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Question 11541Question →

The following transactions occurred in the business of Adebayo Traders during May 2026:

DateTransaction Details
May 4Sold goods listed at ₦200,000\text{₦}200,000 on credit to Ojo, subject to a 15%15\% trade discount and a 5%5\% cash discount if settled within 7 days.
May 10Cash sales of goods to Janet amounting to ₦50,000\text{₦}50,000.
May 15Ojo returned defective goods with a list price of ₦40,000\text{₦}40,000.
May 20Sold old office furniture on credit to Benson for ₦80,000\text{₦}80,000.

What are the correct periodic totals to be entered into the Sales Journal and Sales Returns Journal respectively for the month of May 2026?

Show answer & explanation

Answer: Sales Journal: ₦170,000\text{₦}170,000; Sales Returns Journal: ₦34,000\text{₦}34,000

Answer

Sales Journal: ₦170,000\text{₦}170,000; Sales Returns Journal: ₦34,000\text{₦}34,000
The Sales Journal records only credit sales of trading goods net of trade discounts (₦200,000−₦30,000=₦170,000\text{₦}200,000 - \text{₦}30,000 = \text{₦}170,000). Cash sales of ₦50,000\text{₦}50,000 belong in the Cash Book, and the credit sale of office furniture (₦80,000\text{₦}80,000) is a disposal of a non-current asset recorded in the General Journal. The Sales Returns Journal records returned merchandise net of the initial trade discount (₦40,000−₦6,000=₦34,000\text{₦}40,000 - \text{₦}6,000 = \text{₦}34,000).

Step-by-Step Solution

1
Calculate net credit sales for the Sales Journal
Net Credit Sales = ₦200,000−(15%×₦200,000)=₦170,000\text{₦}200,000 - (15\% \times \text{₦}200,000) = \text{₦}170,000
Sales Journal records only credit sales of stock/inventory. Trade discounts are deducted immediately, while cash discounts are ignored at the journal entry stage.
2
Filter out non-qualifying sales transactions
Cash sales (May 10) go to the Cash Book. Furniture sale (May 20) goes to the General Journal.
Cash sales belong in the Cash Book, and sales of fixed assets on credit belong in the General Journal (Journal Proper).
3
Calculate net returns inward for the Sales Returns Journal
Net Sales Returns = ₦40,000−(15%×₦40,000)=₦34,000\text{₦}40,000 - (15\% \times \text{₦}40,000) = \text{₦}34,000
Returned goods must be adjusted for the same trade discount percentage granted at the time of purchase.

Key Concept

Classification of credit transactions and trade discount adjustment in special journals
Estimated Time:2m 0s
Question 11542Question →

Which of the following represents a primary objective of accounting?

Show answer & explanation

Answer: Ascertaining the net financial performance and position of a business for a period

Answer

Ascertaining the net financial performance and position of a business for a period
Ascertaining the net financial performance (profit or loss) and position (assets, liabilities, equity) is the central objective of accounting, enabling owners and external stakeholders to evaluate business success.

Step-by-Step Solution

1
Distinguish between bookkeeping functions and primary accounting objectives.
Bookkeeping handles routine data recording and document organization, whereas accounting interprets data to determine financial performance and position.
Understanding the hierarchy of financial management helps identify overall objectives versus underlying clerical tasks.
2
Evaluate the choices to find the statement reflecting a core accounting goal.
Ascertaining net financial results (profit/loss) and financial position (balance sheet) directly fulfills the primary objective of accounting.
Accounting aims to provide decision-makers with clear summaries of profit and solvency.

Key Concept

Primary Objectives of Accounting
Estimated Time:45s
Question 11543Question →

A business paid ₦144,000\text{₦}144,000 by bank transfer on 1 April 2025 for an annual insurance policy covering the period from 1 April 2025 to 31 March 2026. At 1 January 2025, the insurance account had an opening prepaid balance of ₦24,000\text{₦}24,000 for the period from 1 January 2025 to 31 March 2025. What amount (in ₦\text{₦}) should be debited to the Profit and Loss Account as insurance expense for the financial year ended 31 December 2025?

Show answer & explanation

Answer: 132000

Answer

The insurance expense to be debited to the Profit and Loss Account for the year ended 31 December 2025 is ₦132,000.
Under the accrual concept, the Profit and Loss Account must reflect only expenses relating to the current accounting period (12 months from 1 January to 31 December 2025). The expense consists of 3 months from the opening prepayment (₦24,000) plus 9 months of the current year's policy payment (9/12 × ₦144,000 = ₦108,000), giving a total expense of ₦132,000.

Step-by-Step Solution

1
Identify cash paid and opening prepayment
Cash paid during the year = ₦144,000; Opening prepayment at 1 January 2025 = ₦24,000.
Opening prepayment represents an expense incurred in the current accounting year that was paid for in advance in the prior year.
2
Calculate the closing prepayment at 31 December 2025
Closing prepayment = 3/12 × ₦144,000 = ₦36,000.
The policy payment of ₦144,000 covers 12 months (1 April 2025 to 31 March 2026), leaving 3 months (January to March 2026) prepaid at year-end.
3
Compute the insurance expense for the Profit and Loss Account
Insurance Expense = ₦144,000 + ₦24,000 - ₦36,000 = ₦132,000.
Applying the accrual principle matches the exact 12-month expense incurred (3 months from opening prepayment + 9 months from current payment) to the 2025 financial period.

Key Concept

Accrual concept treatment of opening and closing prepayments for expense accounts
Question 11544Question →

The following information was extracted from the financial records of Chukwu & Co. for the month of May 2026:

- Opening Purchases Ledger balances: Credit balance N45,000N45,000; Debit balance N1,200N1,200
- Credit purchases at list price (subject to 10%10\% trade discount): N120,000N120,000
- Cash purchases: N15,000N15,000
- Payments made to trade creditors: N82,000N82,000
- Discount received from suppliers: N3,400N3,400
- Bills payable accepted by the firm: N12,000N12,000
- Contra entry set-off with Sales Ledger: N4,500N4,500
- Interest charged by trade creditors on overdue accounts: N800N800
- Refund received in cash from suppliers for overpayment: N1,200N1,200
- Carriage outwards paid: N3,500N3,500
- Closing Purchases Ledger debit balance: N900N900

What is the closing credit balance of the Purchases Ledger Control Account at the end of May 2026?

Show answer & explanation

Answer: N52,800

Answer

The closing credit balance of the Purchases Ledger Control Account is N52,800.
To determine the closing credit balance of the Purchases Ledger Control Account, credit entries (which increase the liability to creditors) and debit entries (which reduce the liability) must be accumulated. Net credit purchases equal N108,000N108,000 (N120,000N120,000 list price less 10%10\% trade discount). The credit side contains: Opening Credit Balance (N45,000N45,000), Net Credit Purchases (N108,000N108,000), Interest Charged (N800N800), Supplier Refund (N1,200N1,200), and Closing Debit Balance (N900N900), totaling N155,900N155,900. The debit side before balancing contains: Opening Debit Balance (N1,200N1,200), Payments (N82,000N82,000), Discount Received (N3,400N3,400), Bills Payable (N12,000N12,000), and Contra Entry (N4,500N4,500), totaling N103,100N103,100. Subtracting the debit subtotal from the credit total yields the correct closing credit balance of N52,800N52,800. Cash purchases (N15,000N15,000) and carriage outwards (N3,500N3,500) are non-ledger control items and must be excluded.

Step-by-Step Solution

1
Calculate Net Credit Purchases and filter out non-relevant transactions
Net Credit Purchases = N120,000−(10%×N120,000)=N108,000N120,000 - (10\% \times N120,000) = N108,000. Cash purchases (N15,000N15,000) and carriage outwards (N3,500N3,500) are excluded because cash purchases do not affect trade creditors and carriage outwards is a distribution expense.
Control accounts only record credit purchases net of trade discount.
2
Sum all items posted to the Credit side of the Purchases Ledger Control Account
Credit Total = Opening Credit Balance (N45,000N45,000) + Net Credit Purchases (N108,000N108,000) + Interest Charged by Creditors (N800N800) + Cash Refund for Overpayment (N1,200N1,200) + Closing Debit Balance (N900N900) = N155,900N155,900.
These items increase the liability to creditors or account for debit balance carry-forwards.
3
Sum all items posted to the Debit side of the Purchases Ledger Control Account before balancing
Debit Subtotal = Opening Debit Balance (N1,200N1,200) + Payments to Creditors (N82,000N82,000) + Discount Received (N3,400N3,400) + Bills Payable Accepted (N12,000N12,000) + Contra Set-off (N4,500N4,500) = N103,100N103,100.
These items reduce the liability to trade creditors or account for opening debit balances.
4
Calculate the closing credit balance (Balance c/d)
Closing Credit Balance = N155,900−N103,100=N52,800N155,900 - N103,100 = N52,800.
The balance required to equate the debit and credit totals represents the final net amount owed to creditors.

Key Concept

Purchases Ledger Control Account Balancing and Item Placement
Estimated Time:2m 0s
Question 11545Question →

Complete the statement below regarding books of original entry and their source documents.

Fill in the blanks below

The source document issued by a buyer to a supplier to inform them that their account has been debited for goods returned is called a .
Show answer & explanation

Answer

The source document issued by a buyer when returning goods to a supplier is a debit note.
When a business returns goods to a supplier, it issues a debit note to inform the supplier that their personal account is being debited for the value of the returned goods. This document is the primary source document for entries in the purchases returns journal.

Step-by-Step Solution

1
Identify the nature of the transaction and who initiates the document.
The buyer is returning goods previously bought on credit to the supplier.
When returning goods to a seller, the buyer reduces the liability owed to that seller by debiting the supplier's account in their ledger.
2
Determine the appropriate source document for recording in the Purchases Returns Journal.
The buyer prepares and sends a debit note to the seller as evidence of the return.
The debit note serves as the primary voucher to record the transaction in the purchases returns journal (returns outwards journal).

Key Concept

Purchases Returns Journal Source Document
Question 11546Question →

The following cost items were extracted from the accounting records of Calabar Craftworks for the financial year ended 31 December 2025:

Cost ItemAmount (₦)
Direct materials consumed180,000180,000
Direct wages120,000120,000
Royalties on production15,00015,000
Factory power and lighting40,00040,000

What is the Prime Cost of the firm for the year?

Show answer & explanation

Answer: 315000

Answer

The Prime Cost of Calabar Craftworks for the year is ₦315,000.
Prime Cost consists strictly of direct costs: direct materials consumed (₦180,000), direct wages (₦120,000), and direct expenses such as royalties (₦15,000). Adding these three components together gives ₦315,000. Factory power and lighting is an indirect expense and is therefore excluded.

Step-by-Step Solution

1
Identify direct manufacturing costs
Direct materials consumed = ₦180,000, Direct wages = ₦120,000, Royalties on production = ₦15,000
Direct costs comprise direct raw materials, direct labour, and direct production expenses.
2
Exclude indirect costs
Factory power and lighting (₦40,000) is classified as factory overheads
Indirect factory expenses are excluded from the calculation of Prime Cost.
3
Calculate Prime Cost
Prime Cost = ₦180,000 + ₦120,000 + ₦15,000 = ₦315,000
Prime cost is the aggregate of all direct costs.

Key Concept

Prime Cost is the sum of all direct costs incurred in manufacturing, consisting of direct materials consumed, direct wages/labour, and direct expenses (such as royalties). Indirect factory costs are excluded.
Question 11547Question →

The following balance information was extracted from the books of Koko Enterprises for the month ended 31st October 2025:

Transaction DetailsAmount (₦)
Balance in creditors ledger (1st Oct 2025) - Credit18,50018,500
Balance in creditors ledger (1st Oct 2025) - Debit400400
Total credit purchases62,00062,000
Cash purchases12,00012,000
Payments made to trade creditors45,00045,000
Discount received from suppliers2,4002,400
Discount allowed to customers1,8001,800
Returns outwards3,1003,100
Set-off contra entry with sales ledger1,5001,500
Interest charged by suppliers on overdue accounts600600
Cash refund received from supplier for overpayment800800

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

Show answer & explanation

Answer: ₦29,500

Answer

The closing credit balance of the Purchases Ledger Control Account as of 31st October 2025 is ₦29,500.
To find the closing credit balance of the Purchases Ledger Control Account, sum all credit side items (Opening Credit Balance ₦18,500 + Credit Purchases ₦62,000 + Interest Charged ₦600 + Supplier Refund ₦800 = ₦81,900) and subtract all debit side items (Opening Debit Balance ₦400 + Payments to Creditors ₦45,000 + Discount Received ₦2,400 + Returns Outwards ₦3,100 + Set-off ₦1,500 = ₦52,400). This yields ₦81,900 - ₦52,400 = ₦29,500. Cash purchases and discount allowed are excluded as they do not affect creditors' individual ledger balances.

Step-by-Step Solution

1
Filter out transactions that do not belong in the Purchases Ledger Control Account.
Cash purchases (₦12,000) belong in the Cash Book/Purchases Account, and discount allowed (₦1,800) belongs in the Sales Ledger Control Account.
Control accounts record summary details strictly affecting trade payables/creditors on credit terms.
2
Calculate total credit entries of the Purchases Ledger Control Account.
Total Credit = Opening Credit Balance (₦18,500) + Credit Purchases (₦62,000) + Interest Charged by Suppliers (₦600) + Refund from Supplier (₦800) = ₦81,900.
Transactions increasing liability to suppliers are posted to the credit side.
3
Calculate total debit entries before closing balance.
Total Debit = Opening Debit Balance (₦400) + Payments to Creditors (₦45,000) + Discount Received (₦2,400) + Returns Outwards (₦3,100) + Set-off Contra (₦1,500) = ₦52,400.
Transactions reducing liability to suppliers are posted to the debit side.
4
Determine the closing credit balance.
Closing Credit Balance = Total Credit (₦81,900) - Total Debit (₦52,400) = ₦29,500.
The closing balance represents the net credit balance required to balance the control account.

Key Concept

Purchases Ledger Control Account Balance Calculation
Question 11548Question →

In a non-profit organization, any excess of income over expenditure (surplus) realized at the end of a financial period is distributed among its subscribing members in the form of dividends.

Show answer & explanation

Answer: False

Answer

The statement is False. Surpluses generated by non-profit organizations are retained and transferred to the Accumulated Fund to support organizational goals, rather than being distributed to members as dividends.
The statement is false because non-profit entities are prohibited from distributing financial gains to members. Any surplus achieved must be transferred to the Accumulated Fund to further the objective of the organization.

Step-by-Step Solution

1
Examine the fundamental motive and nature of a non-profit organization.
Non-profit organizations (such as clubs, societies, and voluntary associations) exist to render services to members and society, not to yield monetary returns to owners.
Distinguishing the service motive of NPOs from the profit motive of commercial enterprises is essential.
2
Determine the accounting treatment of operational surpluses.
The excess of income over expenditure (surplus) is credited directly to the Accumulated Fund on the Statement of Financial Position.
Non-profit organizations do not have share capital or proprietary equity accounts through which dividends can be declared or paid.

Key Concept

Nature and Features of Non-Profit Organizations (Retention of Operational Surplus)
Question 11549Question →

A bespoke furniture manufacturing firm in Lagos provided the following extract from its financial records for the year ended 31st December 2025:

Accounting ItemAmount (₦₦)
Opening stock of raw timber60,000
Purchases of raw timber450,000
Carriage inwards on raw timber30,000
Direct wages paid to craftsmen280,000
Royalty on furniture designs40,000
Salary of factory supervisor120,000
Factory rent and rates90,000
Closing stock of raw timber50,000

Based on the information above, calculate the Prime Cost of production for the year in Naira.

Show answer & explanation

Answer: 810000

Answer

The Prime Cost of production for the year is ₦810,000₦810,000.
The correct answer of ₦810,000₦810,000 is obtained by adding the Cost of Raw Materials Consumed (₦490,000₦490,000), Direct Labour (₦280,000₦280,000), and Direct Expenses (₦40,000₦40,000). Indirect factory costs such as supervisor salary (₦120,000₦120,000) and factory rent (₦90,000₦90,000) are excluded because Prime Cost consists exclusively of direct costs.

Step-by-Step Solution

1
Calculate Cost of Raw Materials Consumed
₦490,000₦490,000
Cost of Raw Materials Consumed is determined by adding carriage inwards to purchases of raw timber and opening stock, then deducting closing stock of raw timber: ₦60,000+₦450,000+₦30,000−₦50,000=₦490,000₦60,000 + ₦450,000 + ₦30,000 - ₦50,000 = ₦490,000.
2
Identify Direct Labour and Direct Expenses
Direct Labour = ₦280,000₦280,000; Direct Expenses = ₦40,000₦40,000
Direct wages paid to craftsmen directly contribute to product creation (Direct Labour), and royalties paid on production designs represent direct expenses directly traceable to units produced.
3
Calculate Prime Cost
₦810,000₦810,000
Prime Cost is the sum total of all direct costs: Prime Cost=Direct Materials Consumed+Direct Labour+Direct Expenses=₦490,000+₦280,000+₦40,000=₦810,000\text{Prime Cost} = \text{Direct Materials Consumed} + \text{Direct Labour} + \text{Direct Expenses} = ₦490,000 + ₦280,000 + ₦40,000 = ₦810,000.

Key Concept

Components and Computation of Prime Cost in Manufacturing Accounts
Estimated Time:1m 30s
Question 11550Question →

The following financial details were extracted from the accounting records of Ibadan Furniture Craft Enterprise for the accounting year ended 31 December 2025:

Accounting ItemAmount (₦)
Inventory of raw materials (1 January 2025)120,000120,000
Inventory of raw materials (31 December 2025)95,00095,000
Purchases of raw materials480,000480,000
Carriage inwards on raw materials25,00025,000
Direct wages paid to factory workers310,000310,000
Royalties paid on production volume45,00045,000
Factory supervisor's salary150,000150,000
Depreciation of factory machinery60,00060,000
Factory power and lighting85,00085,000

What is the Prime Cost of production for the period in Naira (₦)?

Show answer & explanation

Answer: 885000

Answer

The Prime Cost of production for Ibadan Furniture Craft Enterprise for the period ended 31 December 2025 is ₦885,000.
Prime Cost comprises all direct costs involved in production: Direct Raw Materials Consumed + Direct Labor (Wages) + Direct Expenses (Royalties). Calculating raw materials consumed yields ₦120,000 + ₦480,000 + ₦25,000 - ₦95,000 = ₦530,000. Adding direct wages of ₦310,000 and direct expenses (royalties) of ₦45,000 gives ₦885,000. Indirect expenses like supervisor salary, factory power, and machinery depreciation are excluded as they represent factory overheads.

Step-by-Step Solution

1
Calculate the Cost of Raw Materials Consumed
₦530,000
Cost of Raw Materials Consumed = Opening Stock of Raw Materials (₦120,000) + Purchases of Raw Materials (₦480,000) + Carriage Inwards on Raw Materials (₦25,000) - Closing Stock of Raw Materials (₦95,000).
2
Sum all direct cost components to calculate Prime Cost
₦885,000
Prime Cost is the sum of Cost of Raw Materials Consumed (₦530,000), Direct Wages (₦310,000), and Direct Expenses such as Royalties (₦45,000).

Key Concept

Prime Cost consists strictly of direct material costs consumed, direct wages/labor, and direct production expenses.
Question 11551Question →

A local government council publishes its annual financial report showing how public revenue was spent strictly in accordance with approved legislative votes and statutory allocations. Which primary objective of public sector accounting does this practice demonstrate?

Show answer & explanation

Answer: Ensuring public stewardship and legislative compliance

Answer

Ensuring public stewardship and legislative compliance
The primary objective of public sector accounting is to demonstrate stewardship and ensure financial transactions comply strictly with legislative appropriations and public accountability rules.

Step-by-Step Solution

1
Identify the primary purpose of public sector financial reporting.
Unlike commercial accounting which measures profit, public sector accounting focuses on accountability, stewardship, and verifying that public funds are spent in line with legislative authorization.
Government bodies operate to render public services within legally approved budget constraints.

Key Concept

Objectives of Public Sector Accounting
Question 11552Question →

Tunde and Segun entered into a joint venture to trade in electrical appliances, maintaining a separate set of books. They opened a Joint Bank Account, contributing ��2,000,000��2,000,000 and ₦1,000,000₦1,000,000 respectively. Purchases amounting to ₦1,500,000₦1,500,000 and venture expenses of ₦250,000₦250,000 were paid directly from the Joint Bank Account. Tunde supplied goods from his personal business valued at ₦450,000₦450,000, while Segun paid ₦100,000₦100,000 for transport from his private funds. Total sales proceeds of ₦3,800,000₦3,800,000 were deposited into the Joint Bank Account. Profits and losses are shared between Tunde and Segun in the ratio 3:23:2. What is the final amount payable to Segun from the Joint Bank Account upon full settlement?

Show answer & explanation

Answer: 1700000

Answer

The final amount payable to Segun from the Joint Bank Account upon full settlement is 1,700,000 Naira.
The total venture profit is ₦1,500,000 (₦3,800,000 sales less ₦2,300,000 total costs). Segun's 2/5 share of profit equals ₦600,000. Adding this profit share to his capital contribution (₦1,000,000) and personal expenses paid (₦100,000) yields a final settlement balance of ₦1,700,000 due to Segun.

Step-by-Step Solution

1
Determine the net profit of the joint venture by preparing the Joint Venture Account
Total debits = ₦2,300,000; Total credits (sales) = ₦3,800,000; Net Profit = ₦1,500,000
Net profit is the excess of total revenue credited to the venture over total costs debited.
2
Calculate Segun's agreed share of the net profit based on the profit-sharing ratio of 3:2
Segun's share = 2/5 * ₦1,500,000 = ₦600,000
The profit-sharing ratio assigns 3 parts out of 5 to Tunde and 2 parts out of 5 to Segun.
3
Credit Segun's Personal Account with his capital contribution, personal expenses incurred, and profit share
Segun's ledger balance = ₦1,000,000 + ₦100,000 + ₦600,000 = ₦1,700,000
Under the separate set of books method, each co-venturer is credited in their personal account for capital contributed, personal expenses incurred on behalf of the venture, and their profit share to determine final settlement.

Key Concept

Calculation of final co-venturer cash settlement using the Separate Set of Books method in Joint Venture accounting
Question 11553Question →

A manufacturing firm incurs several production-related expenditures during an accounting period. Pair each factory indirect cost listed on the left with its correct sub-classification under factory overheads on the right.

Click a left item, then click its matching right item

Items

Lubricating oil and cleaning rags used on factory machines
Salaries of factory storekeepers and gatekeepers
Factory building rent and electricity charges
Annual depreciation charge on manufacturing plant

Matches

Show answer & explanation

Answer

Lubricating oil and cleaning rags match Indirect Materials Overhead; Salaries of factory storekeepers and gatekeepers match Indirect Labour Overhead; Factory building rent and electricity charges match Factory Services and Occupancy Overhead; Annual depreciation charge on manufacturing plant matches Fixed Asset Depreciation Overhead.
Factory overheads encompass all indirect manufacturing costs incurred within the production environment. These are classified into indirect materials (consumable supplies like machine lubricant), indirect labour (salaries of support staff like storekeepers), indirect factory expenses (occupancy costs like rent and power), and indirect asset costs (depreciation of production machinery).

Step-by-Step Solution

1
Classify consumable workshop supplies
Lubricating oil and cleaning rags represent Indirect Materials Overhead.
Indirect materials are consumable items that support the operation of production equipment without physically forming part of the finished goods.
2
Classify support personnel compensation
Salaries for storekeepers and gatekeepers represent Indirect Labour Overhead.
These workers facilitate factory operations but do not physically transform raw materials into finished units.
3
Classify factory facility running costs
Factory building rent and electricity represent Factory Services and Occupancy Overhead.
These expenses maintain the physical factory building and provide essential utilities for manufacturing.
4
Classify manufacturing asset wear and tear
Depreciation on manufacturing plant represents Fixed Asset Depreciation Overhead.
Depreciation of equipment used in production is an indirect manufacturing cost added to factory overheads.

Key Concept

Sub-classification of Factory Overheads
Question 11554Question →

Apex Apparel Enterprises incurred the following expenses during the financial year ended 31st December 2025:

Account DetailsAmount (₦)
Opening inventory of raw materials45,000
Purchases of raw materials230,000
Carriage inwards on raw materials12,000
Closing inventory of raw materials38,000
Direct factory labour wages115,000
Royalty paid on apparel designs18,000
Factory supervisor's salary40,000
Factory rent and rates25,000
Depreciation of factory machinery15,000

What is the Prime Cost of production for Apex Apparel Enterprises?

Show answer & explanation

Answer: 382000

Answer

The Prime Cost of production for Apex Apparel Enterprises is ₦382,000.
Prime Cost is the sum of all direct costs incurred in production: Direct Materials Consumed (₦45,000 + ₦230,000 + ₦12,000 - ₦38,000 = ₦249,000), Direct Labour (₦115,000), and Direct Expenses (₦18,000 for royalties). Totaling these yields ₦382,000. Factory overheads such as supervisor salary (₦40,000), factory rent (₦25,000), and machinery depreciation (₦15,000) are indirect manufacturing costs and are excluded from Prime Cost.

Step-by-Step Solution

1
Calculate the cost of raw materials consumed during the period.
₦249,000
Cost of Raw Materials Consumed = Opening Inventory (₦45,000) + Purchases (₦230,000) + Carriage Inwards (₦12,000) - Closing Inventory (₦38,000) = ₦249,000.
2
Identify all direct production costs (Direct Labour and Direct Expenses).
Direct Labour = ₦115,000; Direct Expenses (Royalty) = ₦18,000
Direct costs are expenses directly traceable to the production of goods. Royalties on designs are direct expenses, while factory wages for production workers represent direct labour.
3
Sum Raw Materials Consumed, Direct Labour, and Direct Expenses to arrive at Prime Cost.
₦382,000
Prime Cost = Raw Materials Consumed (₦249,000) + Direct Labour (₦115,000) + Direct Expenses (₦18,000) = ₦382,000. Indirect factory costs (supervisor salary, factory rent, and machinery depreciation) are overheads and excluded.

Key Concept

Prime Cost consists of the sum of direct materials consumed, direct labour, and direct expenses (such as royalties). Indirect factory overheads must be excluded.
Question 11555Question →

Emeka Global Ventures operates a dual ledger system and maintains control accounts for its business transactions. For the month of May 2026, the following balances and transactions were extracted from the accounting records:

- Opening credit balance on Purchases Ledger Control Account: N245,000\text{N}245,000
- Opening debit balance on Purchases Ledger Control Account: N3,500\text{N}3,500
- Credit purchases for the month: N480,000\text{N}480,000
- Cash paid to trade creditors: N390,000\text{N}390,000
- Cheques paid to trade creditors: N115,000\text{N}115,000
- Returns outwards: N18,500\text{N}18,500
- Cash discounts received from suppliers: N12,000\text{N}12,000
- Interest charged by suppliers on overdue accounts: N4,200\text{N}4,200
- Set-off (contra entry) between sales ledger and purchases ledger: N28,000\text{N}28,000
- Closing debit balance on Purchases Ledger Control Account at 31st May 2026: N2,000\text{N}2,000

What is the closing credit balance of the Purchases Ledger Control Account at 31st May 2026 in Naira?

Show answer & explanation

Answer: 164200

Answer

The closing credit balance of the Purchases Ledger Control Account at 31st May 2026 is N164,200\text{N}164,200.
A contra entry (set-off) occurs when an entity is both a customer and a supplier. Setting off accounts reduces both the amount owed by debtors and the amount owed to creditors. In the Purchases Ledger Control Account (which normally carries a credit balance), a set-off must be debited to decrease the liability. Taking total credit items (N245,000+N480,000+N4,200+N2,000=N731,200\text{N}245,000 + \text{N}480,000 + \text{N}4,200 + \text{N}2,000 = \text{N}731,200) and subtracting total debit items including the contra set-off (N3,500+N390,000+N115,000+N18,500+N12,000+N28,000=N567,000\text{N}3,500 + \text{N}390,000 + \text{N}115,000 + \text{N}18,500 + \text{N}12,000 + \text{N}28,000 = \text{N}567,000) gives the correct closing credit balance of N164,200\text{N}164,200.

Step-by-Step Solution

1
Sum all items that increase trade payables (credit entries) plus the closing debit balance
Total Credit Side = N245,000+N480,000+N4,200+N2,000=N731,200\text{N}245,000 + \text{N}480,000 + \text{N}4,200 + \text{N}2,000 = \text{N}731,200
Credit purchases and interest charged increase liability to suppliers, while the closing debit balance is placed on the credit side as a balancing figure.
2
Sum all items that decrease trade payables (debit entries) including opening debit balance and contra set-off
Total Known Debit Entries = N3,500+N390,000+N115,000+N18,500+N12,000+N28,000=N567,000\text{N}3,500 + \text{N}390,000 + \text{N}115,000 + \text{N}18,500 + \text{N}12,000 + \text{N}28,000 = \text{N}567,000
Payments, returns, discounts, and contra entries reduce trade payables liability and must be debited to the Purchases Ledger Control Account.
3
Deduct the total known debit side entries from the total credit side to determine the closing credit balance
Closing Credit Balance = N731,200−N567,000=N164,200\text{N}731,200 - \text{N}567,000 = \text{N}164,200
The difference between total credit items and total debit items represents the remaining net liability owed to suppliers.

Key Concept

Contra Entries and Set-offs in Control Accounts
Question 11556Question →

Chinedu operates a retail business using single-entry bookkeeping. The following details relate to his trade creditors for the year ended 31 December 2025:

Transaction DetailsAmount (₦)
Creditors balance at 1 January 202545,000
Payments made to creditors185,000
Discounts received6,500
Returns outwards4,200
Contra entry with sales ledger3,300
Creditors balance at 31 December 202552,000

What is the total credit purchases for the year?

Show answer & explanation

Answer: 206000

Answer

The total credit purchases for the year is ₦206,000.
To find the missing total credit purchases, set up a Purchases Ledger Control Account:

Debit Side (Decreases Liability + Closing Balance):
- Cash/Bank Paid to Creditors: ₦185,000₦185,000
- Discount Received: ₦6,500₦6,500
- Returns Outwards: ₦4,200₦4,200
- Contra Entry (Set-off): ₦3,300₦3,300
- Closing Balance c/dc/d: ₦52,000₦52,000
**Total Debits = ₦251,000₦251,000**

Credit Side (Increases Liability):
- Opening Balance b/fb/f: ₦45,000₦45,000
- Credit Purchases (Balancing Figure): ₦251,000−₦45,000=₦206,000₦251,000 - ₦45,000 = ₦206,000

Thus, the total credit purchases for the year is ₦206,000₦206,000.

Step-by-Step Solution

1
Sum all debit entries in the Purchases Ledger Control Account
₦185,000 (Payments) + ₦6,500 (Discount Received) + ₦4,200 (Returns Outwards) + ₦3,300 (Contra) + ₦52,000 (Closing Balance) = ₦251,000
Creditors are liabilities with a normal credit balance; items that reduce liabilities are recorded on the debit side alongside the closing balance.
2
Deduct the opening balance from total debits to find missing credit purchases
₦251,000 - ₦45,000 = ₦206,000
The total of debit entries minus the opening credit balance yields the balancing credit entry representing total credit purchases during the period.

Key Concept

Reconstructing Purchases Ledger Control Account (Creditors Control Account) to determine missing credit purchases in single-entry bookkeeping.
Question 11557Question →

Match each statutory document or company structure on the left with its defining legal characteristic or statutory requirement on the right under corporate law.

Click a left item, then click its matching right item

Items

Certificate of Incorporation
Company Limited by Guarantee
Articles of Association
Public Limited Company (Plc)

Matches

Show answer & explanation

Answer

Certificate of Incorporation matches with conclusive evidence of statutory registration; Company Limited by Guarantee matches with non-profit objectives and members' winding-up contribution undertakings; Articles of Association matches with internal governance regulations and administrative procedures; Public Limited Company matches with minimum share capital and public subscription rights.
Each corporate document and company type aligns with its established legal attributes: the Certificate of Incorporation verifies official registration status; a company limited by guarantee supports non-profit aims backed by liability guarantees; the Articles of Association govern internal management regulations; and a public limited company complies with statutory capital minimums and public equity offerings.

Step-by-Step Solution

1
Identify the statutory function of the Certificate of Incorporation.
It represents conclusive legal proof of incorporation issued upon successful registration.
Corporate regulations mandate this certificate as the formal birth certificate of the legal person.
2
Analyze the nature of a Company Limited by Guarantee.
It is created for non-profit purposes without share capital distributions, backed by financial guarantees from members.
This structure protects charitable or promotional organizations while establishing limited member liability.
3
Distinguish Articles of Association from external constitutional documents.
Articles of Association control internal management, director powers, and meeting guidelines.
Internal management rules are governed by the Articles, whereas external relations are defined by the Memorandum.
4
Examine the operational scope of a Public Limited Company.
It requires meeting statutory minimum capital thresholds and holds the authority to offer securities publicly.
Private limited companies are forbidden from offering shares to the general public, unlike public limited companies.

Key Concept

Corporate Documents and Company Classifications
Question 11558Question →

A retail store operates three separate divisions—clothing, footwear, and cosmetics—under a single management and roof. Which of the following is a primary objective of preparing departmental accounts for this business?

Show answer & explanation

Answer: To ascertain the profit or loss made by each individual division

Answer

The primary objective of preparing departmental accounts is to ascertain the profit or loss made by each individual division.
Departmental accounting is designed to track financial performance at the divisional level so management can calculate individual departmental profits or losses, compare efficiency across units, and make informed operational decisions.

Step-by-Step Solution

1
Identify the purpose of departmental accounting
Departmental accounting breaks down financial results by operational units within the same organization.
This allows management to assess the financial contribution and trading results of each distinct unit.
2
Evaluate the option choices against core accounting principles
Ascertaining division-level profitability directly aligns with segment performance evaluation.
Legal entity status, tax filings, and replacing bookkeeping are invalid purposes for departmental record-keeping.

Key Concept

Objectives of Departmental Accounting
Estimated Time:45s
Question 11559Question →

Kambai Logistics Enterprise operates three distinct service divisions—Haulage, Warehousing, and Vehicle Maintenance—under one management structure. The firm prepares separate trading and profit and loss accounts for each division at the end of every financial period. What is the primary objective of adopting this departmental accounting system?

Show answer & explanation

Answer: To evaluate the relative profit contribution and operational efficiency of each division to guide internal managerial decisions.

Answer

The primary objective of adopting a departmental accounting system is to evaluate the relative profit contribution and operational efficiency of each division to guide internal managerial decisions.
Departmental accounting provides detailed financial reports for each operational unit within a business. This allows management to assess individual departmental performance, compare operational efficiency across divisions, formulate manager incentives, and decide whether to expand or restructure specific departments.

Step-by-Step Solution

1
Identify the purpose of preparing segment-specific trading and profit and loss accounts.
Recognize that segmenting financial results isolates performance metrics for individual units within the business.
Management needs segment-level data to determine which units are profitable, efficient, or requiring corrective action.
2
Distinguish departmental accounting objectives from legal and bookkeeping concepts.
Departmental accounts are internal operational tools, not statutory requirements for forming separate legal corporations.
All departments remain under one single legal entity.

Key Concept

Objectives of Departmental Accounts
Question 11560Question →

Kalu Enterprises received cash of ₦25,000\text{₦}25,000 from a customer whose account was previously written off as a bad debt in the preceding financial year. Complete the statement below regarding the double-entry bookkeeping procedure required to reinstate the customer's account before recording the cash receipt.

Fill in the blanks below

To reinstate the customer's account, the bookkeeper must debit the account and credit the account.
Show answer & explanation

Answer

To reinstate the customer's account prior to recording cash collection, the Trade Debtors (or Personal) account is debited and the Bad Debts Recovered account is credited.
When a debt previously written off is recovered, proper double-entry accounting mandates a two-stage process. First, the debtor's account is reinstated by debiting the Trade Debtors (or customer's personal) account and crediting the Bad Debts Recovered account. Second, the cash receipt is recorded by debiting Cash/Bank and crediting Trade Debtors.

Step-by-Step Solution

1
Identify the purpose of reinstating a written-off bad debt
The debtor's personal ledger account needs to show that the previously written-off debt has now been honored.
Reinstating the account restores the debt balance temporarily so that the subsequent cash settlement can be properly posted against the customer's personal record.
2
Determine the debit entry for account reinstatement
Debit the Trade Debtors / Personal account of the customer.
Debiting the Trade Debtors account re-establishes the claim against the debtor in the accounting records.
3
Determine the credit entry for account reinstatement
Credit the Bad Debts Recovered account.
Crediting the Bad Debts Recovered account recognizes the income gained from recovering a debt that was formerly treated as an expense.

Key Concept

Bookkeeping entries for bad debts recovered
Estimated Time:1m 30s
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