The following balances have been extracted from the books of Arandis Local Government Treasury, for the month ended 31 March 2015: N$ ,500

Transcription

1 Example 1 Trial Balance The following balances have been extracted from the books of Arandis Local Government Treasury, for the month ended 31 March 2015: N$ ,500 Reserve Fund Cash on hand 53,000 Bank Overdraft 5,700 Revenues (recurrent/capital) 158,500 Expenditures (recurrent/capital) 125,390 Loans 200,000 Deposits into (the L.G. Treasury) 23,450 Advances (granted by L.G.) 25,560 Investments 15,200 Suspense accounts 202,000 You are required to prepare a trial balance for the month ended 31 March, ARANDIS LOCAL GOVERNMENT TRIAL BALANCE AS AT 31 MARCH 2015 DR CR N$'000 N$'000 Reserve Fund 33,500 Cash on hand 53,000 Bank Overdraft 5,700 Revenue (Recurrent/Capital) 158,500 Expenditure (Recurrent/Capital) 125,390 Loans 200,000 Deposits into the L.Govt Treasury 23,450 Advances granted by the L. Govt 25,560 Investments 15,200 Suspense Account 202, , ,150

2 Example 2 Bank reconciliation The cash book of Omaruru Town Council has a credit balance of N$21,000 on 30 June The bank statement showed a debit balance of N$56,400. An investigation into the difference in figures reveals the following information: The bank had paid N$40,000 on 29 June by way of standing order. A cheque for N$103,700 sent to the supplier on 29 June 2016, was not paid by the bank until 6 July 2016 A cheque valued at N$168,000, paid into the back on 28 June 2016 was not credited until 3 July On 27 June 2016, a cheque for N$11,400 received from an insurance company was posted in the Cash Book as N$71,400. N$130,000 drawn from the deposit account had been shown in the Cash Book withdrawal from the current account. Bank charges of N$1,100 shown in the bank statement had not been entered in the Cash Book. You are required to: a) Prepare an Adjusted Cash Book of the Omaruru Town Council for the month ending 30 June (8 Marks) b) Prepare a statement reconciling the amended balance with the one shown on the bank statement. (5 Marks) 1 Mark for presentation of each statement (2 Marks) a) OMARURU TOWN COUNCIL ADJUSTED CASH BOOK FOR THE MONTH ENDED 30 JUNE 2016 N$ N$ P Wrong posting of drawn cash 130,000 Balance B/F 21,000 P Insurance wrong posting (71,400-11,400) 60,000 PP Standing Order 40,000 P Bank charges 1,100 P Balance C/D 7,900 PP 130, ,000 Presentation P b) OMARURU TOWN COUNCIL BANK RECONCILIATION STATEMENT FOR THE MONTH ENDED 30 JUNE 2016 N$ Balance as per Adjusted Cashbook 7,900 P Add: Unpresented cheques 103,700 P 111,600 P Less: Uncredited cheques - 168,000 P Balance as per the bank statement - 56,400 P Presentation P

3 Example 3 Vote Ledger A Vote book is a memorandum accounts book used for monitoring Government expenditure and ensuring that there is no extra-budgetary spending. It is the duty of every officer controlling expenditure to keep a vote book. The following balances were extracted from the Vote Ledger of Ministry of Finance State Treasury in March 2016: Vote Item Amount N$ 211 Contribution from Consolidated Revenue Fund External grant Internal loan External loan Rural development Mining and Quarrying Air transport Education Health Care Environment and tourism Housing Defence General administration In addition, the following pieces of information were derived from the approved Capital Budget of the State: Vote N$ Vote N$ The funds are assumed to flow evenly during the period. Required a) Give five (5) reasons for keeping a Vote Book. (5 Marks) b) Prepare the Development Fund Statement of Accounts for the period ended March 31, (16 Marks)

4 a) Reasons for keeping a Vote Book are: i) For effective monitoring of government expenditure. P ii) To show uncommitted balance at a glance. P iii) To highlight Government creditors and liabilities. P iv) To ensure that funds are available in the appropriate Heads and Sub-heads to meet payments due. P v) To ensure that there is no extra budgetary-spending. P (Max 5 marks) b) Development funds statement of accounts for the period ended March 31, 2012 Vote Item Estimates Actual 211 Contribution from CRF 5,000,000 1,500,000 PP 212 External grant 3,100,000 1,800,000 PP 213 Internal loans 1,600,000 1,100,000 PP 214 External loans 1,200,000 3,300,000 PP 10,900,000 7,700,000 PP 220 Rural development 300, ,000 PP 225 Mining and quarrying 350,000 2,500,000 PP 231 Air transport 160, ,000 PP 233 Education 315, ,000 PP 234 Health care 464, ,000 PP 239 Environment 45,000 1,700,000 PP 240 Housing 150, ,000 PP 245 Defence 700,000 1,170,000 PP 246 General administration 450, ,000 PP 2,934,000 8,254,000 PP Surplus / (Deficit) 7,966, ,000 PP (Max 16 marks - ½ mark for each entry on estimate and actual) Example 4 Vote Accounting The following transactions were recorded in the records of the Ministry of Education in respect of the purchase of stationery, thus: 01/08/2015 Authorised appropriation for the year is N$1,000, /08/2015 Paid N$45,000 for the purchase of stationery from ABC Bookshop on PV No /08/2015 N$50,000 paid on PV no for the supply of pencils from Executive Bookshop. 10/08/2015 Issue LPO no.0044 to Lambus Bookshop for the supply of photocopying papers, for N$100, /08/2015 Settled Lambus on account on PV no /08/2015 Paid N$20,000 for stapling pins and staplers from City Stationers, on PV no /08/2015 PV no for N$120,000 was raised for payment for typing sheets to CSS Bookshop. 27/08/2015 Issued LPO no for N$300,000 for supply of writing pads to Waltons Bookshop. 30/08/2015 Settled N$300,000 on PV no for the purchase of calculators, to Dossy Bookshop. 31/08/2015 Paid Waltons on account on PV. No The Head and Sub-head numbers are 502 and 05 respectively. You are required to prepare the Vote Book of the Ministry of Education for the month of August [34 marks]

5 Head mark Authorised Appropriation: Sub-Head 05 1 mark AGW: N$1,000,000 1 mark 4 Service Stationery 1 mark 1 Presentation Cumm. Payment Balance Liability Ref. Liability incurred Liability cleared Outstanding Liability Uncommitted Balnance Marks awared Marks Line no. Line no. awared Line no. Date PV No. Particulars Payment Remarks Authorised 1 01/08/2015 Appropriation - - 1,000, ,000, /08/ ABC Bookshop 45,000 45, , , Executive 3 06/08/ Bookshop 50,000 95, , , LPO issued to 4 10/08/ , ,000 LPO , ,000 Lambus 905, Settlement to 5 18/08/ Lambus 100, , , ,000 - Lambus 805, /08/ City Stationers 20, , , , /08/ CSS Bookshop 120, , , , LPO issued to 8 27/08/ , ,000 LPO , ,000 Waltons 665, /08/ Dossy Bookshop 300, , , , /08/ Wantons 300, ,000 65, ,000 - Settlement to Waltons 65, Half marks 34 Total marks

6 Example 5 Correcting Journals The following were discovered by the Accounting Officer of the Ministry of Works, Transport and Communication, while cross-checking the books of accounts, on 31 December On 31 March 2015, a double payment of N$95,000 was made to ABC Constructions (Pty) Ltd, a contractor, for services rendered in the maintenance of Government Buildings. 2. An amount of N$90,000 was fraudulently withdrawn from the State Emergency Relief Fund in October The sum of N$900,000 initially charged to Motor Vehicle Advances Account had been abandoned. 4. The sum of N$2,950,000 for revenue which should have been collected by the Government was abandoned. 5. An overpayment of N$12,000 made in 2015 was charged to the Consolidated Revenue Fund. Required: Prepare CORRECTING journal entries to reflect the above transactions. Narratives are required. Date Details Debit Credit 1 Dec 2015 Cash Account P 95,000 P (1/2 mark for each amount) ABC Constructions (Pty) Ltd P 95,000 P Being refund of overpayment made on 31 March 2015 P 2 Dec 2015 Cash Account P 90,000 P (1/2 mark for each amount) State Emergency Relief Fund P 90,000 P Amount fraudulently withdrawn from the Fund P 3 Dec 2015 Bad debt Account P 900,000 P (1/2 mark for each amount) Motor Vehicle Advanced Account P 900,000 P Being the abondonment of the amount charged to the Moto Vehicle Advanced Account P 4 Dec 2015 Bad debt Account P 2,950,000 P (1/2 mark for each amount) Revenue Receivable Account P 2,950,000 P Being revenue receivable, now abondoned P 5 Dec 2015 Cash Account P 12,000 P (1/2 mark for each amount) Consolidated revenue Account P P Being overpayment recovered. P

7 Example 6 Profit Statement & Value Added Statement (a) Differentiate between Value Added and Value-Added Statement. (5 Marks) (b) The following summarized information has been obtained from New Era, a newspaper publishing arm of GRN in respect of the year ended December 31, 2012 N$ Salaries Purchased material used in production Sales Corporate tax for the year Proposed dividend Services consumed Depreciation of fixed assets Loan interest paid Using the vertical method of presentation, you are required to prepare: i) Conventional profit statement of New Era; and ii) Valued Added statement (15 Marks) a) Value Added is the amount by which the sales value of production was enhanced by the effort of the organization and its employees. It is the wealth created by the combined efforts of both the organization and the employees. Value-Added Statement is the information format prepared to show how the excess of turnover brought out materials and services, has been applied to items such as provisions for depreciation, employers, government and employees. (5 marks) b) i) New Era Conventional profit statement for the year ended December 31, N$ N$ Sales Less Purchased material used in production Gross profit Expenses Salaries Services consumed Depreciation of fixed assets Loan interest ( ) Profit Before Tax (PBT) Taxation (60 000) Profit After Tax (PAT) Dividend proposed (33 000) Profit carried forward ( 1/ 2 mark each correct entry excluding gross profit = 6 marks)

8 (ii) New Era Value added statement for the year ended December N$ % Sales Sales Bought out materials and services used in production ( ) Value added Applied to: Employees Government (Corporate tax) Providers of capital: Interest of loan Proposed dividend For expansion/maintenance of assets: Retained earnings Depreciation (½ mark each correct entry = 9 marks) Example 7 Independence of Auditors [22 marks] The independence of Internal Audit in a public sector organisation is considered to be essential to its effectiveness. (a) Define internal audit and internal controls, and explain their roles and objectives in a public sector organisation. (10 Marks) (b) What 3 factors influence the size and organisation of an internal audit section in a Public Sector organisation? (3 Marks) (c) Explain what is meant by independence in this context. (6 Marks) (d) Give examples of circumstances which might impair independence. (3 Marks) a) Definition of internal audit An independent appraisal function within an organisation for the review of activities as a service to all levels of management. It is a control which measures, evaluates and reports upon the effectiveness of internal controls, financial and otherwise as a contribution to the effective use of resources within an organisation. PP (2 marks) Definition of internal audit - as defined in accounting and auditing, is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. PP (2 marks) The role and objectives of internal audit may vary between different parts of the Public Sector, depending on attitudes, statutory requirements, size etc. It is the responsibility of internal audit to review, appraise and report upon the following matters: i) The soundness, adequacy and application of internal controls P internal controls can be said to comprise the whole system of controls established by management in order to: 1) Safeguard its assets P 2) Ensure reliability of records P 3) Promote operational efficiency and P 4) Monitor adherence to policies and directives. P

9 ii) The extent to which the organisation s assets and interests are accounted for and safeguarded from losses of all kinds from: P 1) Fraud and other offences and P 2) Waste, extravagance and inefficient administration, poor value for money and other causes. P (Any 6 points for 6 marks) b) Factors that influence the size and organisation of an internal audit section are: i) Type of organisation P ii) The size of the organisation P iii) The scope and objectives of internal audit P iv) Managerial attitude to internal audit P v) The adequacy of internal control system P (Any 3 points for 3 marks) c) As the internal auditor is appointed within the organisation he cannot be completely independent of the organisation but he must be sufficiently independent to allow him to carry out his duties in a manner which allows his professional judgement and recommendations to be effective and impartial. PP In order to operate effectively, the internal auditor should: 1) Be independent of all staff whose operations are under review. P 2) Not be involved in routine financial systems. P 3) Have direct access to all department heads, chief executive and the management board. P 4) Have full rights of access to records, assets and personnel and receive such information and explanation as are necessary for the performance of their duties. P (6 marks) d) Impairment of Independence (i) Having an interest in business which is involved in any way with the audit. P (ii) Having been previously involved e.g. as accountant in the operations; or P (iii) Personal relationship e.g. a spouse or other relative of persons being audited. P (3 marks)