46,000
Directors Remuneration 20,000
Rates & Insurance 14,100
Goodwill written-off 80,000
General Expenses 16,600
176,700

W3 Selling & Distribution Expenses Le

Motor Expenses 50,000
Depreciation on Motor Vehicles 40,000
90,000

W4 Financial Charges Le
Debenture Interest per question = 50,000
Accrued Debenture Interest = 10,000
60,000

W5 Amortization Le
Goodwill per question 420,000
Less Goodwill written-off 80,000
340,000

W6 Non-Current Assets Le Le Le
Cost Acc Dep NBV
Building 1,680,000 - 1,680,000
Equipment 1,118,200 90,000 1,028,200
Motor Vehicles 1,242,000 149,280 1,092,720
4,040,200 239,280 3,800,920

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Q3. The trail balance of MIRACLE & Co. Ltd as at 31st December, 2021 is as follows:

Debit Credit

Le Le

Equipment at cost 480,500

Motor vehicle at cost 390,000

Purchases & Sales 140,000 640,490

Share capital: authorized and issued 700,000

Receivables & Payables 361,780 155,427

Rent, rates and insurance 30,300

Fixed asset replacement reserve 50,000

Inventory as at 31st December, 20201 410,000

Bank 100,643

Cash 7,350

10% debentures 200,000

General reserve 100,000

Debenture interest 10,000

Profit and loss account as at 31 st December, 2021 74,960

Returns inwards 13,964

Carriage outwards 3,700

Wages and salaries 64,000

Discount allowed 14,640

Directors remuneration 32,000

Provision for depreciation:

Equipment 10,200

Motors 127,800

2,058,877 2,058,877

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Additional notes

i. Inventory on 31st December, 2021 was Le 460, 310

ii. The share capital consisted of 50,000 ordinary shares of Le 10 each and 20,000, 10 percent
preference shares of Le 10 each. The dividend on the preference shares was proposed to be
paid as a dividend of 20 percent on the ordinary shares
iii. Accrued rent Le 6,000, directors remuneration Le 20,500
iv. Debenture interest ½ year’s interest owing
v. Depreciation on cost: equipment 10 percent, motors 20 percent
vi. Transfer to reserves: 12,000 to general reserves and Le 30,000 to asset replacement reserve

Required: Prepare MIRACLE & Co. Ltd

a. Income Statement for the year ended 31st December, 2021

b. Statement of Financial Position as at 31st December, 2021

Q4. SISKO & Co Ltd. extracted the following trial balance as on 31 December, 2021

Dr Cr.

Le Le

Freehold premises at cost 25,000

Motor vehicles at cost 7,500

Fixtures and fittings 1,300

Plant and machinery at cost 2,500

Share capital:

250,000 ordinary shares of Le 1 each 25,000

125,000 10% preference shares of Le 1 each 12,500

10% debentures 10,000

Accumulated depreciation at Jan. 202:

Plant & machinery 1,025

Fixtures & fittings 800

Motor vehicles 1,250

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 Trade Receivables/Payables 2,700 1,500

Profit and loss account 1 Jan. 2020 2,685

Purchases & Sales 16,900 59,475

Inventory at 1 Jan. 2020 10,775

Bad debts written off 125

Dividends paid at 30 June 2021

Preference dividend 625

Ordinary dividend 1,250

Debenture interest paid at 30 June 2021 500

Salaries & wages 4,100

Cash & bank balance 4,775

Investments 22,500

Office expenses 2,300

General reserve 1,000

Selling and distribution expenses 13,750

Director’s emoluments 3,700

Auditors’ remuneration 800

Preliminary expenses 1,200

Sundry income 1,625

Bank charges 60

Income from investments 4,500

122,360 122,360

Additional information available at 31 December 2020

1. Inventory Le. 3,750,000

2. Depreciate fixed assets as follows:
- Motor vehicles at 20% on cost

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 - Fixtures and fittings at 12 ½ % on book value
There were no disposal and acquisition of non-current assets during the year.
3. Expense due but unpaid include salaries and wages Le 62,500 and office expense paid in
advance amount to Le 120,000
4. Provision for bad debts is to be set up at 2 ½ % of sundry debtors
5. Debenture interest is payable half yearly, the half-year to 31 December, 2020 being due on
that date
6. Corporation taxation is chargeable at 30% on the current profits of the year of taxation
liabilities.
7. The directors of Abdul-Lateef & Co. Ltd recommend appropriation as follows:
i. The preliminary expense to be written off in full
ii. Transfer to be made from the profit and loss accounts as follows:
- General reserves Le 1,500,000
iii. Payment of final dividend of 12 ½ % on the ordinary share capital

Required: to prepare SISKO & Son’s Ltd:

(a) Income Statement for the year ended 31 December 2021
(b) Statement of Financial Position as at 31 December 2021

Q4. SOLUTION
SISKO & Co Ltd. Income Statement for the year ended 31st December, 2021

Le Le Le
Sales 59,475
Less: Cost of Sales (w1) (23,925)
Gross Profit 35,550
Sundry Income 1,625
Income from Investment 4,500
41,675
Administrative Expenses (w2) (11,097.5)
Selling & Distribution Expenses (w3) (15,250)
Operating Profit 15,327.5
Financial Charges (w4) (1,060)
Profit before Tax 14,267.5
Corporation Tax (0.30 * 14,267.5) (4,280.25)
Profit after tax 9,987.25

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Add profit for the year B/fwd 2,685
Unappropriated Profit 12,672.25
Less
Interim Dividend Paid: Preference dividend 625
Ordinary Dividend 1,250
Dividend proposed: Preference Dividend 625
Ordinary Dividend 3,125
(0.125*25,000,000)
Preliminary expenses written-off 1,200
Transfer general reserves 1,500
(7,075)
Retained earnings as at 31st December, 2020 5,597.25

SISKO & Co Ltd. Statement of Financial Position as at 31st December, 2021

Le Le Le
Non-Current Assets
Tangible Assets
Freehold Premises, Furniture & Fitting & Motor Vehicles (w6) 32,912.5

Investment 22,500

Current Assets
Inventory 3,750
Trade Receivables 2,632.5
Other Receivables (Prepaid Expenses) 120
Cash & Bank balance 4,775
11,277.5
Total Assets 66,690

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Equity & Liabilities
Authorized Shares Capital
25,000,000 Ordinary Shares @ Le1 each 25,000
125,000 10% Preference Shares @ Le1 each 12,500
37,500
Issued Shares Capital
25,000,000 Ordinary Shares @ Le1 each 25,000
125,000 10% Preference Shares @ Le1 each 12,500
37,500
Reserves
Retained earnings 5,597.25
General reserves (1,000,000 + 1,500,000) 2,500
8,097.25
Non-Current Liability
10% Debentures 10,000
Current Liabilities
Trade Payables 1,500
Other Payables (Unpaid Expenses) 62.5
Accrued Debenture Interest 1,500
Taxation 4,280.25
Proposed Ordinary dividend 3,125
Proposed Preference dividend 625
11,092.75
Total Equity & Liabilities 66,690

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Workings
W1 Cost of Sales Le Le
Opening inventory 10,775
Add Purchases 16,900
27,675
Less Closing Inventory (3,750)
Gross Profit 23,925

W2 Salaries & Wages Le

Salaries & Wages per question 4,100
Add unpaid Salaries & Wages 62.5
4,162.5

W3 Office Expenses Le
Office Expenses per question 2,300
Less Office Expenses 120
2,180

W4 Provision for Bad Debts & Receivable balance Le

Receivable balance b/f 2,700
Less Provision for Bad Debts (0.125 * 2,700 (67.5)
Receivable balance c/f 2,632.5

W5 Administrative Expenses Le
Salaries & Wages (w2) 4,162.5
Directors Emoluments 3,700
Auditors Remuneration 800
Office Expenses (w3) 2,180
Depreciation of Fixture & Fittings (w1) 62.5
Provision for Bad Debts (w4) 67.5
Bad Debts 125
11,097.5

W6 Selling & Distribution Expenses Le

Selling & Distribution Expenses B/f 13,750
Depreciation on Motor Vehicles 1,500
15,250

W7 Financial Charges Le
Debenture Interest per question (0.10 * 10,000) = 1,000
Paid Debenture Interest = 500
Accrued Debenture Interest = 500

25
W7a. Accumulated Depreciation Le
Motor vehicles (0.20 * 7,500) = 1,500
Motor vehicles per question 1,250
Add current depreciation of Motor vehicles 1,500
2,750

Fixtures & Fittings 0.125 * (1,300 - 800) = 62.5

Fixtures & Fittings per question 800
Add current depreciation of Fixtures & Fittings 62.5
862.5

W7b. Non-Current Assets Le Le Le

Cost Acc Dep NBV
Freehold Premises 25,000 - 25,000
Plant & Machinery 2,500 1,025 1,475
Fixtures & Fittings 1,300 862.5 437.5
Motor Vehicles 7,500 1,500 6,000
36,300 3,387.5 32,912.5

W8 Debenture Interest Le
10% Debentures (0.10 * 10,000) 1,000
Debenture Interest paid (500)
Unpaid debenture Interest 500

26
Q5. You have been asked to help prepare the financial statements of ESTOLEX
Ltd for the year ended 31st December, 2021. The company’s trial balance as at 31st
December, 2021 is shown below.

ESTOLEX Ltd Trial balance as at 30 June 2021

Debit Credit
Le000 Le000
Share capital 50,000
Share premium 25,000
Revaluation surplus at 1st January, 2021 10,000
Land and buildings – value/cost 120,000
Accumulated depreciation at 1st January, 2021 22,500
Plant and equipment – cost 32,000
Accumulated depreciation at 1st January, 2021 18,000
Trade and other receivables 20,280
Trade and other payables 8,725
5% bank loan repayable 2015 20,000
Cash and cash equivalents 2,213
Retained earnings at 1st January, 2021 12,920
Sales 100,926
Purchases 67,231
Distribution costs 8,326
Administrative expenses 7,741
Inventories at 1st January, 2021 7,280
Dividends paid 3,000
268,071 268,071

27
Further information:
1. The inventories at the close of business on 31 st December, 2021 cost
Le9, 420,000.
2. Depreciation is to be provided for the year to 31 st December, 2021 as follows:
❖ Buildings 4% per annum Straight line basis. This should all be charged to
administrative expenses
❖ Plant and equipment 20% per annum Reducing balance basis.
This is to be apportioned as follows: %
❖ Cost of sales 70
Distribution costs 20
Administrative expenses 10
❖ Land, which is non-depreciable, is included in the trial balance at a value
of Le40, 000,000 and it is to be revalued to Le54, 000,000. This
revaluation is to be included in the financial statements for the year ended
31st December, 2021.
3. It has been decided to write off a debt of Le540, 000 which will be charged to
administrative expenses.
4. Included within distribution costs are Le2, 120,000 relating to an advertising
campaign that will run from 1 July 2021 to 31st December 2021.
5. The loan interest has not yet been accounted for.
6. The tax charge for the year has been calculated as Le2, 700,000.
(a) Draft the statement of profit or loss and other comprehensive income for
ESTOLEX Ltd for the year ended 31st December, 2021.

(b) Draft the statement of financial position for ESTOLEX Ltd as at 31st December,
2021.
Note: Additional notes and disclosures are not required.
(a) ESTOLEX Ltd – Statement of profit or loss and other comprehensive income
for the year ended 31st December, 2

28
Q6. The following balances were extracted from the books of ELIZABETH & Co. Ltd as at 31st
December, 2020:

Debit Credit
Le000 Le000
Land 200
Buildings at cost 1,800
Capital: authorized 3,500
Issued and fully paid ordinary shares of Le 20 each 2,500
8% redeemable preference shares of Le 20 each 600
9% debentures 800
Retained earnings as at 1 January, 2020 1,990
Discounts allowed & Discounts received 60 40
Purchases & Sales 3,050 5,060
Inventory as at 1 January, 2020 1,900
Provision for depreciation on buildings as at 1 January, 2020 800
Establishment expenses 270
Administration expenses 600
Allowance for doubtful debts 40
Bank balance 760

Additional information
1. Depreciation is to be provided on cost at follows:
Asset rate per annum
Building 2.5% on cost
Fixtures and fittings 10% on cost
The company’s policy is to provide for depreciation in the year of acquisition and none in
the year of disposal
2. Allowance for doubtful debts is to be increased to Le 64,500

29
 3. Interest on debentures for the year ended 31st December, 2020 had been paid. The amount
paid was correctly posted in the cash book but wrongly debited to the trade receivables
4. The following information is provided on the value of closing inventory as at 31 st
December, 2020:
Le

Net realizable value 1,380,000

Cost to the company 1,300,000
Selling price 1,900,000
5. During the year ended 31 August 2017, some items of fixtures and fittings were sold for
Le 60,000. The amount received was erroneously credited to sales. The items disposal off
had cost the company Le 200,000 and has a written down value of Le 160,000 as at 1
January, 2020.
6. The directors proposed to pay on ordinary dividend of Le 2 per share. They have also
proposed to pay preference dividend
7. Corporation tax rate is 30%.

Required: ELIZABETH & Co. Ltd

(a) Income statement for the year ended 31st December, 2020
(b) Statement of financial position as at 31 st December, 2020

Q6. SOLUTION
ELIZABETH & Co. Ltd Income Statement for the year ended 31st December, 2020

Le000 Le000 Le000

Sales (5060-60) – asset disposal proceeds 5,000
Cost of Sales:
Inventory on 1st January, 2020 900
Purchases 3,050
3,950
Less Closing Inventory on 31st December, 2020 (1,300)
Cost of goods sold (2,650)

30
Gross profit 2,350
Discount Received 40
Less Operating Expenses
Depreciation: Building (2.5% * 1,800) 45
Fixtures & Fittings (10%* 3,800) 380
Increase I Provision for doubtful debts 24.5
Interest on Debentures (9% * 800,000) 72
Administrative Expenses 600
Discount Allowed 60
Loss on disposal of assets 100
(1,281.50)
Profit before tax 1,108.50
Corporation tax (30% *1,108.50) ( 332.55)
Profit after tax 775.95
Retained earnings as at 1st January 20,16 1,990.00
Less:
Preference Dividend – 8% *600,000 48
Ordinary dividend – Le2 * 125,000 250
298
Retained earnings as at 31st December 2016 2,467.95

ELIZABETH & Co. Ltd Statement of Financial Position as at 31st December, 2020

Le000 Le000 Le000

Non-Current Assets
Land 200 200
Building 1,800 645 1,155
Fixtures & Fittings 3,800 1,140 2,660
6,000 1,825 4,015

31
Long Term Assets
Establishment Expenses 270
Current Assets
Inventory 1,800
Receivables (1,290,000 – 72,000) 1,218
Less provision for Bad Debts ( 64.5)
1,153.50
Bank balance 760
3,213.50
Total Assets 7,498.50

Equity & Liabilities

Authorized Shares Capital
Total authorized shares capital 3,500
Issued Shares Capital
Issued and fully paid Ordinary Shares @ Le20 each 2,500
8% Redeemable Preference Shares @ Le20 each 600
3,100
Reserves
Retained earnings 2,467.95

Non-Current Liability
9% Debentures 800

Current Liabilities
Trade Payables 500
Corporation tax 322.55
Proposed dividends 298
1,130.55
Total Equity & Liabilities 7,498.50

32
Workings - W1.
Fixtures & Fittings A/c
Le000 Le000
Bal b/f 4,000 Asset Disposal 200
Bal C/d 3,800
4,000 4,000
Bal b/d 3,800

W2.
Asset Disposal A/c - Fixtures & Fittings A/c
Le000 Le000
Bal b/f 200 Asset Disposal 40
Cash Book 60
Loss- Income Statement 100
200 200

Q7. The following balances were extracted from the books AMERIKIN &Co. Limited as at 31th
December, 2020.
Le “000”
Premises at cost 2,000
Provisions for depreciation on Premises 720
Furniture and fittings at cost 5,120
Provision for depreciation of furniture and fittings 2,048
Inventories (1st January, 2020) 3,360
Ordinary shares of Le 20 each fully paid 4,800
8% preference shares of Le 20 each fully and 800
Share premium account 640
6% debenture 800
Trade payables 1,184
Trade receivables 2,560
Sales 38,400
Purchases 33,760
Discounts allowed 40
Discount received 104
Returns outwards 640
Establishment expenses 1,040
Administrative expenses 448
Selling and distribution expenses 1,336
Bad debts written off 32
Allowance for doubtful debts (1st January, 2020) 216
Goodwill 1,280
Bank overdraft 200

33
 Additional information:
1. Inventories as at 31st December, 2020 were valued at Le 4,480,000
2. Depreciation is to be provided on the cost of the non-current assets held at the end of the
financial year at the following rates:
Asset rate
Premises 20% per annum
Furniture and fittings 10% per annum
3. The allowance for doubtful debts as at 31 st December, 2020 is to be 5% of trade receivables
4. Trade receivable balance includes Le80,000 from Tito who had been declared bankrupt
5. Establishment expense prepaid at the year-end amounted to Le32,000 while administrative
expenses occurred were Le 56,000
6. The company paid the interest on the debenture for the year ended 31st December, 2020
7. The interest occurred on the debenture will be paid during the redemption on 31 st
December, 2020.
8. The directors have proposed payment of 8% preference share dividend and on ordinary
dividend of 10%
Note: ignore corporation tax. Required:
(a) Income statement for the year ended 31st December, 2020
(b) Statement of financial position as at 31 st December, 2020.

Q7. SOLUTION
AMERIKIN & Co Ltd Income Statement for the year ended 31st December, 2020
Le Le Le
Sales 38,400,000
Cost of Sales:
Inventory on 1st January, 2016 3,360,000
Purchases 33,760,000
Less Returns Outwards (640,000)
33,120,000
36,480,000
Less Closing Inventory on 31st December 2016 (4,480,000)
Cost of goods sold (32,000,000)
Gross profit 6,400,000
Discount Received 104,000
Decrease in Provision for doubtful debts 16,000

34
 6,520,000
Less Operating Expenses
Depreciation: Building (20% * 4,000,000) 800,000
Fixtures & Fittings (10%*5,240,000) 512,000
Bad debts (32,000 +80,000) 112,000
Establishment Expenses (Le1040,000 less prepaid 1,072,000
Le32,000)
Selling & Distribution expenses 1,272,000
Interest on Debentures (6%*800,000) 48,000
Administrative Expenses (Le448,000 + accrued Le56,000) 504,000
Discount Allowed 40,000
(4,360,000)
Profit for the year 2,160,000
Retained earnings as at 1st January 2020 2,896,000
5,056,000
Less:
Preference Dividend – (8% * 400,000) 64,000
Ordinary dividend – (10% * 2,400,000) 480,000
( 544,000)
Retained earnings as at 31st December 2020 4,512 ,000

AMERIKIN & Co Ltd Statement of Financial Position as at 31st December, 2020

Le Le Le
Non-Current Assets
Building 4,000,000 1,200,000 2,800,000
Fixtures & Fittings 5,120,000 2,560,000 2,560,000
9,120,000 3,760,000 5,360,000
Long Term Assets
Goodwill 1,280,000
6,640,000
Current Assets

35
Inventory 4,480,000
Receivables – Bad debts + invoiced issued 2,560,000
Less provision for Bad Debts (128,000)
2,432,000
Prepaid Establishment Expenses 32,000
6,944,000
Total Assets 13,584,000

Equity & Liabilities

Issued Shares Capital
Issued and fully paid Ordinary Shares each 4,800,000
Preference Shares Issued and fully paid each 800,000
5,600,000
Reserves
Share premium 640,000
Revenue Reserves/Retained earnings 4,512,000
5,152,000
Non-Current Liability
6% Debentures 800,000

Current Liabilities
Trade Payables 1,184,000
Accrued debentures Interest 48,000
Bank Overdraft 200,000
Accrued Admin Expenses 56,000
Proposed dividends 544,000
2,032,000
Total Equity & Liabilities 13,584,000

36
Q8. The following balances were extracted from the books of LEXO & Co. Ltd. as at 31
December 2020.
Le’000
Cash in hand 12,600
Trade payables 19,500
Trade receivables 17,900
Sales 269,500
Purchases 215,200
Ordinary dividends paid 1,500
Debenture interest paid 1,000
Salaries and wages 25,400
Electricity 3,100
Sundry expenses 11,300
Suspense account (credit) 13,500
Ordinary share capital (Le5 each par value) 45,000
10% debentures 20,000
Retained earnings 24,200
General reserves 17,100
Land and building 43,000
Plant and machinery 83,000
Accumulated depreciation:
Buildings 2,000
Plant and machinery 22,200
Inventory (1 January 2020) 19,000

Additional information
1. The land and buildings were acquired some years ago. The cost of buildings was estimated
at Le 10,000,000. The estimated useful life of the buildings was fifty years at the time of
purchase. As at 31 December 2020, the property was to be revalued at Le 80,000,000.

2. The suspense accounts is in respect of the following items:

Le”000”
Proceeds from the issue of 1,000,000 ordinary shares 12,000
Proceeds from the sale of plant 30,000
42,000
Less: consideration for the acquisition of LEXO & Co. Ltd 28,500
13,500

3. The plant which was sold has cost Le 35,000,000 and had a net book value of Le 27 400,000
as at 1 January 2020. Depreciation of Le 3,600,000 is to be provided on plant and
machinery for the year ended 31 December 2020. No depreciation is provided in the year
of sale

4. The net assets of LEXO & Co. Ltd were purchased on 3 March 2020. The fair value of assets
acquired was as follows:
Le “000”
37
Available-for-sale-financial assets 23,100
Inventories 3,400
26,500

All the inventories acquired were sold during the year. The available-for-sale financial assets were
still held by LEXO & Co. Ltd as at 31 December 2020. Goodwill arising on acquisition of LEXO
& Co. Ltd has not been impaired as at 31 December 2020.

5.Sundry expenses include Le 900,000 paid in respect of annual insurance up to 31 August 2021.
Electricity expenses do not include a bill of Le 300,000 for the three months ended 2 January
2018 which was paid in February 2021. Electricity expenses also include Le 2,000,000 relating
to salesmen’s commission
6. The management wish to provide for:
• Audit fees of Le 400,000
• A transfer of Le 1,600,000 to the general reserves
• Debenture interest due
7. Inventory as at 31 December 2020 were valued at Le 22,000,000

Required:
• Statement of comprehensive income for the year ended 31 December 2020
• Statement of financial position as at 31 December 2020.

Q9. LEXIS KAY Co. Ltd. was registered with an authorized Capital of Le 1,000.000 divided into
shares of Le10 each, of which 40,000 shares had been issued and fully paid.

The following is the Trial Balance extracted on 31st March 2020

Dr. Cr.
Le Le

Stock (1.4.2019) 186,420

Returns 12,680 9,850

Sundry manufacturing expenses 19,240

18% Bank Loan (secured) 50,000

Office salaries and Expenses 17,870

Directors’ Remuneration 26,250

Freehold premises 164,210

Furniture 5,000

Receivables and Payables 105,400 62,220

38
 Cash at Bank 96,860
Profit and Loss Account on 1.4.2019 38,640

Share Capital 400,000

Purchases and sales 718,210 1,169,900

Manufacturing Wages 109,740

Carriage Inwards 4,910

Interest on bank loan 4,500

Auditors’ Fees 8,600

Preliminary Expenses 6,000

Plant and machinery 128,400

Loose Tools 12,500

Cash in hand 19,530

Advance payment of Tax 84,290

1,730,610 1,730,610

You are required to prepare LEXIS KAY Income Statement for the year ended 31st March
2020 and a Statement of Financial Position as at that date after taking into consideration
the following adjustments:

(i) On 31st March 2020, outstanding manufacturing wages and outstanding office salaries
stood at Le1, 890 and Le1, 200 respectively. On the same date stock was valued at Le124,
840 and loose tools at Le10, 000.
(ii) Provide for interest on bank loan for 6 months.
(iii) Depreciation on plant and machinery is to be provided @ 15% while on office furniture
it is to be @ 10%.
(iv) Write-off one-third of balance of preliminary expenditure
(v) Make a provision for income tax @ 50%.
(vi)The directors recommended dividend @ 15% for the year ending 31st March 2020 after
a transfer of 5% of the profits to general reserve.

Q10. The following balances were extracted from the general ledger of KAMARA-COLE &
Co. Ltd on 31 December, 2020 after the preparation of the Trading Account.
Le

39
11% preference share capital 1,000,000
Ordinary share capital 3,500,000
Land and buildings (cost Le 5,750.000) 6,000,000
Equipment (cost Le 400,000) 280,000
Motor vehicles (cost Le 860,000) 602,000
Goodwill (cost Le 800,000) 775,000
10% debentures (repayable year 2025) 1,500,000
Inventory at 31 December 2020 1,361,000
Salaries and wages 462,000
Directors’ remuneration 315,000
Motor vehicles expenses 406,000
Rates and insurances 146,500
General expenses 28,000
Debenture interest 75,000
Debtors 930,000
Creditors 568,000
Cash at bank 419,000
General reserves 250,000
Share premium 700,000
Interim ordinary dividends paid 175,000
Fixed assets (land and building)
Revaluation reserves at 1 January 2020 250,000
Profit and loss account at 31 December 2020 847,000
Gross profit for the year 3,360,000

Additional information:
i. Authorized share capital:
• 40,000 11% preference shares of Le 25 each at per.
• 500,000 ordinary shares of Le 10 each at par. (All issued shares are fully paid).
During the year 100,000 ordinary shares were issued at a premium of 20%. No
record has been made in regard to issues. The new shares do not rank for dividend
in the year.

ii. The policy of the company regarding depreciation is:

• Not to depreciate land and building but to revalue the buildings at the end of
every two years. The market value as at 31 December, 2020 has been agreed with
valuation experts at Le 6,300.000.
• To depreciate motor vehicles at the rate of 25 percent on reducing balance.
• To depreciate equipment at the rate of 10% on cost using the straight line
depreciation method.

40
 iii. The interest on debentures is paid semi-annually on 1 July and 1 January. The company
makes provision for interest accrued during a financial year but is not yet paid.
iv. Goodwill is written off at the rate of 3.125%, per annum on cost.
v. The directors propose that the preference dividend and also a final ordinary dividend
which will bring the total dividend on ordinary shares for the year to Le 1.50 per share be
paid. The directors also propose to transfer Le 100,000 to general reserve.
vi. The corporation tax on the profit for the year is estimated at Le 250,000.
vii. The company has decided to write off debts of Le 30,500 which it considers bad.
Whereas doubtful debts loss has previously been recognized when specific accounts are
known to be uncollectible the company now proposed to establish and maintain (with
effect from the current year) a general provision for doubtful debts as 4 percent of Trade
Receivables.
viii. Rates include an amount of Le 96,000 paid to the municipality for the 12 months to 31
March 2020.
ix. Casual labourers have not yet been paid Le 45,000 in respect of the services rendered
during the last two weeks of 31 December 2020.
x. Sales in the years amounted to Le 5,400,000 while purchases were Le 2,100,000.

Required:
(a) Income statement for the year ended 31 December, 2020
(b) Statement of Financial Position as at 31 December, 2020
(c ) Statement of Change in Equity as at 31 December, 2020

Q10. SOLUTION
KAMARA-COLE & Co. Ltd Income Statement for the year ended 31 December

2020
41
 Le Le Le
Sales 5,400,000
Less:
Changes in inventories of finished goods (60,000)
Purchases 2,100,000
Employee’s Benefits cost 507,000
Debenture Interest 507,000
Depreciation and Amortization 215,500
Other Operating expenses 914,000
(3,826,500)
Profit before tax 1,573,500
Add profit for the year B/fwd 847,000
2,170,500
Less
Dividend proposed: Preference Dividend 110,000
Ordinary Dividend 575,000
Dividend paid 175,000
General reserves 100,000
960,000
Retained earnings as at 31st December, 2020 1,210,000

KAMARA-COLE & Co. Ltd Statement of Financial Position as at 31st

December, 2020

Le Le Le

42
Non-Current Assets
Tangible Assets
Land & Building 6,300,000
Equipment 240,000
Motor Vehicles 451,500
6,991,500
Intangible Assets
Goodwill 750,000
Current Assets
Inventory 1,361,000
Receivables 864,000
Other Receivables 48,000
Bank balance 1,619,500
3,892,500
Total Assets 11,634,000

Equity & Liabilities

Authorized & Issued Shares Capital
Issued and fully paid Ordinary Shares 4,500,000
Issued and fully paid Preference Shares 1,000,000
5,500,000
Reserves
Share premium 900,000
Revaluation reserves 550,000
Retained earnings 1,210,500
General reserves 350,000
3,010,500

Non-Current Liability
Debentures 1,500,000

43
 Current Liabilities
Trade Payables 568,500
Other Payables 120,000
Taxation 250,000
Proposed dividends 685,000
1,623,500
Total Equity & Liabilities 11,634,000

Workings
W1 Changes in inventories of finished goods
Sales Le5,400,000
Less Purchases Le2,100,000
Cost of Sales Le3,300,000

Gross Profit Le3,360,000

Less Cost of Sales Le(3,300,000)
Changes in Inventories 60,000

W2 Depreciation Le
Motor Vehicles = 0.25 * 602,000 = 150,500
Equipment = 0.10 * 400,000 = 40,000
190,500
Amortization
Goodwill written-off = 0.03125 *800,000 = 25,000
215,500

W3 Cash Le
Balance b/fwd = 419,000
Additional Share Capital = 1,000,000
Share Premium = 200,000
1,619,000

Le
W4 Salaries & Wages = per question = 462,000
Unpaid Labour = 45,000

44
 507,000

W5 Operating Expenses: Le
W5 (i) Directors Remuniration = 315,000

W5 (ii) Motor Vehicles Expenses = 406,000

W5 (iii) General Expenses = 28,000
W5 (iv) Rates & Insurance: Per Question = 146,500
Less: prepaid (1/2 * 96,000) = ( 48,000)
= 98,500
W5 (v) Debenture Interest: (0.10 * 1,500,000) = 150,000
W5 (vi) Bad Debts = 30,500
W5 (vii) Provision for Bad Debts (930,500 – 30,500) * 0.04 = 36,000
914,000

W6 Dividend Proposed Le Le
Preference Shares = 0.11 * 1,000,000 = 110,000
Ordinary Shares = 0.15* 3,500,000 = 525,000
Additional Ordinary Shares = 1,000,000/20 = 50,000
685,000
Interim ordinary dividend paid = 3,500,000/175,000 = 0.20 * 3,500,000 = 175,000
Total Dividend (Proposed and paid) 860,000

W7 Share Premium Le
0.20 * 1,000,000 = 200,000

10c. KAMARA-COLE & Co. Ltd Statement of Changes in Equity for the yr. ended 31st
December, 2020

45
 ITEMS Ordinary Preference Share Revaluation General Retained Total
Share Share Premium Reserves Reserves Earnings
Capital Capital
Le Le Le Le Le Le Le

Balance B/fwd 3,500,000 1,000,000 700,000 250,000 250,000 847,000 6,547,000

Changes in A/Cing Policy - - - - - - -

Restated Balance 3,500,000 1,000,000 700,000 250,000 250,000 847,000 6,547,000

CHANGES IN EQUITY

Gain on Property 300,000 300,000

Revaluation
Profit for the period 1,323,500 1,323,500

Dividends (860,000) (860,000)

Issue of Share Capital 1,000,000 200,000 1,200,000

General Reserves 100,000 (100,000)

Balance C/d as at 30th 4,500,000 1,000,000 900,000 550,000 350,000 1,210,000 8,510,000
June

46