All practice questions

Question 341Question →

Apex Enterprises operates two departments: Department X and Department Y. Department X transfers finished goods to Department Y at cost plus $33\frac{1}{3}\%$ . At the end of the accounting year ended 31st December 2025, Department Y held closing inventory valued at $\text{N}40,000$ . An inspection of inventory records reveals that $75\%$ of Department Y's closing inventory consists of goods transferred from Department X. Given that the opening provision for unrealized profit at 1st January 2025 was $\text{N}2,500$ , what is the net amount (in Naira) to be debited to the General Profit and Loss Account for provision for unrealized profit for the year?

Show answer & explanation

Answer: 5000

Answer

The net amount to be debited to the General Profit and Loss Account for provision for unrealized profit is 5000.

To calculate the net adjustment to the General Profit and Loss Account, first isolate the transfer component of Department Y's closing inventory (

75\% \times \text{N}40,000 = \text{N}30,000

). Convert the transfer mark-up of

33\frac{1}{3}\%

on cost to a margin on transfer price:

\frac{1/3}{1 + 1/3} = 25\%

. The total unrealized profit contained in closing stock is

25\% \times \text{N}30,000 = \text{N}7,500

. Since an opening provision of

\text{N}2,500

already exists, the additional amount to be debited to the General Profit and Loss Account is

\text{N}7,500 - \text{N}2,500 = \text{N}5,000

.

Step-by-Step Solution

1

Determine the proportion of closing inventory derived from inter-departmental transfers

Transferred goods portion =

75\% \times \text{N}40,000 = \text{N}30,000

Unrealized profit exists only in the portion of closing stock that was transferred from Department X, not in goods purchased externally.

2

Convert mark-up rate to profit margin rate

Margin =

\frac{\text{Mark-up}}{1 + \text{Mark-up}} = \frac{1/3}{4/3} = \frac{1}{4} = 25\%

Department X charges goods at cost plus

33\frac{1}{3}\%

. To extract profit from the transfer price (invoice price), mark-up must be converted to margin on transfer price.

3

Calculate the closing provision required at the end of the year

Closing Provision =

25\% \times \text{N}30,000 = \text{N}7,500

This represents the total profit element included in Department Y's remaining transferred stock that has not yet been sold to third parties.

4

Calculate the net charge to the General Profit and Loss Account

Net P&L Debit = Closing Provision - Opening Provision =

\text{N}7,500 - \text{N}2,500 = \text{N}5,000

The General Profit and Loss Account is debited with the increase in provision required for the current accounting period.

Key Concept

Provision for Unrealized Profit on Inter-Departmental Transfers

Estimated Time:2m 30s

Question 342Question →

Ada and Bello formed a partnership business without drawing up a partnership deed. For the year ended 31st December 2025, the firm earned a profit of ₦180,000 before accounting for any interest or partner allowances. Ada contributed ₦500,000 as capital, while Bello contributed ₦300,000. Additionally, Bello advanced a loan of ₦200,000 to the firm on 1st January 2025. Bello demanded a monthly salary of ₦5,000 and 6% interest per annum on his capital. In accordance with the provisions of the Partnership Act 1890, what is Ada's share of the net profit (in ₦)?

Show answer & explanation

Answer: 85000

Answer

Ada's share of the net profit is ₦85,000.

Because no partnership deed was drawn up, the provisions of the Partnership Act 1890 govern the business. Under this Act, partners are not entitled to salaries or interest on capital, and profits are shared equally. However, partners are entitled to 5% interest per annum on any loan advanced to the firm. Bello's loan interest equals ₦10,000 (5% of ₦200,000), which reduces net profit from ₦180,000 to ₦170,000. Sharing ₦170,000 equally results in ₦85,000 for Ada.

Step-by-Step Solution

1

Determine statutory allowances and interest under the Partnership Act 1890

Partner salary = ₦0; Interest on capital = ₦0; Interest on loan = 5% per annum; Profit sharing ratio = 1:1 (Equal)

When no partnership deed exists, the Partnership Act 1890 applies default statutory provisions.

2

Calculate interest on partner loan

₦200,000 × 5% = ₦10,000

Loans provided by partners above their capital contribution attract 5% interest per annum as a business expense.

3

Calculate divisible profit after deducting loan interest

₦180,000 - ₦10,000 = ₦170,000

Interest on a partner's loan is a charge against profit, not an appropriation of profit.

4

Distribute divisible profit equally to Ada

₦170,000 ÷ 2 = ₦85,000

The Partnership Act 1890 mandates equal profit sharing regardless of capital contribution ratio.

Key Concept

Statutory rules under the Partnership Act 1890 in the absence of a Partnership Deed

Estimated Time:1m 30s

Question 343Question →

Before preparing the final accounts of Okon & Sons, the Sales Ledger Control Account balance was $₦145,800$ . A subsequent audit revealed the following errors:
1. The total of the Sales Day Book was posted to the Sales Ledger Control Account as $₦45,200$ instead of the correct total of $₦54,200$ .
2. Discount allowed of $₦3,400$ was entered in the Sales Ledger Control Account as $₦4,300$ .
3. A contra entry of $₦2,500$ set off against the Purchases Ledger Control Account was omitted entirely from the Sales Ledger Control Account.
4. Bad debts written off of $₦1,800$ were posted to individual debtors' accounts but omitted from the Sales Ledger Control Account.
5. A dishonoured cheque of $₦4,000$ was posted correctly in the Sales Ledger Control Account but entered as $₦400$ in the customer's individual account.

Calculate the corrected Sales Ledger Control Account balance after all necessary adjustments.

Show answer & explanation

Answer: 151400

Answer

The corrected Sales Ledger Control Account balance is 151,400

To arrive at the corrected Sales Ledger Control Account balance, only adjustments affecting the general ledger control account must be processed: add the ₦9,000 under-posted sales day book total, add ₦900 to correct the over-credited discount allowed, subtract ₦2,500 for the omitted contra entry, and subtract ₦1,800 for the omitted bad debt. The posting error in the individual debtor's personal account (item 5) does not affect the control account. Therefore,

145,800 + 9,000 + 900 - 2,500 - 1,800 = 151,400

.

Step-by-Step Solution

1

Identify the unadjusted control account balance

Unadjusted Balance = ₦145,800 (Debit)

This is the starting point before error corrections.

2

Calculate adjustment for Sales Day Book posting error

Add ₦9,000 (₦54,200 - ₦45,200)

Sales Day Book total increases debtors, so under posting on the debit side of the control account requires a debit addition.

3

Calculate adjustment for Discount Allowed overstatement

Add ₦900 (₦4,300 - ₦3,400)

Discount allowed reduces debtors (credited to control account). Crediting ₦4,300 instead of ₦3,400 reduced the control account by ₦900 too much; hence, ₦900 must be debited back.

4

Adjust for omitted contra entry and bad debts

Deduct ₦2,500 (Contra) and deduct ₦1,800 (Bad debts)

Both contra entries and bad debts write-offs reduce total receivables and belong on the credit side of the Sales Ledger Control Account.

5

Evaluate subsidiary ledger error impact

No adjustment to control account for item 5

Errors in individual customer subsidiary ledger accounts affect the list of debtors/schedule of balances, not the control account in the general ledger.

6

Compute final corrected balance

145,800 + 9,000 + 900 - 2,500 - 1,800 = 151,400

Sum of initial balance and all valid general ledger control adjustments.

Key Concept

Control Account Adjustment vs Subsidiary Ledger Reconciliation

Question 344Question →

During May 2026, Ade Trading Enterprise engaged in the following transactions:

1. May 4: Purchased $100$ bags of rice for resale from Alhaji & Sons at $\text{₦}20,000$ per bag, subject to a $10\%$ trade discount.
2. May 10: Purchased office furniture on credit from Woodworks Ltd for $\text{₦}400,000$ less a $5\%$ trade discount.
3. May 15: Purchased $50$ cartons of milk for resale from Dairy Co. for $\text{₦}500,000$ cash.
4. May 22: Purchased $40$ bags of sugar for resale from Sweet Traders at $\text{₦}15,000$ per bag, subject to a $15\%$ trade discount with prompt payment cash discount terms of $2/10, \text{n}/30$ .
5. May 28: Returned $10$ defective bags of rice to Alhaji & Sons from the May 4 purchase.

What is the total amount (in $\text{₦}$ ) to be entered into the Purchases Journal for May 2026?

Show answer & explanation

Answer: 2310000

Answer

The total amount to be entered into the Purchases Journal for May 2026 is ₦2,310,000.

The Purchases Journal records only credit purchases of merchandise intended for resale, calculated after trade discounts. Summing the May 4 net purchase (₦1,800,000) and May 22 net purchase (₦510,000) gives a total of ₦2,310,000.

Step-by-Step Solution

1

Filter transactions for entry into the Purchases Journal

Only transactions on May 4 and May 22 qualify.

The Purchases Journal strictly records credit purchases of inventory/goods intended for resale. Fixed asset purchases on credit go to the General Journal, cash purchases go to the Cash Book, and returns go to the Purchases Returns Journal.

2

Calculate the net price for the May 4 transaction

₦1,800,000

Gross amount is

100 \times \text{₦}20,000 = \text{₦}2,000,000

. Deducting the

10\%

trade discount (

\text{₦}200,000

) gives

\text{₦}1,800,000

.

3

Calculate the net price for the May 22 transaction

₦510,000

Gross amount is

40 \times \text{₦}15,000 = \text{₦}600,000

. Deducting the

15\%

trade discount (

\text{₦}90,000

) gives

\text{₦}510,000

. Cash discounts are ignored when recording entries in the Purchases Journal.

4

Calculate the total Purchases Journal balance for the month

₦2,310,000

Sum the net amounts of eligible transactions:

\text{₦}1,800,000 + \text{₦}510,000 = \text{₦}2,310,000

.

Key Concept

Scope and calculation rules of the Purchases Journal

Question 345Question →

Ade & Sons purchased a delivery van on 1 April 2023 for $₦2,000,000$ . The firm depreciates its motor vehicles using the reducing balance method at the rate of $20\%$ per annum. The financial year of the business ends on 31 December each year. What is the total accumulated depreciation on the delivery van as of 31 December 2024?

Show answer & explanation

Answer: 640000

Answer

The total accumulated depreciation as of 31 December 2024 is ₦640,000.

For the financial year ended 31 December 2023, the van was used for 9 months (April 1 to December 31). Depreciation for 2023 is

20\% \times ₦2,000,000 \times \frac{9}{12} = ₦300,000

. The net book value as of 31 December 2023 becomes

₦2,000,000 - ₦300,000 = ₦1,700,000

. For 2024, depreciation using the reducing balance method is

20\% \times ₦1,700,000 = ₦340,000

. The total accumulated depreciation as of 31 December 2024 is the sum of both years' depreciation charges:

₦300,000 + ₦340,000 = ₦640,000

.

Step-by-Step Solution

1

Determine the time proportion and calculate depreciation for the first year (2023)

₦300,000

The asset was bought on 1 April 2023, so depreciation is charged for only 9 months in 2023:

20\% \times ₦2,000,000 \times \frac{9}{12} = ₦300,000

.

2

Calculate net book value (NBV) at the end of 2023

₦1,700,000

Under reducing balance method, future depreciation applies to the net book value (

₦2,000,000 - ₦300,000 = ₦1,700,000

).

3

Calculate depreciation for the second year (2024)

��340,000

Depreciation for a full year on reducing balance:

20\% \times ₦1,700,000 = ₦340,000

.

4

Sum depreciation for both years to get accumulated depreciation at 31 December 2024

₦640,000

Accumulated depreciation is the aggregate of all yearly depreciation charges (

₦300,000 + ₦340,000 = ₦640,000

).

Key Concept

Reducing balance depreciation method with proportionate mid-year calculation

Question 346Question →

The following transactions and balance details were extracted from the books of Zenith Manufacturing Company for the year ended 31 December 2025:

Financial Item	Amount (₦)
Opening stock of raw materials	45,000
Purchases of raw materials	185,000
Carriage inwards on raw materials	12,500
Returns outwards of raw materials	8,000
Closing stock of raw materials	35,000
Direct manufacturing wages paid	95,000
Accrued direct manufacturing wages	15,000
Royalties paid on production	22,500
Factory rent and rates	40,000
Depreciation of factory machinery	18,000
Factory supervisor's salary	30,000

What is the total prime cost of the manufacturing entity for the year in Naira?

Show answer & explanation

Answer: 332000

Answer

The total prime cost of the manufacturing entity for the year is ₦332,000.

Prime cost is calculated by summing direct materials consumed (₦199,500), direct labour adjusted for accruals (₦110,000), and direct expenses such as production royalties (₦22,500). Indirect items like factory rent, machinery depreciation, and supervisor salaries are factory overheads and are excluded from prime cost, giving a final answer of ₦332,000.

Step-by-Step Solution

1

Calculate the cost of raw materials consumed during the production period

Raw Materials Consumed = ₦45,000 + ₦185,000 + ₦12,500 - ₦8,000 - ₦35,000 = ₦199,500

Carriage inwards is added to purchases to obtain the total cost of raw materials delivered, returns outwards are deducted, and closing stock is subtracted to determine materials actually used in production.

2

Adjust direct wages paid for accrued wages at the end of the financial period

Direct Labour = ₦95,000 + ₦15,000 = ₦110,000

Under the accrual concept of accounting, incurred costs belonging to the period must be added to payments made.

3

Identify direct expenses attributable directly to production

Direct Expenses = Royalties on production = ₦22,500

Royalties paid per unit produced are direct expenses because they vary directly with output.

4

Sum all direct cost components to find Prime Cost

Prime Cost = ₦199,500 + ₦110,000 + ₦22,500 = ₦332,000

Prime cost is the aggregate of direct materials consumed, direct labour, and direct expenses. Indirect factory costs such as factory rent (₦40,000), plant depreciation (₦18,000), and supervisor salary (₦30,000) are factory overheads and must be excluded.

Key Concept

Prime Cost Calculation in Manufacturing Accounts

Question 347Question →

The following financial positions were extracted from the books of Metro Executive Club as at 1st January 2025:

- Club House (Cost): ₦850,000
- Equipment (Net Book Value): ₦200,000
- Bar Inventory: ₦45,000
- Subscriptions owing by members for 2024: ₦18,000
- Subscriptions received in advance for 2025: ₦12,000
- Accrued electricity bill: ₦7,500
- Prepaid insurance premium: ₦4,000
- Bank overdraft: ₦35,000
- Cash in hand: ₦8,500

What is the value (in ₦) of the Accumulated Fund of Metro Executive Club as at 1st January 2025?

Show answer & explanation

Answer: 1071000

Answer

The Accumulated Fund of Metro Executive Club as at 1st January 2025 is ₦1,071,000.

The Accumulated Fund is calculated using the fundamental statement of affairs equation: Accumulated Fund = Total Assets - Total Liabilities. Summing all asset items gives ₦850,000 (Club House) + ₦200,000 (Equipment) + ₦45,000 (Bar Inventory) + ₦18,000 (Subscriptions owing) + ₦4,000 (Prepaid insurance) + ₦8,500 (Cash in hand) = ₦1,125,500. Summing all liability items gives ₦12,000 (Subscriptions in advance) + ₦7,500 (Accrued electricity) + ₦35,000 (Bank overdraft) = ₦54,500. Subtracting liabilities from assets yields ₦1,125,500 - ₦54,500 = ₦1,071,000.

Step-by-Step Solution

1

Calculate Total Assets as at 1st January 2025

Total Assets = ₦1,125,500

Assets comprise non-current assets at net book value (Club House ₦850,000 and Equipment ₦200,000), current assets (Bar Inventory ₦45,000 and Cash in hand ₦8,500), accrued income (Subscriptions owing ₦18,000), and prepaid expenses (Prepaid insurance ₦4,000).

2

Calculate Total Liabilities as at 1st January 2025

Total Liabilities = ₦54,500

Liabilities represent amounts owed or unearned income, including income received in advance (Subscriptions in advance ₦12,000), accrued expenses (Electricity bill owing ₦7,500), and short-term bank borrowing (Bank overdraft ₦35,000).

3

Compute Accumulated Fund using the Accounting Equation

Accumulated Fund = ₦1,071,000

For a non-profit organization, the capital equivalent is the Accumulated Fund, calculated as Total Assets minus Total Liabilities: ₦1,125,500 - ₦54,500 = ₦1,071,000.

Key Concept

Calculation of Accumulated Fund via Statement of Affairs for Non-Profit Organizations

Question 348Question →

Kalu consigned $100$ cases of goods costing $\text{₦}1,000$ per case to Bola. Kalu paid carriage and freight expenses of $\text{₦}10,000$ . Bola received the consignment and sold $80$ cases, incurring non-recurring unloading charges of $\text{₦}5,000$ and recurring godown rent of $\text{₦}2,000$ . What is the total valuation of the unsold consignment stock in Naira?

Show answer & explanation

Answer: 23000

Answer

The total value of the unsold consignment stock is

\text{₦}23,000

.

The valuation of unsold consignment stock is calculated as the base cost of unsold units plus the proportionate share of all direct/non-recurring expenses. Base cost (

20 \times \text{₦}1,000 = \text{₦}20,000

) plus

20\%

of consignor freight (

\text{₦}2,000

) plus

20\%

of consignee unloading charges (

\text{₦}1,000

) equals

\text{₦}23,000

. Godown rent is a recurring cost and is excluded.

Step-by-Step Solution

1

Determine the number of unsold units

20

cases (

100 - 80 = 20

cases, or

20\%

of the consignment)

Valuation is only performed on the proportion of goods remaining unsold.

2

Calculate the base cost of unsold stock

20 \text{ cases} \times \text{₦}1,000 = \text{₦}20,000

The base purchase/cost price of the remaining inventory.

3

Add proportionate consignor expenses

\frac{20}{100} \times \text{₦}10,000 = \text{₦}2,000

All direct non-recurring expenses incurred by the consignor to send the goods are added proportionally to the stock value.

4

Add proportionate non-recurring consignee expenses

\frac{20}{100} \times \text{₦}5,000 = \text{₦}1,000

Only non-recurring direct expenses (unloading charges) incurred before goods reach the godown are added. Recurring expenses like godown rent are excluded.

5

Calculate total valuation of unsold stock

\text{₦}20,000 + \text{₦}2,000 + \text{₦}1,000 = \text{₦}23,000

Total unsold stock value equals base cost plus proportionate direct expenses.

Key Concept

Valuation of Unsold Consignment Stock

Question 349Question →

Ade purchased goods listed at $₦50,000$ , subject to a $10\%$ trade discount and a $5\%$ cash discount for prompt settlement. If Ade settled the account within the discount period, what is the amount of cash discount received in Naira ( $₦$ ) to be recorded in the three-column cash book?

Show answer & explanation

Answer: 2250

Answer

The amount of cash discount received to be entered in the three-column cash book is ₦2,250.

Trade discount is subtracted from the catalog price to get the net invoice value of ₦45,000. Cash discount for prompt payment is calculated as 5% of ₦45,000, giving ₦2,250, which is recorded in the discount column of the cash book.

Step-by-Step Solution

1

Calculate the trade discount

Trade discount = 10% of ₦50,000 = ₦5,000

Trade discount is a reduction in catalog price and is calculated first.

2

Determine the net invoice amount

Net Invoice Amount = ₦50,000 - ₦5,000 = ₦45,000

Trade discount is deducted from the list price before calculating cash discount.

3

Calculate the cash discount

Cash discount = 5% of ₦45,000 = ₦2,250

Cash discount is applied to the net invoice price for prompt payment.

Key Concept

Calculation of cash discount after deducting trade discount from list price

Question 350Question →

Ngozi and Emeka are partners in a firm maintaining fluctuating capital accounts. On 1st January 2025, Ngozi's capital account balance was ₦450,000. During the year ended 31st December 2025, Ngozi introduced additional capital of ₦100,000. The partnership appropriation records show that Ngozi was credited with interest on capital of ₦45,000, a annual partner salary of ₦80,000, and a share of profit amounting to ₦120,000. During the same period, Ngozi made cash drawings of ₦60,000 and was charged ₦5,000 as interest on drawings. What is the balance of Ngozi's capital account as at 31st December 2025 in Naira (₦)?

Show answer & explanation

Answer: 730000

Answer

The balance of Ngozi's capital account as at 31st December 2025 is ₦730,000.

Under the fluctuating capital method, all capital adjustments, partner entitlements, and withdrawals are recorded directly in the Capital Account. The closing balance is calculated by summing all credit entries (Opening Capital ₦450,000 + Additional Capital ₦100,000 + Interest on Capital ₦45,000 + Salary ₦80,000 + Share of Profit ₦120,000 = ₦795,000) and subtracting all debit entries (Drawings ₦60,000 + Interest on Drawings ₦5,000 = ₦65,000), giving a closing capital balance of ₦730,000.

Step-by-Step Solution

1

Calculate total credit additions to Ngozi's capital account.

₦450,000 + ₦100,000 + ₦45,000 + ₦80,000 + ₦120,000 = ₦795,000.

Under the fluctuating capital account system, opening capital, additional capital introduced, interest on capital, partner salaries, and shares of profit are credited to the partner's capital account.

2

Calculate total debit deductions from Ngozi's capital account.

₦60,000 + ₦5,000 = ₦65,000.

Drawings and interest on drawings reduce the partner's total capital balance and are debited to the capital account.

3

Compute the closing capital balance as at 31st December 2025.

₦795,000 - ₦65,000 = ₦730,000.

Deducting total debits from total credits provides the net closing credit balance of the capital account.

Key Concept

Calculation of closing capital balance under the fluctuating capital account method.

Estimated Time:1m 30s

Question 351Question →

Mr. Babatunde, a sole trader who keeps incomplete accounting records, had an opening capital of ₦120,000 on 1st January 2023 and a closing capital of ₦180,000 on 31st December 2023. During the year, he introduced additional capital of ₦30,000 and withdrew ₦15,000 for personal use. What is the net profit of the business for the year ended 31st December 2023 in Naira?

Show answer & explanation

Answer: 45000

Answer

The net profit for the year ended 31st December 2023 is ₦45,000.

Under the Statement of Affairs method, net profit is calculated by taking closing capital, adding back drawings, subtracting additional capital introduced, and deducting opening capital. Here, (₦180,000 + ₦15,000 - ₦30,000) - ₦120,000 = ₦45,000.

Step-by-Step Solution

1

Apply the Statement of Affairs profit determination formula.

Net Profit = (Closing Capital + Drawings - Additional Capital) - Opening Capital

Drawings reduce ending capital so they must be added back, while additional capital increases ending capital so it must be deducted to determine profit generated purely from business operations.

2

Substitute the financial figures into the formula.

Net Profit = (₦180,000 + ₦15,000 - ₦30,000) - ₦120,000

Inserting the given values into the equation allows direct evaluation.

3

Perform arithmetic calculations to find the net profit.

₦45,000

₦165,000 - ₦120,000 = ₦45,000.

Key Concept

Statement of Affairs Method for Capital and Profit Determination

Question 352Question →

On 31st December 2025, the Cash Book of Folake Trading Enterprise showed an overdrawn bank balance of $\text{NGN } 14,800$ . Upon comparing the Cash Book with the Bank Statement, the accountant identified the following items:

1. Unpresented cheques totaling $\text{NGN } 6,200$
2. Uncredited lodgements amounting to $\text{NGN } 4,500$
3. A direct credit transfer from a customer, Mr. Audu, of $\text{NGN } 3,400$ recorded only on the bank statement
4. Bank charges debited by the bank amounting to $\text{NGN } 850$
5. A standing order payment for business insurance of $\text{NGN } 1,200$ paid by the bank but not entered in the Cash Book
6. A cheque of $\text{NGN } 2,100$ previously deposited and entered in the Cash Book was returned unpaid (dishonoured) by the bank

What is the adjusted Cash Book balance in $\text{NGN}$ ? (Express an overdrawn balance as a negative number, e.g., $-5000$ ).

Show answer & explanation

Answer: -15550

Answer

The adjusted Cash Book balance is an overdraft of

-\text{NGN } 15,550

.

To calculate the adjusted Cash Book balance, start with the unadjusted overdraft of

-\text{NGN } 14,800

. Add unrecorded receipts such as the direct credit of

\text{NGN } 3,400

. Deduct unrecorded payments and debits made by the bank, which include bank charges (

\text{NGN } 850

), standing order (

\text{NGN } 1,200

), and the dishonoured cheque (

\text{NGN } 2,100

). Unpresented cheques and uncredited lodgements are timing differences that are reconciled only in the Bank Reconciliation Statement, so they are not included in adjusting the Cash Book. Calculating

-\text{NGN } 14,800 + \text{NGN } 3,400 - \text{NGN } 850 - \text{NGN } 1,200 - \text{NGN } 2,100

gives

-\text{NGN } 15,550

.

Step-by-Step Solution

1

Identify the starting Cash Book balance

Initial balance =

-\text{NGN } 14,800

(overdraft)

An overdrawn Cash Book balance is treated as a negative cash position.

2

Add items that increase the Cash Book balance

Add Direct Credit =

+\text{NGN } 3,400

. Running total =

-\text{NGN } 11,400

Direct credits are receipts deposited straight into the bank account by third parties which must be added to the Cash Book.

3

Deduct items that reduce the Cash Book balance

Deduct Bank Charges (

-\text{NGN } 850

), Standing Order (

-\text{NGN } 1,200

), and Dishonoured Cheque (

-\text{NGN } 2,100

). Total deductions =

-\text{NGN } 4,150

Bank charges, standing orders, and dishonoured cheques represent payments or uncollectible deposits recorded by the bank that must be debited/subtracted in the Cash Book.

4

Filter out items that do not belong in the Adjusted Cash Book

Unpresented cheques (

\text{NGN } 6,200

) and uncredited lodgements (

\text{NGN } 4,500

) are excluded from the Cash Book adjustment.

Unpresented cheques and uncredited lodgements are timing differences already correctly entered in the Cash Book, so they are adjusted in the Bank Reconciliation Statement rather than the Cash Book.

5

Calculate the final adjusted balance

Adjusted Cash Book balance =

-\text{NGN } 11,400 - \text{NGN } 4,150 = -\text{NGN } 15,550

Combining the initial overdraft with net adjustments gives the corrected balance.

Key Concept

Distinction between Cash Book adjustments (omitted items, errors, bank charges, direct debits) and Bank Reconciliation Statement items (timing differences like unpresented cheques and uncredited lodgements).

Question 353Question →

Tunde and Folake are partners in an architectural firm sharing profits and losses in the ratio of $3:2$ . They agree to admit Ibrahim as a new partner with a $\frac{1}{4}$ share in the profits of the firm. If the total goodwill of the firm is valued at $\text{₦}20,000$ , what is the amount of goodwill premium in Naira that Ibrahim must bring in for his share?

Show answer & explanation

Answer: 5000

Answer

The amount of goodwill premium that Ibrahim must bring in is 5,000 (or ₦5,000).

Upon admission, an incoming partner is required to bring in a goodwill premium equal to their fraction of the total goodwill valuation. Multiplying the total goodwill of ₦20,000 by Ibrahim's profit share of 1/4 yields ₦5,000.

Step-by-Step Solution

1

Determine the incoming partner's profit share

Ibrahim's share of profits is 1/4

The terms of admission grant Ibrahim a 1/4 share of total future profits.

2

Compute the incoming partner's share of goodwill premium

₦20,000 × (1/4) = ₦5,000

A new partner must contribute goodwill premium proportional to the share of profits acquired.

Key Concept

Calculation of Incoming Partner's Share of Goodwill Premium

Question 354Question →

Musa and Audu are partners sharing profits and losses in the ratio $3:2$ . For the year ended 31 December 2025, the net profit before adjusting for interest on Musa's loan was $₦500,000$ . The partnership agreement provides for the following:
- Interest on Musa's loan: $₦20,000$
- Interest on capital: Musa $��30,000$ , Audu $₦20,000$
- Salary to Audu: $₦70,000$ per annum
- Interest on drawings: Musa $₦10,000$ , Audu $₦10,000$

What is the net divisible profit available for distribution among the partners?

Show answer & explanation

Answer: 380000

Answer

The net divisible profit available for distribution is

₦380,000

.

The net divisible profit of

₦380,000

is calculated by starting with the adjusted net profit after loan interest (

₦500,000 - ₦20,000 = ₦480,000

), adding interest on drawings (

₦10,000 + ₦10,000 = ₦20,000

), and subtracting appropriations comprising interest on capital (

₦30,000 + ₦20,000 = ₦50,000

) and partner salary (

₦70,000

).

Step-by-Step Solution

1

Deduct interest on partner's loan from net profit

Adjusted Net Profit =

₦480,000

Interest on a partner's loan is a charge against profit in the Profit and Loss Account, not an appropriation.

2

Add total interest on drawings to net profit

Total Available Profit =

₦500,000

Interest on drawings is paid by partners to the firm, which increases total profit available for appropriation.

3

Deduct appropriations of profit (interest on capital and partner salary)

Net Divisible Profit =

₦380,000

Interest on capital (

₦50,000

) and Audu's salary (

₦70,000

) are appropriations of profit paid out of available profit.

Key Concept

Profit and Loss Appropriation Account Adjustments

Question 355Question →

A petty cashier was allocated an imprest float of ₦15,000 at the beginning of the month. During the month, payments were made for office stationery of ₦3,500, transport fares of ₦2,200, and cleaning supplies of ₦1,800. What amount of cash is required to reimburse the petty cashier at the end of the month to restore the float to its initial balance?

Show answer & explanation

Answer: 7500

Answer

The reimbursement amount required to restore the imprest float is ₦7,500.

Under the imprest system of petty cash, a fixed float is established at the start of a period. At regular intervals, the petty cashier is reimbursed an amount equal to the total disbursements made during that period. Since total expenses incurred are ₦3,500 + ₦2,200 + ₦1,800 = ₦7,500, the reimbursement needed to restore the float to ₦15,000 is ₦7,500.

Step-by-Step Solution

1

Calculate total petty cash expenditure for the period

Total expenditure = ₦3,500 + ₦2,200 + ₦1,800 = ₦7,500

To find how much money was spent, sum up all petty cash vouchers.

2

Determine reimbursement under the imprest system

Reimbursement = ₦7,500

The core rule of the imprest system specifies that the cash float must be restored to its original balance by topping it up with the exact total amount spent.

Key Concept

Imprest System Float Reimbursement

Estimated Time:45s

Question 356Question →

Audu consigned $400$ cartons of goods costing $\text{₦}5,000$ per carton to Emeka. Audu paid carriage of $\text{₦}80,000$ and transit insurance of $\text{₦}40,000$ . Emeka received the consignment and paid landing charges of $\text{₦}60,000$ , godown rent of $\text{₦}30,000$ , and selling expenses of $\text{₦}50,000$ . At the end of the accounting period, Emeka reported that $300$ cartons had been sold. What is the total valuation of the unsold consignment stock in Naira?

Show answer & explanation

Answer: 545000

Answer

The total valuation of the unsold consignment stock is ₦545,000.

Unsold consignment stock is valued at cost plus a proportionate share of all non-recurring (direct) expenses incurred by both the consignor and consignee. The total non-recurring expenses are ₦120,000 (consignor carriage and transit insurance) plus ₦60,000 (consignee landing charges), totaling ₦180,000. Since 100 out of 400 cartons remain unsold (1/4 of total consignment), the proportionate direct expense share is ₦45,000. Adding this to the basic cost of 100 cartons (₦500,000) gives a final valuation of ₦545,000.

Step-by-Step Solution

1

Calculate the quantity of unsold stock and its basic cost price

Unsold units = 400 - 300 = 100 units. Basic cost = 100 × ₦5,000 = ₦500,000.

Stock valuation starts with the original cost price of the unsold units.

2

Identify non-recurring (direct) expenses incurred by both consignor and consignee

Consignor expenses (carriage + transit insurance) = ₦80,000 + ₦40,000 = ₦120,000. Consignee non-recurring expenses (landing charges) = ₦60,000. Total direct expenses = ₦180,000.

Only direct/non-recurring expenses incurred to bring goods to their present location are included in unsold stock valuation. Recurring expenses (godown rent and selling expenses) are excluded.

3

Apportion the direct non-recurring expenses to the unsold stock

Proportionate share = (100 / 400) × ₦180,000 = ₦45,000.

Direct expenses are distributed proportionally based on the ratio of unsold units to total units consigned.

4

Sum basic cost price and proportionate direct expenses

Valuation of unsold stock = ₦500,000 + ₦45,000 = ₦545,000.

The final inventory value is the sum of basic cost and allocated non-recurring expenses.

Key Concept

Valuation of Unsold Consignment Stock incorporating cost price and proportionate non-recurring expenses

Estimated Time:2m 0s

Question 357Question →

A merchant's three-column cash book recorded the following transactions with a customer:
- Sold goods listed at $₦120,000$ subject to a $15\%$ trade discount.
- The customer settled half of the net invoice value by cheque within the prompt settlement period, receiving a $5\%$ cash discount.
- The remaining balance was settled later in cash, receiving a $2.5\%$ cash discount for early payment.

What is the total amount, in naira, recorded in the discount allowed column of the cash book for these transactions?

Show answer & explanation

Answer: 3825

Answer

The total amount recorded in the discount allowed column is ₦3,825.

Trade discount of 15% (₦18,000) reduces the gross sales price from ₦120,000 to a net invoice amount of ₦102,000. Cash discounts apply only to cash payments made for prompt settlement and are calculated on the net invoice figure. The first settlement of half the account (₦51,000) earns a 5% discount equal to ₦2,550. The second settlement of the remaining ₦51,000 earns a 2.5% discount equal to ₦1,275. Adding both cash discounts yields a total of ₦3,825 entered in the discount allowed column.

Step-by-Step Solution

1

Calculate the net invoice value after trade discount

Net Invoice Value = ₦102,000

Trade discounts are deducted from catalog list prices prior to recording transactions and do not appear in cash book discount columns.

2

Calculate the cash discount allowed on the first settlement

First Cash Discount = ₦2,550

5% discount is calculated on the ₦51,000 portion being settled.

3

Calculate the cash discount allowed on the second settlement

Second Cash Discount = ₦1,275

2.5% discount is calculated on the remaining ₦51,000 portion being settled.

4

Sum all cash discounts granted to determine total discount allowed

Total Discount Allowed = ₦3,825

The discount allowed column on the debit side of the three-column cash book aggregates all cash discounts granted to customers.

Key Concept

Calculation and recording of cash discounts versus trade discounts in a three-column cash book

Question 358Question →

Bello Plc has an authorized share capital of 800,000 ordinary shares of ₦1 each, out of which 400,000 ordinary shares are fully issued and paid up. If the directors propose a final dividend of 12% on the paid-up capital, what is the total amount payable as dividends to the ordinary shareholders?

Show answer & explanation

Answer: 48000

Answer

The total amount payable as dividends to ordinary shareholders is ₦48,000.

Dividends are declared and paid exclusively on issued and paid-up capital. With 400,000 issued and fully paid shares at ₦1 per share, the paid-up capital equals ₦400,000. A 12% dividend on ₦400,000 yields ₦48,000.

Step-by-Step Solution

1

Calculate the total paid-up share capital

Paid-up Share Capital = 400,000 shares × ₦1 = ₦400,000

Dividends are distributed based on capital actually paid up by shareholders, not authorized capital.

2

Calculate the dividend amount

Total Dividend = 12% × ₦400,000 = ₦48,000

Applying the 12% dividend rate to the total paid-up capital gives the dividend payout.

Key Concept

Dividend Calculation on Paid-Up Share Capital

Estimated Time:45s

Question 359Question →

On a topographical map drawn to a scale of $1 : 50,000$ , the straight-line distance between Town X and Town Y is measured as $8\text{ cm}$ . What is the actual ground distance between the two towns in kilometers?

Show answer & explanation

Answer: 4

Answer

The actual ground distance between Town X and Town Y is

4\text{ km}

.

To determine the actual ground distance, multiply the measured map distance (

8\text{ cm}

) by the representative scale ratio denominator (

50,000

), giving

400,000\text{ cm}

. Dividing this by

100,000

converts the distance into kilometers, yielding

4\text{ km}

.

Step-by-Step Solution

1

Calculate the ground distance in centimeters using the map scale denominator.

Ground distance in cm =

8\text{ cm} \times 50,000 = 400,000\text{ cm}

.

A Representative Fraction of

1 : 50,000

indicates that

1\text{ unit}

on the map represents

50,000\text{ units}

of the same measurement on the actual ground.

2

Convert centimeters into kilometers.

Ground distance in km =

\frac{400,000}{100,000} = 4\text{ km}

.

Since

1\text{ m} = 100\text{ cm}

and

1\text{ km} = 1,000\text{ m}

,

1\text{ km}

contains

100,000\text{ cm}

.

Key Concept

Ground distance calculation using Representative Fraction (RF) scale

Estimated Time:45s

Question 360Question →

The following details were extracted from the financial records of Apex Manufacturing Enterprise for the year ended 31st December 2025:

Financial Item	Amount (₦)
Inventory of Raw Materials (1st January 2025)	45,000
Purchases of Raw Materials	180,000
Carriage Inwards on Raw Materials	12,000
Returns Outward of Raw Materials	8,000
Inventory of Raw Materials (31st December 2025)	52,000
Direct Factory Wages Paid	95,000
Direct Wages Accrued (31st December 2025)	15,000
Direct Wages Prepaid (1st January 2025)	5,000
Royalties Paid on Production	25,000
Hire of Special Machine for Production	10,000
Factory Supervisor's Salary	40,000
Factory Rent and Rates	30,000
Depreciation of Factory Machinery	18,000
Carriage Outwards on Finished Goods	14,000

Calculate the Prime Cost for Apex Manufacturing Enterprise for the year ended 31st December 2025.

Show answer & explanation

Answer: 327000

Answer

The Prime Cost for Apex Manufacturing Enterprise for the year ended 31st December 2025 is ₦327,000.

Prime Cost is the sum of all direct costs incurred in manufacturing: Direct Materials Consumed (₦177,000) + Direct Labour (₦115,000) + Direct Expenses (₦35,000) = ₦327,000. Indirect costs (factory supervisor's salary, factory rent, and machinery depreciation) are factory overheads and must be excluded, as well as carriage outwards which is a selling expense.

Step-by-Step Solution

1

Calculate Direct Raw Materials Consumed

₦177,000

Opening Raw Materials (₦45,000) + Purchases (₦180,000) + Carriage Inwards (₦12,000) - Returns Outward (₦8,000) - Closing Raw Materials (₦52,000) = ₦177,000.

2

Calculate Total Direct Labour Cost

₦115,000

Direct Wages Paid (₦95,000) + Accrued Direct Wages at year-end (₦15,000) + Prepaid Direct Wages at start of year (₦5,000) = ₦115,000.

3

Calculate Total Direct Expenses

₦35,000

Royalties Paid on Production (₦25,000) + Hire of Special Machine for Production (₦10,000) = ₦35,000.

4

Identify and exclude indirect overheads and non-manufacturing expenses

Indirect factory items and selling expenses excluded

Factory supervisor's salary (₦40,000), factory rent and rates (₦30,000), and depreciation of factory machinery (₦18,000) are indirect manufacturing costs (factory overheads). Carriage outwards (₦14,000) is a selling expense.

5

Sum all direct cost components to arrive at Prime Cost

₦327,000

Prime Cost = Direct Materials Consumed (₦177,000) + Direct Labour (₦115,000) + Direct Expenses (₦35,000) = ₦327,000.

Key Concept

Direct Costs and Calculation of Prime Cost

Estimated Time:3m 0s

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