38 Questions
Which financial statement includes a profit and loss appropriation account?
Statement of Financial Position
What is an appropriation that gives recognition to partners contributing different amounts of capital to the firm?
Interest on capital
Which of the following is not an appropriation in the Profit and Loss Appropriation Account?
Depreciation
What is typically found in the Statement of Financial Position for each partner?
Capital accounts and current accounts
What is an appropriation that is not to be confused with salaries paid to employees?
Salary
What is an appropriation that is related to a partner's drawings?
Interest on drawings
What is the consideration for shares issued by a company?
Valuable consideration
What happens in a Capitalization/Bonus/Scrip Issue?
Monies in a company's reserve is converted into capital and then distributed to shareholders as new shares
What is the purpose of circulating a Prospectus?
To invite the public to apply for shares
What is a Rights Issue?
Shares are issued to existing shareholders in proportion to their current shareholding
What is the maximum number of shares that a company can issue?
The total number authorized by its regulations
When are shares paid for?
At the time agreed by the members and the company
What is Private Placement?
The sale of shares of companies to private investors without the use of public market exchanges
What is Initial Public Offer?
Sale of shares by a private company for the first time to the public
What is the unrealized profit amount?
1400
What is the maximum number of persons allowed in a partnership in Ghana?
20
What is the purpose of preparing a profit and loss appropriation account?
To distribute profits among partners
What is the closing balance of the income surplus?
57500
What is the total capital financed by?
144500
What is the amount of dividend paid out?
3500
What is a partnership?
The association of two or more individuals carrying on business jointly for the purpose of making profits
What is the purpose of preparing a current account?
To record the daily transactions of the partnership
What is the debit account when cash or cheque is received on application?
Bank/Cash Account
What is the credit account when consideration other than cash is received?
Application Account
What happens to the application amount received in respect of shares allotted at the allotment stage?
It is transferred to the Stated Capital Account
What is the debit account when there is a refund of money for rejected applications?
Application Account
What happens to excess funds for other stages (partly successful applicants) at the allotment stage?
It is retained in the Allotment Account
What is the debit account when allotment monies (cash/cheque) due on shares issued are received?
Cash/Bank Account
What is the credit account when there is a transfer to the stated capital at the allotment stage?
Stated Capital Account
Who is the author of the content provided?
F. Aboagye
What is the primary purpose of business organizations?
To make profits and provide returns to its owners
What type of organizations are not intended to be profit-oriented?
Non-profit making organizations
When making adjustments for accruals and prepayments, what is being prepared?
Income statement
What is the normal assumption when the missing amount is in respect of payments?
The missing figure is the amount required to make both totals agree in the cash column
What is the likely scenario when payments are more than receipts?
The missing figure is cash receipts from customers
What is the purpose of this session?
To differentiate between profit and non-profit oriented organizations
What type of organizations provide services to the public or its members?
Non-profit making organizations
What can always be obtained from the bank in respect of bank related transactions?
A copy of all transactions
Study Notes
Partnership Accounts
- Incorporated Private Partnership Act of 1962 (Act 152) governs partnerships in Ghana.
- A partnership is an association of two or more individuals carrying on business jointly for the purpose of making profits.
- Maximum number of partners is 20.
Characteristics of Partnership
- Unrestricted voting rights
Financial Statements of a Partnership
- Income statement: profit and loss appropriation account
- Statement of Financial Position: capital accounts for each partner and current accounts for each partner
Profit and Loss Appropriation Account
- Typical appropriations:
- Interest on capital (%)
- Salary (annual)
- Interest on drawings
- Interest on current accounts
- Share of profit and loss
Differences in Financial Statements
- Partnership financial statements differ from company financial statements
Issuance of Shares
- A company may issue shares up to the total number authorized by its regulations (Section 41)
- Shares may be issued at such times and for such consideration as the company may determine
- Shares shall be issued for valuable consideration and paid for in cash, except otherwise agreed (Section 42)
Forms of Issuing Shares
- Initial Public Offer (IPO)
- Private Placement
- Capitalization/Bonus/Scrip Issue
- Rights Issue
Procedure for Issuance of Shares
- Invitation to the public to apply for shares through a prospectus and advertising
- Application stage: application account is debited, and bank/cash account is credited
- Allotment stage: application account is credited, and stated capital account is debited
- Refund of money for rejected applications: application account is credited, and bank/cash account is debited
Incomplete Records and Missing Figures
- Drawings/Cash Received/Cash Paid: missing figure is likely to be cash receipts from customers if payments are more than receipts
Accounting for Non-Profit Making Organizations
- Non-profit organizations exist to provide services to the public or its members, rather than to make profits
- Accounting for NPOs differs from accounting for profit-oriented organizations
This quiz is about accounting, specifically income statement, net profit, and dividend calculation. It is designed for students of Accounting 50.
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