Accounting: Income Statement and Dividend
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Questions and Answers

Which financial statement includes a profit and loss appropriation account?

  • Income Statement
  • Balance Sheet
  • Cash Flow Statement
  • Statement of Financial Position (correct)

    • What is an appropriation that gives recognition to partners contributing different amounts of capital to the firm?

  • Salary
  • Interest on capital (correct)
  • Interest on drawings
  • Share of profit and loss

    • Which of the following is not an appropriation in the Profit and Loss Appropriation Account?

  • Interest on current accounts
  • Depreciation (correct)
  • Salary
  • Interest on drawings

    • What is typically found in the Statement of Financial Position for each partner?

    <p>Capital accounts and current accounts</p> Signup and view all the answers

    What is an appropriation that is not to be confused with salaries paid to employees?

    <p>Salary</p> Signup and view all the answers

    What is an appropriation that is related to a partner's drawings?

    <p>Interest on drawings</p> Signup and view all the answers

    What is the consideration for shares issued by a company?

    <p>Valuable consideration</p> Signup and view all the answers

    What happens in a Capitalization/Bonus/Scrip Issue?

    <p>Monies in a company's reserve is converted into capital and then distributed to shareholders as new shares</p> Signup and view all the answers

    What is the purpose of circulating a Prospectus?

    <p>To invite the public to apply for shares</p> Signup and view all the answers

    What is a Rights Issue?

    <p>Shares are issued to existing shareholders in proportion to their current shareholding</p> Signup and view all the answers

    What is the maximum number of shares that a company can issue?

    <p>The total number authorized by its regulations</p> Signup and view all the answers

    When are shares paid for?

    <p>At the time agreed by the members and the company</p> Signup and view all the answers

    What is Private Placement?

    <p>The sale of shares of companies to private investors without the use of public market exchanges</p> Signup and view all the answers

    What is Initial Public Offer?

    <p>Sale of shares by a private company for the first time to the public</p> Signup and view all the answers

    What is the unrealized profit amount?

    <p>1400</p> Signup and view all the answers

    What is the maximum number of persons allowed in a partnership in Ghana?

    <p>20</p> Signup and view all the answers

    What is the purpose of preparing a profit and loss appropriation account?

    <p>To distribute profits among partners</p> Signup and view all the answers

    What is the closing balance of the income surplus?

    <p>57500</p> Signup and view all the answers

    What is the total capital financed by?

    <p>144500</p> Signup and view all the answers

    What is the amount of dividend paid out?

    <p>3500</p> Signup and view all the answers

    What is a partnership?

    <p>The association of two or more individuals carrying on business jointly for the purpose of making profits</p> Signup and view all the answers

    What is the purpose of preparing a current account?

    <p>To record the daily transactions of the partnership</p> Signup and view all the answers

    What is the debit account when cash or cheque is received on application?

    <p>Bank/Cash Account</p> Signup and view all the answers

    What is the credit account when consideration other than cash is received?

    <p>Application Account</p> Signup and view all the answers

    What happens to the application amount received in respect of shares allotted at the allotment stage?

    <p>It is transferred to the Stated Capital Account</p> Signup and view all the answers

    What is the debit account when there is a refund of money for rejected applications?

    <p>Application Account</p> Signup and view all the answers

    What happens to excess funds for other stages (partly successful applicants) at the allotment stage?

    <p>It is retained in the Allotment Account</p> Signup and view all the answers

    What is the debit account when allotment monies (cash/cheque) due on shares issued are received?

    <p>Cash/Bank Account</p> Signup and view all the answers

    What is the credit account when there is a transfer to the stated capital at the allotment stage?

    <p>Stated Capital Account</p> Signup and view all the answers

    Who is the author of the content provided?

    <p>F. Aboagye</p> Signup and view all the answers

    What is the primary purpose of business organizations?

    <p>To make profits and provide returns to its owners</p> Signup and view all the answers

    What type of organizations are not intended to be profit-oriented?

    <p>Non-profit making organizations</p> Signup and view all the answers

    When making adjustments for accruals and prepayments, what is being prepared?

    <p>Income statement</p> Signup and view all the answers

    What is the normal assumption when the missing amount is in respect of payments?

    <p>The missing figure is the amount required to make both totals agree in the cash column</p> Signup and view all the answers

    What is the likely scenario when payments are more than receipts?

    <p>The missing figure is cash receipts from customers</p> Signup and view all the answers

    What is the purpose of this session?

    <p>To differentiate between profit and non-profit oriented organizations</p> Signup and view all the answers

    What type of organizations provide services to the public or its members?

    <p>Non-profit making organizations</p> Signup and view all the answers

    What can always be obtained from the bank in respect of bank related transactions?

    <p>A copy of all transactions</p> Signup and view all the answers

    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

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    Description

    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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