All practice questions

Question 5961Question →

Match each category of accounting software on the left with its corresponding defining feature or operational characteristic on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Off-the-shelf Software corresponds to mass-produced standard programs with rigid pre-configured routines; Bespoke Software corresponds to software engineered entirely from scratch; Customized Software corresponds to pre-packaged applications modified with user-defined settings; Cloud-based Accounting Software corresponds to web-hosted applications enabling remote real-time access.

Each type of accounting software meets specific business needs based on scale, budget, and operational complexity. Off-the-shelf software is mass-produced and rigid; Bespoke software is built from scratch for proprietary workflows; Customized software adapts standard packages through setting adjustments; Cloud-based software provides web-hosted access without local hardware constraints.

Step-by-Step Solution

1

Identify the defining features of ready-made standardized software.

Off-the-shelf software is mass-produced for general business use, making it immediately available and cost-effective, but rigid in functionality.

Distinguish general-purpose accounting packages from specialized software.

2

Differentiate ground-up development from package modification.

Bespoke software is designed from scratch exclusively for one entity, whereas customized software starts with an existing off-the-shelf package and alters its code or configuration parameters.

Avoid confusing bespoke creation with software customization.

3

Analyze modern delivery models for accounting information systems.

Cloud-based software is hosted remotely on vendor infrastructure and accessed via web browsers, removing the need for local hardware installation and on-site maintenance.

Recognize deployment architecture differences between desktop and internet-hosted systems.

Key Concept

Classification and Defining Characteristics of Accounting Software

Question 5962Question →

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 5963Question →

Match each commercial scenario listed on the left with its corresponding e-commerce model or electronic business operational category on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The correct pairings match the developer offering services to businesses as Consumer-to-Business (C2B), the manufacturer-supplier portal as Business-to-Business (B2B), the retail customer purchasing online as Business-to-Consumer (B2C), and the internal ERP integration as an Internal E-Business Process.

Each scenario correctly reflects the specific participant flow and operational boundary. Freelancers offering services to businesses represent C2B e-commerce. Inter-firm trade between manufacturers and suppliers represents B2B e-commerce. Direct selling from a business to a retail shopper represents B2C e-commerce. Internal operations using ERP platforms represent internal e-business functions.

Step-by-Step Solution

1

Analyze the participant roles in each scenario to identify who is selling/providing value and who is receiving/buying.

Identified individual-to-company, company-to-company, company-to-individual, and internal corporate system interactions.

E-commerce models are categorized based on the nature and direction of the trading partners involved.

2

Distinguish between external commercial transactions (e-commerce) and internal business process automation (e-business).

The ERP inventory and payroll synchronization is recognized as an internal e-business operation because no external buying or selling takes place.

E-business is a broader concept that includes internal administrative and operational processing, whereas e-commerce specifically focuses on buying and selling transactions.

3

Match each scenario to its exact transaction category.

Matched freelancer service bidding to C2B, manufacturer supplier portal to B2B, consumer retail purchase to B2C, and ERP synchronization to Internal E-Business Process.

Ensures complete alignment with established commerce taxonomy.

Key Concept

Classification of E-Commerce Models and E-Business Operations

Question 5964Question →

Match each accounting concept or convention on the left with its correct practical accounting application on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Accrual Concept pairs with recognizing revenue/expenses when earned or incurred regardless of cash flow; Materiality Concept pairs with expensing low-value items immediately; Periodicity Concept pairs with dividing the business life into regular time intervals; Historical Cost Concept pairs with recording assets at original acquisition price.

Each concept aligns directly with its governing practical accounting treatment: Accrual recognizes revenue and expenses when earned or incurred; Materiality allows immediate expensing of low-value assets; Periodicity divides ongoing operations into uniform reporting periods; and Historical Cost records assets at acquisition cost.

Step-by-Step Solution

1

Analyze the Accrual Concept

Matches the principle of recognizing revenue and expenses in the accounting period in which they occur rather than when cash flows.

Accrual accounting focuses on economic events when earned or incurred.

2

Analyze the Materiality Concept

Matches the accounting rule for writing off trivial monetary items immediately.

Immaterial items do not alter financial statement decision-making.

3

Analyze the Periodicity Concept

Matches dividing the business lifespan into defined time intervals.

Stakeholders require periodic reports to evaluate financial performance.

4

Analyze the Historical Cost Concept

Matches recording assets at their original purchase cost.

Historical cost provides objective and verifiable transaction evidence.

Key Concept

Accounting Concepts and Conventions

Estimated Time:1m 30s

Question 5965Question →

Which of the following represents a non-tax recurrent source of revenue for the government?

Court fines and drivers' license fees

Value Added Tax collected on luxury goods

Proceeds from the sale of government-owned real estate

Companies Income Tax paid by private corporations

Show answer & explanation

Answer: Court fines and drivers' license fees

Answer

Court fines and drivers' license fees represent a non-tax recurrent source of revenue for the government.

Court fines and drivers' license fees are non-tax recurrent revenue sources because they arise from government administrative services and regulatory activities rather than compulsory tax levies or asset liquidations.

Step-by-Step Solution

1

Identify the categories of government revenue.

Government revenue is classified into tax revenue (direct and indirect taxes), non-tax recurrent revenue (fees, fines, licenses, earnings from government services), and capital receipts (asset sales, loans).

Understanding the broad classification helps isolate non-tax revenue streams.

2

Analyze court fines and license fees.

Fines and license fees are regular, ongoing payments collected for administration and regulatory adherence, without being a compulsory percentage tax on income or expenditure.

These administrative receipts constitute recurrent non-tax revenue.

Key Concept

Recurrent Non-Tax Revenue

Question 5966Question →

During the financial year ended 31 December 2025, a business received $₦85,000$ cash as interest on investments. At the end of the year, $₦10,000$ of this amount was determined to be received in advance for the following financial year. What is the amount of interest income to be credited to the Profit and Loss Account for the year?

₦75,000

₦95,000

₦85,000

₦10,000

Show answer & explanation

Answer: $₦75,000$

Answer

₦75,000

Under the accrual concept of accounting, only income earned in the current financial period should be credited to the Profit and Loss Account. Since

₦10,000

of the

₦85,000

cash received relates to the next period, it must be subtracted to leave

₦75,000

as the earned income for the year.

Step-by-Step Solution

1

Identify total cash received for interest during the period

Total cash received =

₦85,000

This represents the starting cash movement for interest income.

2

Deduct closing prepaid income (received in advance)

Earned Interest Income =

₦85,000 - ₦10,000 = ₦75,000

According to the accrual concept, revenue received in advance for future periods must be excluded from the current year's Profit and Loss Account.

Key Concept

Adjustment for Prepaid Income in the Profit and Loss Account

Estimated Time:45s

Question 5967Question →

Kemi and Tunde are partners in a firm sharing profits and losses in the ratio of $3:2$ . On 1st January 2025, they admit Bisi into the partnership, and the new profit-sharing ratio among Kemi, Tunde, and Bisi is agreed at $5:3:2$ . Goodwill is to be valued at $3$ years' purchase of the super profit of the firm. The average annual profit of the firm for the past four years is $\mathcal{N}45,000$ , while the normal annual profit expected on capital employed is $\mathcal{N}25,000$ . If goodwill is raised in the books and immediately written off, what is the net adjustment to Tunde's Capital Account?

Credited with

\mathcal{N}6,000

Debited with

\mathcal{N}6,000

Credited with

\mathcal{N}13,500

Debited with

\mathcal{N}18,000

Show answer & explanation

Answer: Credited with $\mathcal{N}6,000$

Answer

Credited with

\mathcal{N}6,000

Super profit is calculated as

\mathcal{N}45,000 - \mathcal{N}25,000 = \mathcal{N}20,000

. Total goodwill equals

3 \times \mathcal{N}20,000 = \mathcal{N}60,000

. Raising goodwill credits Tunde's Capital Account with

\frac{2}{5} \times \mathcal{N}60,000 = \mathcal{N}24,000

, while writing off goodwill debits Tunde's Capital Account with

\frac{3}{10} \times \mathcal{N}60,000 = \mathcal{N}18,000

. The net difference is a credit adjustment of

\mathcal{N}6,000

.

Step-by-Step Solution

1

Calculate the super profit of the firm

Super Profit = Average Profit - Normal Profit =

\mathcal{N}45,000 - \mathcal{N}25,000 = \mathcal{N}20,000

Super profit is the excess of average profit over expected normal profit.

2

Calculate total valuation of goodwill

Firm Goodwill =

3 \times \mathcal{N}20,000 = \mathcal{N}60,000

Goodwill is calculated at 3 years' purchase of super profit.

3

Determine Tunde's credit share when raising goodwill in the old ratio (

3:2

)

Tunde's Credit Share =

\frac{2}{5} \times \mathcal{N}60,000 = \mathcal{N}24,000

Goodwill existing prior to admission is credited to old partners in their old profit-sharing ratio.

4

Determine Tunde's debit share when writing off goodwill in the new ratio (

5:3:2

)

Tunde's Debit Share =

\frac{3}{10} \times \mathcal{N}60,000 = \mathcal{N}18,000

Goodwill written off is debited to all partners in the new profit-sharing ratio.

5

Compute the net adjustment to Tunde's Capital Account

Net Adjustment = Credit of

\mathcal{N}24,000 - \text{Debit of } \mathcal{N}18,000 = \text{Credit of } \mathcal{N}6,000

Comparing total credit and debit entries gives a net credit adjustment of

\mathcal{N}6,000

.

Key Concept

Valuation of Goodwill via Super Profit Method and Accounting Treatment on Admission of a Partner

Question 5968Question →

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

Question 5969Question →

The Sales Ledger Control Account of Bisi Enterprises showed a debit balance of ₦354,200 prior to reconciliation. An audit of the books revealed the following discrepancies:

1. A sales return of ₦14,600 was recorded in the Sales Returns Day Book as ₦16,400 and posted as such to the Sales Ledger Control Account.
2. Credit sales of ₦28,500 correctly recorded in the Sales Day Book were posted to the customer's personal account as ₦52,800.
3. Discount allowed of ₦6,400 correctly entered in the Cash Book was omitted from the Sales Ledger Control Account.
4. A dishonoured cheque of ₦12,200 received from a customer was correctly recorded in the Cash Book but posted to the credit side of the Sales Ledger Control Account.
5. A set-off (contra entry) of ₦8,500 between the sales ledger and purchases ledger was correctly posted in the Purchases Ledger Control Account but omitted entirely from the Sales Ledger Control Account.

Calculate the adjusted debit balance of the Sales Ledger Control Account.

Show answer & explanation

Answer: 365500

Answer

The adjusted debit balance of the Sales Ledger Control Account is ₦365,500.

To obtain the adjusted debit balance of ₦365,500:
- Unadjusted Balance: ₦354,200 (Debit)
- Error 1 (Sales Return over-statement): Debit ₦1,800 (₦16,400 - ₦14,600)
- Error 2 (Personal Account error): ₦0 adjustment to Control Account
- Error 3 (Discount Allowed omitted): Credit ₦6,400
- Error 4 (Dishonoured Cheque on wrong side): Debit ₦24,400 (2 × ₦12,200)
- Error 5 (Contra Entry omitted): Credit ₦8,500

Net calculation: ₦354,200 + ₦1,800 - ₦6,400 + ₦24,400 - ₦8,500 = ₦365,500.

Step-by-Step Solution

1

Determine the effect of the sales return recording error.

Sales returns reduce debtors and belong on the credit side of the Sales Ledger Control Account. Since ₦16,400 was credited instead of ₦14,600, the control account was over-credited by ₦1,800. Correcting this requires a debit adjustment of ₦1,800.

Debiting the account by the difference of ₦1,800 reduces the excess credit entry.

2

Evaluate the customer personal account posting error.

No adjustment to the Sales Ledger Control Account (₦0).

Errors made in posting to individual customer accounts alter the total of the list of debtors, but do not affect the control account because control accounts are posted from totals of books of prime entry.

3

Account for omitted discount allowed.

Credit the Sales Ledger Control Account with ₦6,400.

Discount allowed reduces total trade receivables and must be posted on the credit side of the Sales Ledger Control Account.

4

Correct the dishonoured cheque posted to the wrong side of the control account.

Debit the Sales Ledger Control Account with ₦24,400.

Dishonoured cheques reinstate debt and should be debited to the control account. Posting ₦12,200 to the credit side created a ₦12,200 deficit; hence a debit entry of twice the amount (2 × ₦12,200 = ₦24,400) is required to reverse the credit and apply the debit.

5

Post the omitted set-off (contra entry).

Credit the Sales Ledger Control Account with ₦8,500.

Contra entries reduce both debtors and creditors, requiring a credit entry in the Sales Ledger Control Account.

6

Calculate the final corrected balance.

₦354,200 + ₦1,800 - ₦6,400 + ₦24,400 - ₦8,500 = ₦365,500.

Summing the initial balance and all net debit and credit adjustments yields the true corrected balance.

Key Concept

Sales Ledger Control Account Error Corrections and Ledger Reconciliation

Question 5970Question →

Bisi dispatched $250$ bags of rice costing $\text{₦}20,000$ per bag to Okon on consignment. Bisi incurred freight of $\text{₦}150,000$ and transit insurance of $\text{₦}50,000$ . Okon took delivery of the goods and paid clearing charges of $\text{₦}100,000$ , godown rent of $\text{₦}60,000$ , and advertising expenses of $\text{₦}40,000$ . At the end of the period, Okon had sold $200$ bags. What is the value of the unsold consignment stock?

\text{₦}1,060,000

\text{₦}1,040,000

\text{₦}1,080,000

\text{₦}1,000,000

Show answer & explanation

Answer: $\text{₦}1,060,000$

Answer

\text{₦}1,060,000

The value of unsold consignment stock is determined by adding the proportionate share of all non-recurring expenses (incurred by both consignor and consignee) to the basic cost price of the unsold units. In this scenario,

50

out of

250

bags (

20\%

) remain unsold. The cost is

\text{₦}1,000,000

. Consignor expenses (freight and insurance) total

\text{₦}200,000

, of which

20\%

is

\text{₦}40,000

. Consignee direct non-recurring expenses (clearing charges) are

\text{₦}100,000

, of which

20\%

is

\text{₦}20,000

. Godown rent and advertising are recurring selling expenses and are excluded. Thus, total stock value =

\text{₦}1,000,000 + \text{₦}40,000 + \text{₦}20,000 = \text{₦}1,060,000

.

Step-by-Step Solution

1

Calculate the number and cost price of unsold bags

Unsold quantity =

250 - 200 = 50

bags. Cost of unsold stock =

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

.

Unsold stock ratio is

\frac{50}{250} = \frac{1}{5}

(or

20\%

).

2

Calculate the proportionate share of consignor's direct non-recurring expenses

Total consignor expenses =

\text{₦}150,000 + \text{₦}50,000 = \text{₦}200,000

. Proportionate share =

\frac{1}{5} \times \text{₦}200,000 = \text{₦}40,000

.

All expenses paid by consignor to bring goods into saleable location/condition are non-recurring and must be apportioned.

3

Identify and calculate the proportionate share of consignee's direct non-recurring expenses

Consignee direct non-recurring expense (clearing charges) =

\text{₦}100,000

. Proportionate share =

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

.

Godown rent (

\text{₦}60,000

) and advertising (

\text{₦}40,000

) are recurring/selling expenses and must be excluded from stock valuation.

4

Sum up the components to find total valuation of unsold stock

Valuation =

\text{₦}1,000,000 + \text{₦}40,000 + \text{₦}20,000 = \text{₦}1,060,000

.

Total value of unsold consignment stock includes prime cost plus proportionate direct non-recurring expenses of both consignor and consignee.

Key Concept

Valuation of Unsold Consignment Stock

Estimated Time:1m 30s

Question 5971Question →

Emeka and Tunde are partners in a business. For the year ended 31 December 2025, the net profit before adjusting for interest on Tunde's loan of ₦30,000 was ₦450,000. The partnership agreement provides for:
- Salary to Emeka: ₦50,000
- Total interest on capital: ₦70,000
- Total interest on drawings: ₦20,000

What is the net divisible profit to be shared between the partners?

₦320,000

₦350,000

₦280,000

₦250,000

Show answer & explanation

Answer: ₦320,000

Answer

The net divisible profit to be shared between the partners is ₦320,000.

Net divisible profit is determined after deducting charges such as loan interest in the Profit and Loss Account (₦450,000 - ₦30,000 = ₦420,000). Adding interest on drawings (₦20,000) and subtracting appropriations for salary (₦50,000) and interest on capital (₦70,000) gives ₦320,000.

Step-by-Step Solution

1

Calculate net profit after charging interest on partner loan

₦450,000 - ₦30,000 = ₦420,000

Interest on partner's loan is an expense in the Profit and Loss Account, not an appropriation of profit.

2

Add interest on drawings to net profit

₦420,000 + ₦20,000 = ₦440,000

Interest on drawings is income charged to partners, increasing total profits available for appropriation.

3

Deduct partner salary and interest on capital

₦440,000 - ₦50,000 (Salary) - ₦70,000 (Interest on Capital) = ₦320,000

Partner salaries and interest on capital are appropriations paid to partners out of divisible profits.

Key Concept

Profit and Loss Appropriation Account adjustments

Question 5972Question →

The financial records of Prime Ventures Ltd. show the following balances at the end of its financial year:

Item	Amount (₦)
Authorized Share Capital	3,000,000
Issued Ordinary Shares	1,800,000
8% Long-term Debentures	600,000
Bank Overdraft	200,000
Trade Creditors	150,000
Stock in Trade	450,000
Trade Debtors	300,000
Cash at Bank	200,000

Based on the table above, what is the Net Working Capital of Prime Ventures Ltd.?

₦600,000

₦1,300,000

₦0

₦2,400,000

Show answer & explanation

Answer: ₦600,000

Answer

The Net Working Capital of Prime Ventures Ltd. is ₦600,000.

The option stating ₦600,000 is correct because Net Working Capital equals total Current Assets (Stock ₦450,000 + Debtors ₦300,000 + Cash ₦200,000 = ₦950,000) minus total Current Liabilities (Bank Overdraft ₦200,000 + Creditors ₦150,000 = ₦350,000).

Step-by-Step Solution

1

Calculate total Current Assets

Stock (₦450,000) + Debtors (₦300,000) + Cash at Bank (₦200,000) = ₦950,000

Current assets consist of short-term liquid assets convertible to cash within one trading cycle.

2

Calculate total Current Liabilities

Bank Overdraft (₦200,000) + Trade Creditors (₦150,000) = ₦350,000

Current liabilities are short-term financial obligations due for settlement within one year.

3

Deduct total Current Liabilities from total Current Assets

₦950,000 - ₦350,000 = ₦600,000

Net Working Capital represents the operational liquidity available to fund day-to-day business operations.

Key Concept

Net Working Capital Formula

Question 5973Question →

An accountant altered financial reporting formats and asset valuation methods from those used in prior years without disclosure or standardization, preventing investors from evaluating the enterprise's performance against its industry peers. Which qualitative characteristic of accounting information has been violated?

Comparability

Business entity separation

Bookkeeping recording scope

Audit trail control

Show answer & explanation

Answer: Comparability

Answer

Comparability is the qualitative characteristic that enables users to identify and understand similarities in, and differences among, financial items across time periods and across different business entities.

Comparability is an enhancing qualitative characteristic that enables financial statement users to identify similarities and differences between reporting periods and among different business entities. Inconsistent application of valuation methods and reporting formats violates this characteristic.

Step-by-Step Solution

1

Analyze the reporting defect in the scenario

The business changed valuation methods and presentation formats without consistency, impeding multi-period and peer analysis.

Consistent accounting policies are necessary for users to compare performance over time.

2

Map the defect to qualitative characteristics of accounting information

Inconsistency in application directly impairs comparability, an enhancing qualitative characteristic.

Comparability requires that financial information be prepared using consistent principles so that meaningful trends and comparisons can be drawn.

Key Concept

Qualitative Characteristics of Accounting Information - Comparability

Question 5974Question →

Zainab and Tariq are partners sharing profits and losses in the ratio $3:2$ . On 1st January 2025, their fixed capital balances were $\text{₦}800,000$ and $\text{₦}500,000$ , while their current account balances were $\text{₦}45,000$ (Credit) and $\text{₦}12,000$ (Debit) respectively. Zainab had also granted a loan of $\text{₦}100,000$ to the firm on 1st January 2025 at $10\%$ interest per annum. For the year ended 31st December 2025, the net profit before charging loan interest was $\text{��}340,000$ .

Additional partnership details for the year:
- Interest on capital is allowed at $5\%$ per annum on fixed capital.
- Tariq is entitled to an annual partner salary of $\text{₦}35,000$ .
- Interest on drawings charged: Zainab $\text{₦}5,000$ , Tariq $\text{₦}3,000$ .
- Drawings made during the year: Zainab $\text{₦}50,000$ , Tariq $\text{₦}30,000$ .

If the partners decide to switch from a fixed capital system to a fluctuating capital system at year-end by amalgamating their current account balances into their capital accounts, what is the closing balance of Tariq's Capital Account as at 31st December 2025?

₦610,200

₦614,200

₦634,200

₦670,200

Show answer & explanation

Answer: ₦610,200

Answer

The closing balance of Tariq's Capital Account as at 31st December 2025 under the fluctuating capital system is ₦610,200.

The correct answer is derived by first deducting the ₦10,000 interest on Zainab's loan from net profit to arrive at an adjusted net profit of ₦330,000. Adding total interest on drawings (₦8,000) and deducting interest on capital (₦65,000) and partner salary (₦35,000) yields a residual profit of ₦238,000, of which Tariq's 2/5 share is ₦95,200. Combining Tariq's credits (₦25,000 interest on capital + ₦35,000 salary + ₦95,200 profit share) and deducting his debits (₦12,000 opening debit balance + ₦30,000 drawings + ₦3,000 interest on drawings) gives a net current account balance of ₦110,200 (Credit). Merging this with his fixed capital of ₦500,000 yields a total fluctuating closing capital of ₦610,200.

Step-by-Step Solution

1

Calculate the correct Net Profit after charging interest on partner loan

Net Profit = ₦340,000 - (10% of ₦100,000) = ₦330,000

Interest on partner's loan is a charge against profit (debited to P&L account), not an appropriation of profit.

2

Compute total appropriations and residual profit available for sharing

Divisible Profit = ₦330,000 + ₦8,000 (Interest on Drawings) - ₦65,000 (Interest on Capital) - ₦35,000 (Tariq's Salary) = ₦238,000

Interest on drawings increases profits available for distribution, while interest on capital and salary reduce it.

3

Calculate Tariq's share of residual profit

Tariq's Share = (2 / 5) * ₦238,000 = ₦95,200

Profits are shared in the agreed ratio of 3:2.

4

Determine Tariq's ending Current Account balance

Credit items = ₦25,000 (Interest on Capital) + ₦35,000 (Salary) + ₦95,200 (Share of Profit) = ₦155,200. Debit items = ₦12,000 (Opening Dr Balance) + ₦30,000 (Drawings) + ₦3,000 (Interest on Drawings) = ₦45,000. Net Current Account Balance = ₦155,200 - ₦45,000 = ₦110,200 (Credit)

Debits (drawings, interest on drawings, opening debit balance) are subtracted from credits (salary, interest on capital, profit share).

5

Calculate Tariq's closing fluctuating capital account balance

Closing Capital Balance = Opening Fixed Capital (₦500,000) + Ending Current Account Balance (₦110,200) = ₦610,200

Under a fluctuating capital system, capital and current account entries are combined into a single capital account.

Key Concept

Fixed vs Fluctuating Capital Accounts in Partnership Accounting

Estimated Time:3m 0s

Question 5975Question →

During the financial year, a business received $₦75,000$ cash for rent income. At the end of the financial year, $₦15,000$ of this amount represented rent received in advance for the following year. What is the total amount of rent income (in $₦$ ) to be credited to the Profit and Loss Account for the year?

Show answer & explanation

Answer: 60000

Answer

The total amount of rent income to be credited to the Profit and Loss Account for the year is

₦60,000

.

To calculate the rent income earned during the financial period, closing prepaid rent income is subtracted from the total cash received (

₦75,000 - ₦15,000 = ₦60,000

).

Step-by-Step Solution

1

Identify cash received during the year

Cash received =

₦75,000

This represents total cash inflows recorded for rent during the financial period.

2

Deduct closing prepaid income

Income for P&L =

₦75,000 - ₦15,000 = ₦60,000

According to the accrual concept, income received in advance relates to the subsequent accounting period and must be deducted from the current year's Profit and Loss Account.

Key Concept

Adjustment for Prepaid Income in Final Accounts

Question 5976Question →

Olu, a sole trader, started the month of May with a cash balance of $\text{₦}45,000$ and a bank overdraft of $\text{₦}12,000$ . During the month, the following transactions occurred:
1. Bought goods with a catalog list price of $\text{₦}80,000$ on credit, subject to a $10\%$ trade discount.
2. Settled the supplier's account by cheque within the stipulated period, receiving a $5\%$ cash discount.
3. Withdrew $\text{₦}15,000$ cash from the bank for business use.
4. Received a cheque of $\text{₦}28,500$ from a debtor in full settlement of a $\text{₦}30,000$ account balance.

What is the closing balance of the bank column in the three-column cash book at the end of May?

\text{₦}66,900

overdraft

\text{₦}66,500

overdraft

\text{₦}51,900

overdraft

\text{₦}42,900

overdraft

Show answer & explanation

Answer: $\text{₦}66,900$ overdraft

Answer

\text{₦}66,900

overdraft (Credit balance)

To find the closing bank balance, we calculate the net bank transactions:
1. Opening Bank Overdraft (Credit):

\text{₦}12,000

2. Net Purchase Price after

10\%

trade discount =

\text{₦}80,000 - \text{₦}8,000 = \text{₦}72,000

. Cash discount of

5\% \times \text{₦}72,000 = \text{₦}3,600

. Cheque paid (Credit) =

\text{₦}72,000 - \text{₦}3,600 = \text{₦}68,400

.
3. Cash withdrawn for office use (Contra, Credit) =

\text{₦}15,000

.
4. Cheque received from debtor (Debit) =

\text{₦}28,500

.
Total Credit side =

\text{₦}12,000 + \text{₦}68,400 + \text{₦}15,000 = \text{₦}95,400

.
Total Debit side =

\text{₦}28,500

.
Closing Overdraft =

\text{₦}95,400 - \text{₦}28,500 = \text{₦}66,900

overdraft.

Step-by-Step Solution

1

Calculate the net invoice price after trade discount and the net cheque payment after cash discount.

Invoice Price =

\text{₦}80,000 - (10\% \times 80,000) = \text{₦}72,000

. Cash Discount Received =

5\% \times 72,000 = \text{₦}3,600

. Cheque Paid =

\text{₦}72,000 - \text{₦}3,600 = \text{₦}68,400

.

Trade discounts are deducted from list price prior to entry and are not shown in the cash book; cash discount is computed on the net invoice amount.

2

Identify debit entries (bank receipts) in the bank column.

Cheque received from debtor =

\text{₦}28,500

. Total Debit =

\text{₦}28,500

.

Cheques received increase bank funds and are debited to the bank column.

3

Identify credit entries (bank payments/outflows) in the bank column.

Opening Overdraft =

\text{₦}12,000

; Cheque paid to supplier =

\text{₦}68,400

; Cash withdrawn for office use (Contra entry) =

\text{₦}15,000

. Total Credit =

\text{₦}12,000 + \text{₦}68,400 + \text{₦}15,000 = \text{₦}95,400

.

Overdrafts, payments, and contra withdrawals from the bank are all recorded on the credit side of the bank column.

4

Determine the net closing balance of the bank column.

Closing Balance = Credit Total (

\text{₦}95,400

) - Debit Total (

\text{₦}28,500

) =

\text{₦}66,900

overdraft (Credit balance).

When the credit side exceeds the debit side in a cash book bank column, the remaining balance represents a bank overdraft.

Key Concept

Accounting treatment of trade/cash discounts and contra entries in a three-column cash book

Question 5977Question →

Ade, a sole trader, extracted the following account balances from his ledger at the end of the accounting period:

- Capital: $₦50,000$
- Sales: $₦80,000$
- Purchases: $₦45,000$
- Rent Expense: $₦5,000$
- Cash at Bank: $₦30,000$
- Machinery: $₦50,000$

What is the total of the Trial Balance extracted from these accounts?

Show answer & explanation

Answer: 130000

Answer

The total of the trial balance extracted from the ledger accounts is

₦130,000

.

The total of the trial balance is obtained by adding up either all debit balances (

₦45,000 + ₦5,000 + ₦30,000 + ₦50,000 = ₦130,000

) or all credit balances (

₦50,000 + ₦80,000 = ₦130,000

). Since total debits equal total credits, the total is

₦130,000

.

Step-by-Step Solution

1

Classify the ledger balances into Debit and Credit sides.

Debit balances: Purchases (

₦45,000

), Rent Expense (

₦5,000

), Cash at Bank (

₦30,000

), Machinery (

₦50,000

). Credit balances: Capital (

₦50,000

), Sales (

₦80,000

).

Assets and expenses have debit balances, while equity and revenue accounts have credit balances.

2

Sum either column to find the trial balance total.

Total Debit =

₦45,000 + ₦5,000 + ₦30,000 + ₦50,000 = ₦130,000

. (Total Credit =

₦50,000 + ₦80,000 = ₦130,000

).

Under double-entry bookkeeping, the total of all debit balances must equal the total of all credit balances.

Key Concept

Extraction and balancing of Trial Balance column totals

Question 5978Question →

Match each commercial contract situation listed below with the correct legal concept governing its discharge or vitiation.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The cargo shipping contract hindered by government action matches 'Discharge by frustration'. The intentional false statements regarding commercial property match 'Vitiation by fraudulent misrepresentation'. The mutual lack of knowledge of the destroyed truck matches 'Vitiation by common mistake (res extincta)'. The full delivery of goods per agreement matches 'Discharge by performance'.

The correct pairings accurately categorize each scenario according to principles of contract law: government prohibitions creating physical/legal impossibility lead to discharge by frustration; intentional false inducements constitute fraudulent misrepresentation; non-existence of subject matter prior to agreement creates a common mistake (res extincta); and full compliance with terms constitutes discharge by performance.

Step-by-Step Solution

1

Analyze the unexpected government seaport closure scenario.

Identified supervening impossibility of performance beyond the control of either party.

An unforeseeable statutory prohibition makes performance impossible, which operates legally as discharge by frustration.

2

Analyze the property seller's intentional falsehoods.

Identified intentional deceit inducing a contract.

A knowingly false representation of fact made with intent to induce reliance constitutes fraudulent misrepresentation, making the contract voidable.

3

Analyze the contract for the destroyed truck.

Identified non-existence of subject matter unknown to both parties at contract formation.

When the subject matter has ceased to exist before contract formation without the knowledge of either party, it is a common mistake (res extincta).

4

Analyze the exact delivery of ordered goods.

Identified exact and complete compliance with contractual terms.

Meeting all obligation requirements completely and precisely satisfies the standard for discharge by performance.

Key Concept

Law of Contract: Modes of Discharge and Vitiating Factors

Question 5979Question →

During a financial year, a state ministry recorded the following receipts:

• Mining and mineral royalties: ₦15,000,000
• Court fines and vehicle license fees: ₦5,000,000
• Proceeds from the disposal of surplus administrative buildings: ₦25,000,000
• External concessionary loans drawn for infrastructure development: ₦40,000,000

Based on public sector accounting principles, what is the total amount that should be categorized as Recurrent Non-Tax Revenue?

₦20,000,000

₦45,000,000

₦60,000,000

₦85,000,000

Show answer & explanation

Answer: ₦20,000,000

Answer

₦20,000,000

The correct calculation sums only the recurrent non-tax income streams: mining royalties (₦15,000,000) and fees/fines (₦5,000,000), which equals ₦20,000,000. Capital receipts such as fixed asset sales and loans are excluded.

Step-by-Step Solution

1

Identify items belonging to Recurrent Non-Tax Revenue

Mining royalties (₦15,000,000) and Court fines/license fees (₦5,000,000) are ongoing non-tax operating inflows.

Recurrent non-tax revenues are regular, non-compulsory or service-based charges collectible in the day-to-day operations of government.

2

Identify items belonging to Capital Receipts

Proceeds from disposal of buildings (₦25,000,000) and External concessionary loans (₦40,000,000) are Capital Receipts.

Disposal of fixed assets and long-term borrowing represent capital fund inflows meant for the Capital Development Fund, not recurrent revenue.

3

Sum the Recurrent Non-Tax Revenue components

₦15,000,000 + ₦5,000,000 = ₦20,000,000

Only mineral royalties and fines/fees qualify as recurrent non-tax income.

Key Concept

Classification of Government Receipts (Recurrent Non-Tax Revenue vs Capital Receipts)

Estimated Time:2m 0s

Question 5980Question →

Kalu consigned 1,000 crates of soft drinks costing ₦2,000 per crate to an agent in Enugu. He paid carriage of ₦150,000 and insurance of ₦50,000. During transit, 100 crates were completely destroyed in an accident. What is the value of the abnormal loss in Naira (₦) to be credited to the Consignment Account?

Show answer & explanation

Answer: 220000

Answer

The value of the abnormal loss to be credited to the Consignment Account is ₦220,000.

Abnormal loss is valued at cost plus its proportionate share of consignor expenses. Total outlay for 1,000 crates is ₦2,000,000 + ₦150,000 + ₦50,000 = ₦2,200,000, giving a cost per crate of ₦2,200. The 100 crates lost in transit are therefore valued at 100 × ₦2,200 = ₦220,000.

Step-by-Step Solution

1

Calculate the total prime cost of the consigned goods

1,000 crates × ₦2,000 = ₦2,000,000

Determine the basic purchase price of all items dispatched.

2

Sum all direct expenses incurred by the consignor prior to transit loss

₦150,000 (carriage) + ₦50,000 (insurance) = ₦200,000; Total outlay = ₦2,200,000

Consignor expenses add to the capital cost of the goods before reaching the destination.

3

Determine the effective cost per unit including consignor expenses

₦2,200,000 / 1,000 crates = ₦2,200 per crate

Find the unit cost to properly allocate values to lost items.

4

Compute the total valuation of the abnormal loss

100 crates × ₦2,200 = ₦220,000

Abnormal loss must be valued at cost plus a proportionate share of non-recurring expenses incurred up to the point of loss.

Key Concept

Valuation of Abnormal Loss in Consignment Accounting

Answer

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