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Difficulty: HardBar Trading and Special Activities Account

Silver Crest Social Club operates a bar for its members. The following details relate to the bar operations for the financial year ended 31 December 2025:

DetailsAmount (₦)
Cash received from bar sales450,000
Bar inventory as at 1 January 202540,000
Bar inventory as at 31 December 202555,000
Cash paid to bar suppliers260,000
Bar creditors as at 1 January 202530,000
Bar creditors as at 31 December 202545,000
Bar steward's wages paid50,000
Accrued bar steward's wages as at 31 December 202510,000

What is the net profit from the bar trading operations to be transferred to the Income and Expenditure Account for the year?

  1. ₦130,000Answer
  2. B
    ₦180,000
  3. C
    ���100,000
  4. D
    ₦145,000

Answer

The net profit from bar operations to be transferred to the Income and Expenditure Account is ₦130,000.
The net bar profit transferred to the Income and Expenditure Account is ₦130,000. It is computed by finding total credit purchases (₦275,000), evaluating Cost of Goods Sold (₦260,000) to get Gross Profit (₦190,000), and deducting total steward wages including accrued amount (₦60,000).

Step-by-Step Solution

1
Calculate total bar purchases for the year
Total Purchases = ₦260,000+₦45,000−₦30,000=₦275,000\text{₦}260,000 + \text{₦}45,000 - \text{₦}30,000 = \text{₦}275,000
Cash payments must be adjusted by adding closing creditors and deducting opening creditors to derive credit purchases.
2
Calculate Cost of Bar Goods Sold (COGS)
COGS = ₦40,000+₦275,000−₦55,000=₦260,000\text{₦}40,000 + \text{₦}275,000 - \text{₦}55,000 = \text{₦}260,000
Opening inventory is added to total purchases and closing inventory is deducted.
3
Calculate Bar Gross Profit
Gross Profit = ₦450,000−₦260,000=₦190,000\text{₦}450,000 - \text{₦}260,000 = \text{₦}190,000
Cost of goods sold is subtracted from total cash takings/sales.
4
Deduct total bar expenses to find Net Bar Profit
Total Wages = ₦50,000+₦10,000=₦60,000\text{₦}50,000 + \text{₦}10,000 = \text{₦}60,000; Net Profit = ₦190,000−₦60,000=₦130,000\text{₦}190,000 - \text{₦}60,000 = \text{₦}130,000
Accrued wages must be added to paid wages to determine total expense, which is then subtracted from bar gross profit.

Key Concept

Preparation of Bar Trading and Profitability Statement in Non-Profit Organizations
Estimated Time:2m 0s
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Topics

Bar Trading and Special Activities Account

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