All practice questions

Question 11521Question →

In manufacturing accounting, specific terminologies are used to classify costs and measure production outcomes. Match each manufacturing account term on the left with its correct accounting definition or description on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Prime Cost matches with the aggregate total of direct materials, direct labour, and direct expenses. Factory Overheads matches with the sum of all indirect factory production expenses. Work-in-Progress matches with partially completed goods remaining in the factory at period end. Cost of Production matches with the net total cost of completed goods transferred to the Trading Account.

Each manufacturing term is accurately matched with its accounting definition: Prime Cost is the sum of all direct expenses; Factory Overheads represents all indirect production expenses; Work-in-Progress refers to uncompleted inventory at period end; and Cost of Production is the net cost of finished goods transferred to the Trading Account.

Step-by-Step Solution

1

Identify the primary direct components of production cost.

Prime Cost is the sum of Direct Material + Direct Labour + Direct Expenses.

Direct expenses are costs specifically traced and assigned directly to units produced.

2

Identify the indirect operational costs within the factory.

Factory Overheads comprise indirect material, indirect labour (e.g., supervisor salary), and indirect expenses (e.g., factory rent, machinery depreciation).

Costs incurred inside the factory that cannot be traced directly to a single unit are treated as factory overheads.

3

Evaluate uncompleted inventory at the closing date.

Work-in-Progress (WIP) represents goods partially processed but not yet finished.

Adjusting for opening and closing WIP ensures that costs allocated strictly match goods completed in the current period.

4

Determine the overall balance transferred out of the Manufacturing Account.

Cost of Production = Prime Cost + Factory Overheads + Opening WIP - Closing WIP.

This total reflects the cost to bring finished goods into stock and is transferred to the Trading Account.

Key Concept

Key terminologies and cost classifications in Manufacturing Accounts

Question 11522Question →

Lumina Stores operates two departments: Assembly and Packaging. During the trading year, total canteen expenses incurred amounted to $₦50,000$ . Assembly employs $30$ workers, while Packaging employs $20$ workers. What is the amount of canteen expenses to be apportioned to the Packaging department?

₦30,000

₦20,000

₦25,000

₦50,000

Show answer & explanation

Answer: ₦20,000

Answer

The amount of canteen expenses apportioned to the Packaging department is ₦20,000.

Canteen expenses are an indirect staff-related cost and are equitably apportioned using the number of employees in each department. The total number of employees is

30 + 20 = 50

. Packaging's share is calculated as

\frac{20}{50} \times ₦50,000 = ₦20,000

.

Step-by-Step Solution

1

Identify the total expense and the appropriate basis of apportionment.

Total canteen expense =

₦50,000

. Standard basis for canteen expenses is the number of employees.

Canteen expenses benefit employees directly, so employee headcount provides an equitable distribution.

2

Calculate total employee count and the proportion for the Packaging department.

Total employees =

30 + 20 = 50

. Packaging ratio =

\frac{20}{50} = \frac{2}{5}

.

Determining the fractional share of Packaging relative to the business total.

3

Multiply the fraction by total canteen expenses.

Packaging share =

\frac{20}{50} \times ₦50,000 = ₦20,000

.

Calculates the monetary expense charged to the Packaging departmental profit and loss account.

Key Concept

Apportionment of indirect staff expenses based on departmental headcount

Question 11523Question →

Nneka, a laundry service provider, maintains single-entry records for her business. At the beginning of the financial year, her opening capital was ₦120,000, and at the end of the year, her closing capital stood at ₦180,000. During the year, she introduced additional capital of ₦30,000 and withdrew ₦15,000 for her personal use. What was her net profit for the year?

₦15,000

₦45,000

₦75,000

₦105,000

Show answer & explanation

Answer: ₦45,000

Answer

₦45,000

Under the Statement of Affairs method, Net Profit is calculated as (Closing Capital + Drawings - Capital Introduced) - Opening Capital. Substituting the values gives (₦180,000 + ₦15,000 - ₦30,000) - ₦120,000 = ₦165,000 - ₦120,000 = ₦45,000.

Step-by-Step Solution

1

Identify the relevant formula for determining profit under the Statement of Affairs method.

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

Drawings reduce equity during the period and must be added back to closing capital, while additional capital increases equity and must be deducted to isolate operational profit.

2

Substitute the given values into the capital equation.

Adjusted Closing Capital = ₦180,000 + ₦15,000 - ₦30,000 = ₦165,000

Adding drawings of ₦15,000 to closing capital of ₦180,000 gives ₦195,000; subtracting additional capital of ₦30,000 leaves ₦165,000.

3

Deduct opening capital from the adjusted closing capital to compute net profit.

Net Profit = ₦165,000 - ₦120,000 = ₦45,000

The difference between adjusted closing capital and opening capital represents the net profit earned over the accounting period.

Key Concept

Statement of Affairs Method for Capital and Profit Determination

Question 11524Question →

Zuma Enterprises recorded the following transactions during the month of April 2026:

Date	Transaction Details
April 3	Purchased 50 units of merchandise on credit from Boma Ltd at ₦8,000 per unit, subject to a 15% trade discount.
April 8	Bought an office delivery van on credit from Motor Care Ltd for ₦2,500,000.
April 14	Purchased 30 units of merchandise for cash from Zenith Stores at ₦7,500 per unit.
April 18	Returned 10 defective units of merchandise purchased on April 3 to Boma Ltd.
April 22	Purchased 40 units of merchandise on credit from Koko & Sons at ₦12,000 per unit, subject to a 10% trade discount and 5% cash discount terms.
April 27	Received 5 units of returned merchandise from a credit customer valued at ₦50,000.

What is the total amount recorded in the Purchases Journal for April 2026 to be transferred to the Purchases Account in the General Ledger?

Show answer & explanation

Answer: 772000

Answer

The total amount recorded in the Purchases Journal for April 2026 is ₦772,000.

The Purchases Journal strictly records credit purchases of goods intended for resale, net of trade discounts. Cash purchases are entered in the Cash Book, non-current asset purchases are recorded in the General Journal, and purchases returns are recorded in the Purchases Returns Journal. Cash discounts are ignored when making entries in the Purchases Journal. Adding the net credit purchases of ₦340,000 (April 3) and ₦432,000 (April 22) yields a total Purchases Journal transfer of ₦772,000 to the debit of the Purchases Account.

Step-by-Step Solution

1

Calculate net invoice amount for April 3 credit purchase

₦340,000

Gross amount = 50 × ₦8,000 = ₦400,000. Less 15% trade discount (₦60,000) gives ₦340,000.

2

Filter out non-purchases journal items

Delivery van (capital expenditure), cash purchases, returns outwards, and customer returns are excluded

The Purchases Journal strictly records credit purchases of merchandise meant for resale only.

3

Calculate net invoice amount for April 22 credit purchase

₦432,000

Gross amount = 40 × ₦12,000 = ₦480,000. Less 10% trade discount (₦48,000) gives ₦432,000. Cash discounts are not recorded in the Purchases Journal.

4

Sum valid Purchases Journal entries

₦772,000

Total Purchases Journal balance = ₦340,000 + ₦432,000 = ₦772,000.

Key Concept

Scope and Entry Rules of the Purchases Journal

Question 11525Question →

Apex Enterprises operates three departments: Department A, Department B, and Department C. During the year ended 31st December 2025, total insurance premium paid was $₦520,000$ , which includes an unexpired insurance (prepayment) of $₦70,000$ .

It was ascertained that of the net insurance cost:
- $60\%$ relates to factory building insurance, which is apportioned on the basis of floor space area.
- $40\%$ relates to plant and machinery insurance, which is apportioned on the basis of book value of machinery.

The departmental details are provided below:
- Floor Space (sq. meters): Dept A = $1,500$ ; Dept B = $2,000$ ; Dept C = $1,500$
- **Book Value of Machinery ( $₦$ )**: Dept A = $₦1,200,000$ ; Dept B = $₦800,000$ ; Dept C = $₦2,000,000$

What is the total amount of insurance expense to be apportioned to Department B?

Show answer & explanation

Answer: 144000

Answer

The total insurance expense apportioned to Department B is

₦144,000

.

To compute the total insurance cost for Department B, the net insurance expense (

₦450,000

) after deducting the

₦70,000

prepayment is divided into building insurance (

₦270,000

) and machinery insurance (

₦180,000

). Department B occupies

\frac{2,000}{5,000}

(

40\%

) of total floor space, incurring

₦108,000

for building insurance, and holds

\frac{800,000}{4,000,000}

(

20\%

) of total machinery value, incurring

₦36,000

for machinery insurance. Adding both components gives

₦144,000

.

Step-by-Step Solution

1

Adjust total insurance paid for prepayment to get the net expense for the current period.

Net Insurance Expense =

₦520,000 - ₦70,000 = ₦450,000

.

Only the expense relating to the current financial year should be apportioned among departments.

2

Divide net insurance expense into building insurance and machinery insurance.

Building Insurance =

60\% \times ₦450,000 = ₦270,000

; Machinery Insurance =

40\% \times ₦450,000 = ₦180,000

.

Each type of insurance has a different equitable basis of apportionment.

3

Determine Department B's portion of building insurance using floor space ratio.

Total floor space =

1,500 + 2,000 + 1,500 = 5,000

sq. meters. Department B share =

\frac{2,000}{5,000} \times ₦270,000 = ₦108,000

.

Building rent and insurance expenses are equitably apportioned based on floor space occupied.

4

Determine Department B's portion of machinery insurance using book value of machinery ratio.

Total machinery value =

₦1,200,000 + ₦800,000 + ₦2,000,000 = ₦4,000,000

. Department B share =

\frac{800,000}{4,000,000} \times ₦180,000 = ₦36,000

.

Machinery insurance is apportioned based on the capital values/book values of the machinery in each department.

5

Sum Department B's shares from both building and machinery insurance.

Total Department B Insurance =

₦108,000 + ₦36,000 = ₦144,000

.

The total expense charged to Department B is the sum of all individual apportioned overhead costs.

Key Concept

Dual-basis apportionment of departmental expenses with accrual/prepayment adjustments

Question 11526Question →

Match each term or feature related to the single entry system of bookkeeping on the left with its appropriate accounting description or limitation on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Pure Single Entry System matches with the practice where only personal accounts of debtors and creditors are maintained, with no cash book or real accounts. Quasi Single Entry System matches with the practice where personal accounts, a cash book, and supplementary daybooks are maintained despite lacking full double entry. Statement of Affairs matches with a financial summary compiled from incomplete records to estimate capital in the absence of a proper balance sheet. Omission of Nominal Accounts matches with a fundamental limitation that prevents the direct preparation of a traditional Trading and Profit & Loss Account.

Each single entry component is accurately paired with its definitive feature or limitation: Pure Single Entry is restricted solely to personal accounts; Quasi Single Entry incorporates cash books and subsidiary books; Statement of Affairs acts as an asset/liability capital estimation tool; and Omission of Nominal Accounts is the core structural cause preventing normal income statement preparation.

Step-by-Step Solution

1

Analyze the definitions of single entry variations.

Identify that Pure Single Entry excludes cash books and real/nominal accounts, matching the description specifying only personal accounts. Quasi Single Entry includes personal accounts, cash books, and subsidiary journals.

Single entry systems vary in completeness from pure personal records to quasi-systems with auxiliary journals.

2

Examine the role of Statement of Affairs under incomplete records.

Recognize that Statement of Affairs serves as an estimated substitute for a balance sheet to find opening and closing capital.

Without double-entry ledger balances, capital must be derived via Assets minus Liabilities.

3

Evaluate the impact of omitting nominal accounts.

Connect the lack of nominal accounts directly to the limitation of being unable to extract a standard Trading and Profit & Loss Account.

Nominal accounts store revenues and expenses necessary for calculating gross and net profits directly.

Key Concept

Meaning, Features, and Limitations of Single Entry System

Question 11527Question →

An accounting extract from the books of Kemi Enterprises as at 31 December 2025 reveals the following balance sheet items:

- Fixtures and Fittings: $\text{₦}450,000$
- Motor Vehicles: $\text{₦}800,000$
- Trade Debtors: $\text{₦}160,000$
- Closing Stock: $\text{₦}190,000$
- Prepaid Rent: $\text{₦}25,000$
- Bank Overdraft: $\text{₦}85,000$
- Trade Creditors: $\text{₦}110,000$
- Accrued Electricity: $\text{₦}20,000$
- 5-Year Mortgage Loan: $\text{₦}350,000$

Calculate the Capital Employed of Kemi Enterprises.

Show answer & explanation

Answer: 1410000

Answer

The Capital Employed of Kemi Enterprises is ₦1,410,000.

Capital Employed is the total net investment used to generate earnings. It equals Total Assets (₦1,625,000) minus Current Liabilities (₦215,000), which results in ₦1,410,000. Alternatively, it can be computed as Non-current Assets (₦1,250,000) plus Working Capital (₦160,000) = ₦1,410,000.

Step-by-Step Solution

1

Classify and total Non-current Assets

Total Non-current Assets = ₦450,000 (Fixtures) + ₦800,000 (Motor Vehicles) = ₦1,250,000

Non-current assets are long-term resources owned for business operations lasting more than one accounting period.

2

Classify and total Current Assets

Total Current Assets = ₦160,000 (Debtors) + ₦190,000 (Stock) + ₦25,000 (Prepaid Rent) = ₦375,000

Current assets are cash or short-term assets expected to be converted into cash within one year.

3

Classify and total Current Liabilities

Total Current Liabilities = ₦85,000 (Bank Overdraft) + ₦110,000 (Creditors) + ₦20,000 (Accrued Electricity) = ₦215,000

Current liabilities are short-term obligations payable within one year.

4

Compute Net Current Assets (Working Capital)

Working Capital = ��375,000 - ₦215,000 = ₦160,000

Working capital measures short-term operating liquidity.

5

Compute Capital Employed

Capital Employed = Non-current Assets + Working Capital = ₦1,250,000 + ₦160,000 = ₦1,410,000

Capital Employed represents the total long-term capital invested in running the business entity.

Key Concept

Capital Employed is calculated as Total Assets minus Current Liabilities, or Non-current Assets plus Net Current Assets (Working Capital). Long-term liabilities are part of total capital employed, not deducted from non-current assets.

Estimated Time:2m 0s

Question 11528Question →

In public sector accounting, financial transactions are strictly governed by legislative appropriations and vote accounting to monitor government spending. What is the primary objective of enforcing this budgetary control framework?

Determining the net profit and operational margins of individual public ministries

Demonstrating public stewardship and ensuring strict compliance with parliamentary authorizations

Maximizing returns on equity investments for private government shareholders

Accruing all uncollected revenue and future capital commitments under commercial accounting rules

Show answer & explanation

Answer: Demonstrating public stewardship and ensuring strict compliance with parliamentary authorizations

Answer

Demonstrating public stewardship and ensuring strict compliance with parliamentary authorizations

The fundamental objective of vote accounting and legislative control in public sector accounting is to enforce financial discipline, demonstrate stewardship of public funds, and ensure all disbursements comply strictly with legally authorized parliamentary votes.

Step-by-Step Solution

1

Identify the core purpose of vote accounting and legislative budget control in the public sector.

Vote accounting tracks expenditure against approved budgetary allocations (votes) passed by the legislature.

Government funds are public resources held in trust, requiring legal accountability rather than profit measurement.

2

Differentiate public sector accounting objectives from commercial accounting goals.

Public sector accounting prioritizes stewardship, transparency, and statutory compliance over profit generation.

Commercial entities focus on profit maximization and equity returns, whereas government entities focus on public service accountability.

Key Concept

Features and Objectives of Public Sector Accounting

Question 11529Question →

The Industrial Revolution led to the emergence of large joint-stock companies and complex manufacturing operations. Which of the following best describes how the scope of accounting expanded during this historical era?

Accounting expanded from simple record-keeping of transactions to analyzing financial data for decision-making and reporting to external investors.

Accounting narrowed its function solely to the routine mechanical entry of daily transactions into journals without summarizing financial statements.

Accounting began combining the personal financial transactions of business owners with official corporate records under a single entity.

Accounting replaced double-entry record systems entirely with single-entry cash record-keeping to simplify factory payroll.

Show answer & explanation

Answer: Accounting expanded from simple record-keeping of transactions to analyzing financial data for decision-making and reporting to external investors.

Answer

Accounting expanded from simple record-keeping of transactions to analyzing financial data for decision-making and reporting to external investors.

The correct answer accurately highlights that the Industrial Revolution transformed accounting from basic clerical record-keeping into a comprehensive system of financial analysis, cost accounting, and external financial reporting created for corporate shareholders and management.

Step-by-Step Solution

1

Identify the key historical driver mentioned in the stem.

The Industrial Revolution brought joint-stock corporations, professional management, and large capital investments.

Understanding the economic environment clarifies why record-keeping needs changed.

2

Distinguish between traditional bookkeeping and modern accounting functions.

Traditional bookkeeping focused on recording past transactions for stewardship, while expanded accounting incorporates data analysis, cost control, and financial reporting for external stakeholders.

Separation of ownership and control necessitated reporting to absentee shareholders and investors.

Key Concept

Impact of the Industrial Revolution on Accounting Scope

Question 11530Question →

On 1 January 2025, the Rent Account of a trader showed a prepaid balance of $\text{₦}15,000$ and an accrued balance of $\text{₦}20,000$ . Total cash paid for rent during the year ended 31 December 2025 was $\text{₦}210,000$ . At 31 December 2025, rent prepaid was $\text{₦}25,000$ while rent owing amounted to $\text{₦}35,000$ . What is the amount of rent expense to be charged to the Profit and Loss Account for the year ended 31 December 2025?

\text{₦}195,000

\text{₦}205,000

\text{₦}215,000

\text{₦}225,000

Show answer & explanation

Answer: $\text{₦}215,000$

Answer

The amount to be charged to the Profit and Loss Account for rent expense is

\text{₦}215,000

.

Under accrual accounting, the expense charged to the Profit and Loss Account reflects the actual expense incurred during the accounting period regardless of when cash is paid. Therefore, opening prepaid rent (

\text{₦}15,000

) and closing accrued rent (

\text{₦}35,000

) are added to the cash paid (

\text{₦}210,000

), while opening accrued rent (

\text{₦}20,000

) and closing prepaid rent (

\text{₦}25,000

) are deducted, giving

\text{₦}215,000

.

Step-by-Step Solution

1

Identify the base cash payment made during the financial year.

Total cash paid =

\text{₦}210,000

Cash paid forms the starting point for calculating the actual expense incurred for the year.

2

Adjust for opening balances at 1 January 2025.

Add Opening Prepaid (

\text{₦}15,000

) and Subtract Opening Accrued (

\text{₦}20,000

)

Prepaid rent brought forward belongs to the current year, whereas accrued rent brought forward relates to the previous year.

3

Adjust for closing balances at 31 December 2025.

Add Closing Accrued (

\text{₦}35,000

) and Subtract Closing Prepaid (

\text{₦}25,000

)

Accrued rent at year-end belongs to the current year's expense, whereas prepaid rent at year-end relates to the next financial year.

4

Calculate the net charge to the Profit and Loss Account.

\text{₦}210,000 + \text{₦}15,000 - \text{₦}20,000 + \text{₦}35,000 - \text{₦}25,000 = \text{₦}215,000

Combining cash paid with accrual basis adjustments yields the true rental expense for the period.

Key Concept

Accruals and Prepayments Adjustment Formula for Expense Accounts

Question 11531Question →

Apex Manufacturing Ltd. is negotiating a long-term wage contract with its labor union. The union's representatives request the company's audited financial statements to assess whether the business can sustain salary increases and guarantee pension contributions. In financial accounting classification, how is the labor union categorized as a user, and what is their primary information requirement?

An external user interested primarily in long-term stability, profitability, and job security

An internal user interested primarily in routine cost allocation and daily bookkeeping control

An external user interested primarily in assessing corporate tax liabilities and statutory tax compliance

An internal user interested primarily in combining directors' personal drawings with business operating capital

Show answer & explanation

Answer: An external user interested primarily in long-term stability, profitability, and job security

Answer

An external user interested primarily in long-term stability, profitability, and job security

Labor unions represent employees and operate as external stakeholders. Their main interest in accounting statements lies in assessing business profitability, financial health, and enterprise stability to evaluate job security, wage growth potential, and retirement benefits.

Step-by-Step Solution

1

Identify the user category of the labor union

Labor unions and employees are external users because they operate outside the day-to-day managerial control of the firm, despite having a direct stake in its operations.

Internal users are limited to management personnel who directly make operational planning and control decisions.

2

Determine the specific financial information needs of the labor union

Unions need information regarding profitability, long-term solvency, and enterprise stability.

This information enables them to negotiate fair remuneration, evaluate job security, and verify pension plan sustainability.

Key Concept

Classification of users of accounting information and their specific needs

Question 11532Question →

In accounting for non-profit organizations, the excess of total income over total expenditure is referred to as net profit.

True

False

Show answer & explanation

Answer: False

Answer

The statement is False. In non-profit organizations, the excess of income over expenditure is termed a surplus, not a net profit.

The statement is false because non-profit organizations aim to provide services rather than generate profit for proprietary owners, meaning any financial excess of income over expenditure is termed a surplus.

Step-by-Step Solution

1

Identify the primary operational objective of a non-profit organization.

Non-profit organizations (such as clubs and voluntary societies) aim to render services rather than maximize profit.

Accounting terminology reflects an entity's core operational purpose.

2

Determine the proper financial term for excess receipts in an Income and Expenditure Account.

The balance is called a surplus (or deficit if expenses exceed income) and is transferred to the Accumulated Fund.

Commercial entities use 'net profit' to denote earnings distributable to owners, whereas non-profit entities retain surplus funds for ongoing service delivery.

Key Concept

The excess of income over expenditure in a non-profit organization is termed surplus, reflecting its service-oriented nature.

Question 11533Question →

A sole trader maintains business records by recording cash and bank transactions alongside personal accounts of debtors and creditors, while omitting entries for real accounts (assets) and nominal accounts (expenses and revenues). Which of the following best explains why the arithmetical accuracy of these financial records cannot be verified using a trial balance?

The systematic record of dual aspects (debit and credit) is incomplete across real and nominal accounts, preventing the extraction of equal corresponding debit and credit balances.

Profit is determined strictly by combining opening capital and closing capital with cash receipts, rendering the balancing of ledger accounts unnecessary.

A single entry system routinely records full bookkeeping entries but lacks the accounting scope needed to format a trial balance.

The inclusion of the owner's personal drawings automatically causes the debit side of the trial balance to be higher than the credit side.

Show answer & explanation

Answer: The systematic record of dual aspects (debit and credit) is incomplete across real and nominal accounts, preventing the extraction of equal corresponding debit and credit balances.

Answer

The systematic record of dual aspects (debit and credit) is incomplete across real and nominal accounts, preventing the extraction of equal corresponding debit and credit balances.

Under a single entry bookkeeping system, dual aspect posting (debit and credit) is not systematically maintained for all transactions. Since real accounts (fixed assets, stock) and nominal accounts (expenses, revenues) are omitted or incomplete, ledger account balances cannot be summarized into equal total debits and total credits. Consequently, extracting a trial balance to prove arithmetical accuracy is structurally impossible.

Step-by-Step Solution

1

Analyze the nature of the single entry system described in the scenario.

Single entry systems typically maintain personal accounts (debtors/creditors) and cash/bank records, but omit real accounts (assets) and nominal accounts (expenses/incomes).

Understanding which accounts are omitted helps identify structural limitations of the system.

2

Evaluate the prerequisite for extracting a trial balance.

A trial balance requires every debit entry to have a corresponding credit entry across all transaction types.

Testing arithmetical accuracy requires verifying that total debits equal total credits across the ledger system.

3

Determine why arithmetical accuracy cannot be verified in single entry.

Because corresponding debit or credit postings are missing for nominal and real accounts, ledger accounts cannot yield balanced debit and credit totals.

Without complete double-entry records, a trial balance cannot be extracted.

Key Concept

Limitations of Single Entry System - Trial Balance and Arithmetical Accuracy

Question 11534Question →

The following transaction balances were extracted from the books of Kalu Traders for the year ended 31st December 2025:

- Opening balance (credit): $\text{N}18,500$
- Credit purchases: $\text{N}94,000$
- Cash purchases: $\text{N}12,500$
- Returns outwards: $\text{N}3,200$
- Discount received: $\text{N}1,800$
- Cheques paid to creditors: $\text{N}78,500$
- Dishonoured cheques: $\text{N}1,400$
- Contra entry (set-off) with sales ledger: $\text{N}2,400$

What is the closing credit balance of the Purchases Ledger Control Account at 31st December 2025?

\text{N}28,000

\text{N}31,600

\text{N}40,500

\text{N}25,200

Show answer & explanation

Answer: $\text{N}28,000$

Answer

\text{N}28,000

The closing credit balance of

\text{N}28,000

is determined by summing all credit entries (Opening Credit Balance of

\text{N}18,500

, Credit Purchases of

\text{N}94,000

, and Dishonoured Cheques of

\text{N}1,400

, totaling

\text{N}113,900

) and subtracting all debit entries (Cheques paid of

\text{N}78,500

, Returns outwards of

\text{N}3,200

, Discount received of

\text{N}1,800

, and Set-off of

\text{N}2,400

, totaling

\text{N}85,900

). Cash purchases of

\text{N}12,500

are excluded as they do not affect creditor balances.

Step-by-Step Solution

1

Identify relevant credit items and calculate total credits.

Total Credits = Opening Credit Balance (

\text{N}18,500

) + Credit Purchases (

\text{N}94,000

) + Dishonoured Cheques (

\text{N}1,400

) =

\text{N}113,900

. Cash purchases are excluded because they do not involve credit suppliers.

Credit purchases increase amounts owed to suppliers, and dishonoured cheques reinstate the liability to creditors on the credit side.

2

Identify relevant debit items and calculate total debits.

Total Debits = Cheques paid to creditors (

\text{N}78,500

) + Returns outwards (

\text{N}3,200

) + Discount received (

\text{N}1,800

) + Contra entry (

\text{N}2,400

) =

\text{N}85,900

.

Payments, allowances, returns, and set-offs reduce the balance owed to creditors and are posted to the debit side of the account.

3

Subtract total debits from total credits to determine the closing credit balance.

Closing Credit Balance =

\text{N}113,900 - \text{N}85,900 = \text{N}28,000

.

The Purchases Ledger Control Account has a normal credit balance, calculated as total credit entries minus total debit entries.

Key Concept

Purchases Ledger Control Account Balancing

Question 11535Question →

Emeka, a sole proprietor who maintains incomplete accounting records, extracted the following details regarding his trade debtors for the financial year:

- Opening Trade Debtors: ₦15,000
- Cash collected from trade debtors: ₦50,000
- Discount allowed to trade debtors: ₦2,000
- Closing Trade Debtors: ₦20,000

What is the total amount of credit sales for the year?

₦47,000

₦53,000

₦55,000

₦57,000

Show answer & explanation

Answer: ₦57,000

Answer

The total amount of credit sales for the year is ₦57,000.

The Sales Ledger Control Account summarizes all transactions affecting trade debtors. Credit sales are computed as

\text{Closing Debtors (₦20,000)} + \text{Cash Received (₦50,000)} + \text{Discount Allowed (₦2,000)} - \text{Opening Debtors (₦15,000)} = ₦57,000

.

Step-by-Step Solution

1

Identify the double-entry components of the Sales Ledger Control Account

Debit side: Opening Balance + Credit Sales. Credit side: Cash Collected + Discount Allowed + Closing Balance.

Debtors are assets, so opening balance and credit sales increase debtors on the debit side, while cash receipts, discounts, and closing balance decrease debtors on the credit side.

2

Calculate the total of the credit side of the control account

\text{Credit Side Total} = ₦50,000 + ₦2,000 + ₦20,000 = ₦72,000

Summing cash collected, discount allowed, and closing trade debtors gives the total credit entries needed to balance the account.

3

Deduct the opening debtors balance to find missing credit sales

\text{Credit Sales} = ₦72,000 - 15,000 = ₦57,000

Reconstructing the equation:

\text{Credit Sales} = \text{Closing Debtors} + \text{Cash Received} + \text{Discount Allowed} - \text{Opening Debtors}

.

Key Concept

Sales Ledger Control Account Reconstruction

Question 11536Question →

Match each accounting item related to the preparation of a sole trader's Trading Account with its correct accounting treatment.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Carriage Inwards matches with 'Added to purchases to determine net cost of purchases in the Trading Account', Returns Outwards matches with 'Deducted from gross purchases to obtain net purchases', Closing Inventory matches with 'Deducted from cost of goods available for sale to determine cost of goods sold', and Carriage Outwards matches with 'Excluded from the Trading Account and charged as an operating expense in the Profit and Loss Account'.

Each trading account item is classified according to its role in deriving cost of goods sold or operating expenses. Carriage inwards adds to purchase costs, returns outwards reduce gross purchases, closing inventory reduces goods available for sale to derive cost of goods sold, and carriage outwards is treated as an operating expense in the profit and loss account.

Step-by-Step Solution

1

Identify direct freight costs on goods purchased

Carriage inwards increases the cost of acquiring inventory and is added directly to purchases in the Trading Account.

All direct expenses involved in bringing goods to their present location for resale form part of the total cost of purchases.

2

Account for goods returned to suppliers

Returns outwards reduce gross purchases.

Returned merchandise reduces the net value of inventory bought during the trading period.

3

Determine the treatment of unsold inventory at year end

Closing inventory is deducted from goods available for sale.

Under the matching concept, only the cost of goods actually sold in the period should be matched against sales revenue to determine gross profit.

4

Distinguish distribution costs from direct purchasing costs

Carriage outwards is excluded from the Trading Account.

Carriage outwards relates to selling and distribution rather than buying merchandise, making it an operating expense in the Profit and Loss Account.

Key Concept

Classification and treatment of items in the Trading Account

Question 11537Question →

Match each transaction or accounting adjustment on the left with its correct entry treatment in the Purchases Ledger Control Account on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Dishonoured cheques are credited to reinstate liability; contra entries are debited to settle mutual indebtedness; interest charged by suppliers is credited to increase amounts owed; and discounts received are debited to reduce trade payable balances.

Items that increase trade payables (such as interest charged by suppliers and dishonoured payment cheques) are credited to the Purchases Ledger Control Account. Items that decrease trade payables (such as discounts received and contra set-off transfers) are debited to the control account.

Step-by-Step Solution

1

Analyze the nature of Purchases Ledger Control Account balance

The control account maintains a credit balance representing total trade liabilities (creditors).

Increases in liabilities are credited, while decreases in liabilities are debited.

2

Evaluate dishonoured cheque and interest charged

Both items increase the liability owed to trade creditors.

A dishonoured cheque cancels the original reduction in debt upon payment failure, and interest adds penalty charges to the debt; thus, both must be credited.

3

Evaluate contra set-offs and discounts received

Both items decrease the liability owed to trade creditors.

Contra set-offs discharge debt against sales receivables, and discounts received lower the payable amount; thus, both must be debited.

Key Concept

Purchases Ledger Control Account Debit and Credit Posting Principles

Estimated Time:2m 0s

Question 11538Question →

Apex Retailers operates two departments: Department P and Department Q. For the financial year ended 31 December 2025, the following balances were extracted from the books:

Item	Department P (₦)	Department Q (₦)
Sales	400,000	600,000
Opening Stock	50,000	70,000
Purchases	250,000	350,000
Closing Stock	40,000	60,000

Additional financial information:
1. Department P transferred goods costing $₦30,000$ to Department Q at a transfer price incorporating a $20\%$ mark-up on cost.
2. Shared Administrative Salaries of $₦120,000$ are to be apportioned based on staff headcount (Department P has 6 staff members, Department Q has 4 staff members).
3. Total Rent and Rates paid was $₦50,000$ , which includes $₦10,000$ prepaid for the subsequent year. Rent is apportioned based on floor space occupied (Department P: $1,200\text{ sq ft}$ ; Department Q: $800\text{ sq ft}$ ).
4. Total Discount Allowed of $₦20,000$ is to be apportioned on the basis of sales turnover.

What is the net profit of Department Q for the year ended 31 December 2025 in Naira ( $₦$ )?

Show answer & explanation

Answer: 128000

Answer

The net profit of Department Q for the year ended 31 December 2025 is ₦128,000.

The net profit of ₦128,000 is correctly determined by calculating Department Q's gross profit after accounting for the inter-departmental transfer in at transfer price (₦36,000), subtracting proper closing stock, and deducting all appropriately apportioned operating expenses after adjusting rent for prepaid amounts.

Step-by-Step Solution

1

Calculate Inter-Departmental Transfer Value

Transfer Price =

₦36,000

Department P transferred goods costing

₦30,000

to Department Q at cost plus a

20\%

mark-up:

30,000 + (20\% \times 30,000) = 36,000

. Department Q records this as a transfer in to its trading account.

2

Determine Department Q Gross Profit

Gross Profit =

₦204,000

Cost of Goods Sold (COGS) for Department Q = Opening Stock (

₦70,000

) + Purchases (

₦350,000

) + Transfer In (

₦36,000

) - Closing Stock (

₦60,000

) =

₦396,000

. Gross Profit = Sales (

₦600,000

) - COGS (

₦396,000

) =

₦204,000

.

3

Calculate Apportioned Expenses for Department Q

Total Department Q Expenses =

₦76,000

Salaries apportioned by headcount (

6:4

):

₦120,000 \times \frac{4}{10} = ₦48,000

. Net Rent Expense after subtracting

₦10,000

prepayment (

₦50,000 - ₦10,000 = ₦40,000

) apportioned by floor area (

1,200:800

):

₦40,000 \times \frac{800}{2,000} = ₦16,000

. Discount Allowed apportioned by sales ratio (

400,000:600,000

):

₦20,000 \times \frac{600,000}{1,000,000} = ₦12,000

. Total expenses =

48,000 + 16,000 + 12,000 = ₦76,000

.

4

Compute Net Profit of Department Q

Net Profit =

₦128,000

Net Profit = Gross Profit (

₦204,000

) - Total Expenses (

₦76,000

) =

₦128,000

.

Key Concept

Preparation of Departmental Trading, Profit and Loss Accounts with inter-departmental transfers and multi-basis expense apportionment

Estimated Time:3m 0s

Question 11539Question →

Kofi and Segun are partners in a firm operating a fixed capital account system. On 1st January 2025, Segun's current account had a credit balance of $\text{₦}120,000$ . During the year ended 31st December 2025, the following transactions occurred in respect of Segun:
- Partnership salary: $\text{₦}180,000$
- Interest on capital: $\text{₦}40,000$
- Personal drawings made: $\text{₦}150,000$
- Interest charged on drawings: $\text{₦}10,000$
- Share of profit: $\text{₦}210,000$
- Interest on loan advanced by Segun to the firm: $\text{₦}30,000$ (paid directly into his personal bank account)

What is the balance on Segun's Current Account as at 31st December 2025?

₦390,000 Credit

₦420,000 Credit

₦400,000 Credit

₦410,000 Credit

Show answer & explanation

Answer: ₦390,000 Credit

Answer

The balance on Segun's Current Account as at 31st December 2025 is ₦390,000 Credit.

Under a fixed capital account system, partner capital remains fixed while daily transactions, appropriations, and drawings pass through the current account. Segun's current account is credited with his opening balance (₦120,000), salary allowance (₦180,000), interest on capital (₦40,000), and share of profit (₦210,000), totaling ₦550,000. It is debited with drawings (₦150,000) and interest on drawings (₦10,000), totaling ₦160,000. The net closing balance is ₦550,000 - ₦160,000 = ₦390,000 Credit. Interest on loan paid into his bank account is a financial charge in the Profit and Loss Account and does not affect the current account.

Step-by-Step Solution

1

Identify items to credit to Segun's Current Account

Total Credit items = Opening Credit Balance (₦120,000) + Partnership Salary (₦180,000) + Interest on Capital (₦40,000) + Share of Profit (₦210,000) = ₦550,000.

Under a fixed capital system, all appropriations, entitlements, and opening credit balances increase the partner's current account balance on the credit side.

2

Identify items to debit to Segun's Current Account

Total Debit items = Personal Drawings (₦150,000) + Interest on Drawings (₦10,000) = ₦160,000.

Drawings and interest on drawings reduce the partner's balance and must be placed on the debit side of the current account.

3

Examine the non-current account item (Interest on Loan)

Interest on partner's loan (₦30,000) is excluded from the current account calculation.

Interest on partner loan is a charge against profit in the main Profit and Loss Account and paid via bank/cash, not an appropriation credited to the current account.

4

Calculate the net closing Current Account balance

Net balance = ₦550,000 (Credits) - ₦160,000 (Debits) = ₦390,000 Credit.

The excess of credit entries over debit entries yields a closing credit balance.

Key Concept

Fixed Capital System and Partner Current Account Preparation

Question 11540Question →

In public sector accounting, under which category of government revenue is the money derived from the outright sale of surplus government landed property classified?

Capital receipt

Recurrent non-tax revenue

Recurrent tax revenue

Statutory revenue allocation

Show answer & explanation

Answer: Capital receipt

Answer

Capital receipt

The correct answer is capital receipt. In public sector accounting, proceeds from the disposal of government fixed assets (such as land, buildings, or state-owned enterprises) are non-recurring inflows categorized under capital receipts.

Step-by-Step Solution

1

Analyze the nature of the transaction

The transaction involves the outright sale of government landed property (a long-term fixed asset).

Government revenue classification depends on whether an inflow is recurring operational income or non-recurring capital inflow.

2

Classify the financial inflow based on public sector accounting rules

Funds generated from disposing of capital assets or raising loans are non-recurrent capital receipts.

Capital receipts are meant to fund capital expenditures and are credited to capital development funds rather than general recurrent revenue heads.

Key Concept

Classification of Government Revenue (Capital Receipts vs Recurrent Revenue)

Answer

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