IA2: ACCOUNTING FOR SPECIALIZED BUSINESSES 2

This unit deals with the peculiarities associated with accounting for specialized business of solicitor’s account, provident fund accounting, voyage/shipping accounts and accounts of cooperative societies.

SOLICITOR’s ACCOUNT
Fiduciary relationship exists between the solicitor and his clients. Consequently, a firm of solicitors is obliged to keep separate account of client’s moneys and solicitor’ own money.
Accounting books required
The solicitor must keep the following accounting books to record the transactions on behalf of his client’s and his office operations.

(a) Cashbook (2 columns: client’s bank account, office bank account).
(b) Bill delivered book.
(c) Petty cash or disbursement book.
(d) Client’s ledger account- (2 columns- client’s a/c; office a/c).
(e) Private ledger- account not included in client’s ledger.
Accounting entries
The following entries should be made in solicitor’s books when the stated transactions take place:
(a) When money is received from the client by the solicitor.
DR Cash Book (client)

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ILLUSTRATION

Mr George, a solicitor, carried out the following transactions during the month of October 2008:

October 10: paid N60,000 to Mr James, at the request of his client, Mr Da-Silva, on account of a debt due from Mr Da-Silva to James; the client having no money in the hand of solicitor.

October 20: Mr Da-Silva pays N240,000 to the solicitor to meet the N60,000 and to discharge the balance of debt due to Mr James.

October 25: Mr James received a cheque of N150,000 from the solicitor, being the balance of the debt due from Mr Da-Silva. The solicitor charged Mr Da-Silva N6,000 as costs which are agreed by the client and remits the balance to Mr James by cheque.

Required: post the above transactions in the necessary accounts, and records as it will appear in the books of Mr George.

Suggested Solution

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VOYAGE/SHIPPING ACCOUNTS

Shipping companies are expected to maintain a separate voyage account for each vessel to ascertain profit/loss account of a trading concern.

All expenses relating to a voyage (for example, stores, wages, insurance, commission brokerage, fuel and repairs) are debited to the voyage account. All earnings, passage money, freight and mail money (if any) are credited to voyage account. The balance on the voyage account represents the profit or loss made on the voyage and is transferred to the general profit and loss account.

ILLUSTRATION

SS Olokun was chartered on 1 March 2008, by Ocean View Shipping Agency Ltd from Awaye Lines Limited. It sets on a voyage on that date as follows:

Accra to Apapa with general cargo at N2,300 per ton. The charter stipulates for an address commission to the chatterers of 2% on freight, payable on signing the bill of lading together with a brokerage of 5% to the charters’ agents, of which, one fifth is repayable to the vessel.

Conakry to Port Harcourt is at N1,700 per ton. Address commission of 2% on freight payable to charterers and brokerage of one-third of 5% payable to charters’ agent on signing charter. The vessel was insured by Cornerstone Insurance Plc on 1 January 2008, for one year at N3 million and managing owner’s Articles of Association fixed remuneration at 1.5% of gross freight charges.

The following are relevant extracts from the shipping company’s account:

Freight of 15,000 tons of rice to Apapa and 17,500 tons of rubber to Port Harcourt:

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The voyage terminated on 30 November 2008. You are required to prepare a voyage account (provide expenses to the nearest month).

SUGGESTED SOLUTION

 OCEANIC VIEW SHIPPING AGENCY LTD

VOYAGE ACCOUNT FOR THE PERIOD 1/3/04 TO 30/11/04

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ACCOUNTS OF COOPERATIVE SOCIETIES

Introduction

Groups of individuals in employment, trade, commerce or industry, come together to form a co-operative society with a view to investing their resources for the benefits of the members.

The society is guided by its constitution and by-laws and must be registered with the Director of Co-operative Societies of the State of its operations.

The Funds of a cooperative society are usually generated from the contributions from members through direct monthly contributions and agreed deductions from members’ salaries, in case of employees. The fund is then lent to its members for a stated purpose at an interest rate that is usually below the market rate.

Contributions from members could be in form of subscriptions to the society’s share capital, members’ savings or education fund.

The Society’s funds are invested in shares of limited liability companies, short-term deposits, or commodities for sale to its members, to generate income for the society.

ILLUSTRATION

 ONITSHA CO-OPERATIVE THRIFT AND CREDIT SOCIETY LIMITED

 TRIAL BALANCE AS AT 31 DECEMBER 2008 IS AS FOLLOWS:

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After appropriation to reserve and education fund, the Executive Committee proposed to pay #1,227,000 as dividends to members and transfer the balance to general reserve.

Required:

Prepare the Society’ reserve account for the year ended 31 December, 2008 and a balance sheet as at that date.

SUGGESTED SOLUTION

 ONITSHA CO-OPERATIVE TRIFT AND CREDIT SOCIETY LIMITED

 REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2008 INCOME

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Conclusion

In this unit, the conclusion is that the officers of the society are obliged to prepare and lay before its members, the audited financial statements of the society at a properly convened Annual General

Meeting at which issues relating to the activities of the society in the year under review and dividends payable to members are discussed. The account prepared by the society must include a balance sheet and a revenue account with relevant notes on the accounts.

 

 

 

 

 

 

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