All practice questions

Question 11681Question →

The trial balance of Danladi Commercial Enterprise as at 31 December 2025 showed Motor Vehicles at cost of $₦15,000,000$ and Provision for Depreciation on Motor Vehicles of $₦5,400,000$ .

On 30 June 2025, a vehicle that had been purchased on 1 January 2023 for $₦3,000,000$ was sold for $₦1,600,000$ .

The policy of the enterprise is to provide depreciation on motor vehicles at $20\%$ per annum using the reducing balance method, charging a full year's depreciation in the year of purchase and no depreciation in the year of disposal.

What is the balance of the Provision for Depreciation on Motor Vehicles Account to be presented in the Statement of Financial Position as at 31 December 2025?

₦5,856,000

₦5,640,000

₦6,600,000

₦6,936,000

Show answer & explanation

Answer: ₦5,856,000

Answer

The correct balance of the Provision for Depreciation on Motor Vehicles Account as at 31 December 2025 is ₦5,856,000.

The correct balance of ₦5,856,000 is derived by first removing the ₦1,080,000 accumulated depreciation of the sold vehicle from the opening provision of ₦5,400,000, leaving ₦4,320,000. Next, the net book value of the remaining vehicles (₦12,000,000 cost minus ₦4,320,000 accumulated depreciation) is ₦7,680,000. Applying the 20% reducing balance rate yields a current year depreciation charge of ₦1,536,000. Adding this charge to ₦4,320,000 gives a closing provision balance of ₦5,856,000.

Step-by-Step Solution

1

Calculate accumulated depreciation on the disposed vehicle up to 31 December 2024

Year 2023 depreciation =

20\% \times ₦3,000,000 = ₦600,000

(Net Book Value =

₦2,400,000

). Year 2024 depreciation =

20\% \times ₦2,400,000 = ₦480,000

. Total accumulated depreciation on disposed vehicle =

₦600,000 + ₦480,000 = ₦1,080,000

.

Because no depreciation is charged in the year of disposal, accumulated depreciation covers only 2023 and 2024.

2

Remove the accumulated depreciation of the disposed vehicle from the opening provision

Remaining opening provision balance =

₦5,400,000 - ₦1,080,000 = ₦4,320,000

.

When an asset is sold, its total accumulated depreciation must be debited to the Provision for Depreciation Account and credited to the Asset Disposal Account.

3

Determine the Net Book Value (NBV) of remaining vehicles at 1 January 2025

Cost of remaining vehicles =

₦15,000,000 - ₦3,000,000 = ₦12,000,000

. NBV of remaining vehicles =

₦12,000,000 - ₦4,320,000 = ₦7,680,000

.

Depreciation under the reducing balance method must be calculated on the net book value of active assets at the start of the accounting period.

4

Calculate 2025 depreciation expense and closing provision balance

Depreciation for 2025 =

20\% \times ₦7,680,000 = ₦1,536,000

. Closing Provision for Depreciation =

₦4,320,000 + ₦1,536,000 = ₦5,856,000

.

The current year's depreciation is credited to the Provision for Depreciation Account to yield the updated closing balance.

Key Concept

Accounting Treatment of Asset Disposal and Provision for Depreciation under Reducing Balance Method

Question 11682Question →

Kalu Traders completed the following transactions during May 2026:
- May 4: Purchased $100$ bags of sugar at $\text{N}2,000$ per bag on credit from Dangote Foods Ltd, subject to a $10\%$ trade discount.
- May 12: Purchased office furniture on credit from Woodworks Ltd for $\text{N}50,000$ .
- May 18: Bought $50$ bags of rice at $\text{N}3,000$ per bag for cash.
- May 25: Bought $40$ cartons of milk at $\text{N}5,000$ per carton on credit from Peak Ltd, subject to a $5\%$ trade discount.

What is the total amount in Naira ( $\text{N}$ ) to be recorded in the Purchases Journal for May 2026?

Show answer & explanation

Answer: 370000

Answer

The total amount to be recorded in the Purchases Journal for May 2026 is ₦370,000.

The Purchases Journal records only credit purchases of goods intended for resale. Calculating net amounts after trade discounts gives ₦180,000 for May 4 and ₦190,000 for May 25, resulting in a total of ₦370,000. Capital expenditure (furniture) and cash purchases (rice) are excluded.

Step-by-Step Solution

1

Calculate net credit purchase of sugar on May 4

Gross amount = 100 × ₦2,000 = ₦200,000. Less 10% trade discount (₦20,000) = ₦180,000.

Credit purchases of inventory intended for resale are entered in the Purchases Journal after deducting trade discounts.

2

Evaluate May 12 transaction

₦0 included in Purchases Journal.

Purchasing office furniture is a capital expenditure (fixed asset) and must be entered in the General Journal (Journal Proper).

3

Evaluate May 18 transaction

₦0 included in Purchases Journal.

Cash purchases of goods are entered in the Cash Book, not the Purchases Journal.

4

Calculate net credit purchase of milk on May 25

Gross amount = 40 × ₦5,000 = ₦200,000. Less 5% trade discount (₦10,000) = ₦190,000.

Trade discount is deducted on the invoice before recording in the book of prime entry.

5

Sum total credit purchases of goods

Total = ₦180,000 + ₦190,000 = ₦370,000.

The total of the Purchases Journal reflects total net credit purchases of inventory for the period.

Key Concept

Purchases Journal Scope and Trade Discount Calculation

Question 11683Question →

Match each accounting activity on the left with its corresponding primary objective or accounting function on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Chronological entry in books corresponds to systematic record keeping; determining net profit or loss corresponds to ascertaining financial performance; evaluating statements for planning corresponds to decision-making support; and reporting on resource utilization corresponds to stewardship reporting.

The matches correctly pair routine recording activities with the record-keeping function, profit determination with the primary objective of measuring operating results, management reporting with the decision-support function, and accountability to owners with the stewardship objective.

Step-by-Step Solution

1

Classify routine clerical recording tasks

Entering daily transactions into books of prime entry and ledgers is identified as systematic record keeping.

Record keeping provides the raw systematic foundation required for all subsequent accounting processes.

2

Identify the primary accounting objectives

Calculating profit/loss matches ascertaining financial performance, while reporting to owners on asset management matches stewardship reporting.

Objectives define the overarching goals of accounting, which include measuring periodic earnings and holding managers accountable to enterprise owners.

3

Differentiate analytical functions from routine tasks

Using financial information for managerial planning matches the decision-making support function.

Accounting functions extend beyond bookkeeping by interpreting financial data to guide strategic decision-making.

Key Concept

Objectives and Functions of Accounting

Question 11684Question →

Prior to reconciliation, the Purchases Ledger Control Account of Bisi Stores showed a credit balance of $\text{₦}210,000$ . An audit revealed that a purchases journal total of $\text{₦}15,000$ was completely omitted from posting to the Purchases Ledger Control Account. What is the corrected balance of the Purchases Ledger Control Account in Naira?

Show answer & explanation

Answer: 225000

Answer

The corrected balance of the Purchases Ledger Control Account is

\text{₦}225,000

.

Purchases on credit increase total trade payables (creditors). Omitting a purchases journal total from the Purchases Ledger Control Account understates the credit balance. Adding the omitted

\text{₦}15,000

to the initial credit balance of

\text{₦}210,000

yields the corrected balance of

\text{₦}225,000

.

Step-by-Step Solution

1

Identify the unadjusted credit balance

Unadjusted balance =

\text{₦}210,000

This represents the initial balance of the control account prior to adjustments.

2

Apply the correction for the omitted purchases journal total

Corrected credit balance =

\text{₦}210,000 + \text{₦}15,000 = \text{₦}225,000

Credit purchases increase the liability owed to trade creditors; omitting the total requires adding (crediting) it to the control account balance.

Key Concept

Correcting omissions in the Purchases Ledger Control Account

Question 11685Question →

The accounting records of Bamidele Manufacturing Ltd for the year ended 31 December 2025 reveal the following financial data:

Cost Item	Amount ( $\text{₦}$ )
Direct raw materials consumed	$180,000$
Direct wages paid (includes $\text{₦}10,000$ paid in advance for 2026)	$90,000$
Factory overheads paid	$120,000$
Opening work-in-progress	$45,000$

Additional Information:
1. Factory power accrued and unpaid at year-end amounted to $\text{₦}15,000$ .
2. The cost of finished goods produced transferred to trading account was $\text{₦}410,000$ .

What is the valuation of closing work-in-progress as at 31 December 2025?

\text{₦}15,000

\text{₦}20,000

\text{₦}30,000

\text{₦}60,000

Show answer & explanation

Answer: $\text{₦}30,000$

Answer

The valuation of closing work-in-progress as at 31 December 2025 is

\text{₦}30,000

.

The correct answer of

\text{₦}30,000

is obtained by first adjusting direct wages for prepayment (

\text{₦}90,000 - \text{₦}10,000 = \text{₦}80,000

) to get Prime Cost of

\text{₦}260,000

. Adding adjusted factory overheads (

\text{₦}120,000 + \text{₦}15,000 = \text{₦}135,000

) gives total manufacturing costs of

\text{₦}395,000

. Adding opening WIP of

\text{₦}45,000

gives

\text{₦}440,000

. Subtracting the transferred cost of production (

\text{₦}410,000

) yields the closing WIP valuation of

\text{₦}30,000

.

Step-by-Step Solution

1

Calculate adjusted direct wages incurred for the period

\text{Direct Wages} = \text{₦}90,000 - \text{₦}10,000\text{ (prepayment)} = \text{₦}80,000

Prepaid expenses must be deducted because they relate to the subsequent accounting period.

2

Determine Prime Cost

\text{Prime Cost} = \text{Direct Materials} (\text{₦}180,000) + \text{Direct Wages} (\text{₦}80,000) = \text{₦}260,000

Prime Cost consists of all direct manufacturing costs incurred during the period.

3

Calculate adjusted total factory overheads

\text{Factory Overheads} = \text{₦}120,000 + \text{₦}15,000\text{ (accrual)} = \text{₦}135,000

Accrued expenses must be added as they represent costs incurred in the current period but unpaid.

4

Compute total manufacturing costs incurred during the period

\text{Total Manufacturing Costs} = \text{Prime Cost} (\text{₦}260,000) + \text{Factory Overheads} (\text{₦}135,000) = \text{₦}395,000

Total current production costs equal direct costs plus indirect factory costs.

5

Apply the Work-in-Progress formula to solve for Closing Work-in-Progress

\text{Closing WIP} = \text{Total Manufacturing Costs} (\text{₦}395,000) + \text{Opening WIP} (\text{₦}45,000) - \text{Cost of Production} (\text{₦}410,000) = \text{₦}30,000

Rearranging the formula

\text{Cost of Production} = \text{Total Manufacturing Costs} + \text{Opening WIP} - \text{Closing WIP}

isolates closing work-in-progress.

Key Concept

Valuation and Adjustment for Work-in-Progress (WIP)

Estimated Time:2m 30s

Question 11686Question →

On 12 May 2026, Babatunde Traders sold goods with a catalog list price of $\text{₦}200,000$ on credit to O. Musa, subject to a $15\%$ trade discount and a $5\%$ cash discount for settlement within 14 days. On 18 May 2026, O. Musa returned defective goods having a list price of $\text{₦}40,000$ . What is the exact amount to be recorded in Babatunde Traders' Sales Returns Journal?

\text{₦}34,000

\text{₦}40,000

\text{₦}32,300

\text{₦}170,000

Show answer & explanation

Answer: $\text{₦}34,000$

Answer

The correct figure to be recorded in the Sales Returns Journal is

\text{₦}34,000

.

When credit sales returns occur, the entry in the Sales Returns Journal (Returns Inward Journal) must reflect the list price minus any trade discount given at the time of sale. The trade discount on

\text{₦}40,000

at

15\%

is

\text{₦}6,000

, leaving a net return value of

\text{₦}34,000

. Cash discounts are strictly for prompt cash settlement and do not affect special journals.

Step-by-Step Solution

1

Calculate the trade discount applicable to the returned goods

Trade discount on returns =

15\% \times \text{₦}40,000 = \text{₦}6,000

Trade discounts granted on initial sales must also be deducted proportionally from returns.

2

Subtract the trade discount from the list price of returned goods

Net sales return amount =

\text{₦}40,000 - \text{₦}6,000 = \text{₦}34,000

Special day books record transactions net of trade discounts.

3

Determine the treatment of cash discount

Cash discount (

5\%

) is ignored for the Sales Returns Journal entry

Cash discount is recorded only in the cash book when payment is actually received within the stipulated period.

Key Concept

Valuation of entries in the Sales Returns Journal net of trade discounts

Question 11687Question →

Match each accounting scenario described on the left with the governing accounting concept or convention listed on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Recognizing income when earned matches Accrual Concept; Expensing small items matches Materiality Convention; Providing for anticipated losses matches Prudence Convention; Presuming indefinite business operations matches Going Concern Concept.

Each scenario represents a classic application of a fundamental accounting guideline: Accrual aligns revenues and expenses to time periods; Materiality permits practical simplified accounting for minor values; Prudence enforces conservatism regarding potential losses; Going Concern assumes continuous ongoing operations.

Step-by-Step Solution

1

Analyze each scenario to identify its core accounting intent.

Identified four separate transaction recording scenarios.

Each scenario relates directly to one standard accounting concept or convention.

2

Pair each scenario with its governing accounting rule.

Accrual governs revenue recognition timing, Materiality governs minor item treatment, Prudence governs conservative loss recognition, and Going Concern governs operational longevity assumptions.

Matching principles require exact alignment between practical accounting policies and theoretical accounting rules.

Key Concept

Accounting Concepts and Conventions

Question 11688Question →

Tunde & Sons Trading maintains a two-column cash book. On 1 July 2026, the firm had a cash balance of ₦68,500 and a bank overdraft of ₦14,200. During the month of July 2026, the following transactions occurred:

- July 5: Paid a creditor ₦28,500 by cheque in settlement of a debt after deducting a 5% cash discount.
- July 12: Made cash sales of ₦45,000, out of which ₦30,000 was immediately lodged into the bank.
- July 18: Withdrew ₦12,000 from the bank for office cash use.
- July 25: Received a cheque of ₦48,000 from a debtor in full settlement of a ₦50,000 debt.
- July 28: Paid office rent of ₦8,500 in cash.

What is the closing bank balance of Tunde & Sons Trading as at 31 July 2026 in Naira (₦)?

Show answer & explanation

Answer: 23300

Answer

The closing bank balance of Tunde & Sons Trading as at 31 July 2026 is ₦23,300 (debit balance).

The closing bank balance is determined by starting with the credit overdraft balance of ₦14,200, adding bank credits for cheque payments (₦28,500) and bank cash withdrawal (₦12,000) to get total bank credits of ₦54,700. Comparing this to total bank debits of ₦78,000 (₦30,000 lodged + ₦48,000 debtor cheque) yields a net closing debit balance of ₦23,300.

Step-by-Step Solution

1

Identify the opening bank balance and its debit/credit orientation

Opening Bank Balance = -₦14,200 (Credit / Overdraft)

A bank overdraft is a short-term liability and is recorded on the credit side of the bank column in the cash book.

2

Calculate total debit entries (bank receipts)

Total Bank Receipts = ₦30,000 (July 12 cash lodged) + ₦48,000 (July 25 cheque received) = ₦78,000

Money paid into the bank account increases the asset balance and must be debited in the bank column.

3

Calculate total credit entries (bank payments and opening overdraft)

Total Bank Payments = ₦14,200 (opening overdraft) + ₦28,500 (July 5 cheque payment) + ₦12,000 (July 18 cash withdrawal) = ₦54,700

Payments made by cheque and cash withdrawals from the bank decrease the bank account balance and are credited.

4

Balance the bank column to obtain the closing balance

Closing Bank Balance = ₦78,000 (Debits) - ₦54,700 (Credits) = ₦23,300

Total debit entries exceed total credit entries by ₦23,300, resulting in a positive debit balance at the end of the month.

Key Concept

Balancing a Two-Column Cash Book with Overdraft and Contra Entries

Question 11689Question →

Kwara Furniture Enterprise operates two departments: Timber Department and Assembly Department. The Timber Department transfers processed wood to the Assembly Department at cost plus a $25\%$ mark-up. On 1 January 2025, the Assembly Department held opening stock valued at $\text{N}50,000$ , of which $80\%$ represented transferred wood from the Timber Department. On 31 December 2025, the Assembly Department's closing stock was valued at $\text{N}70,000$ , of which $75\%$ consisted of transferred wood. What is the net increase in the provision for unrealized profit to be debited to the General Profit and Loss Account for the year ended 31 December 2025?

Show answer & explanation

Answer: 2500

Answer

The net increase in the provision for unrealized profit to be debited to the General Profit and Loss Account is 2500 Naira.

The correct response of 2500 is calculated by establishing the unrealized profit included in the transferred portion of both opening and closing inventory using the

20\%

margin rate (

25\%

mark-up converted to margin). Opening provision is

\text{N}8,000

(

20\% \times 80\% \times \text{N}50,000

) and closing provision is

\text{N}10,500

(

20\% \times 75\% \times \text{N}70,000

). The net increase debited to General Profit and Loss is

\text{N}10,500 - \text{N}8,000 = \text{N}2,500

.

Step-by-Step Solution

1

Convert mark-up rate to profit margin rate

Profit margin on transfer price is

20\%

(or

\frac{1}{5}

)

Inter-departmental transfers are recorded at transfer price, so unrealized profit must be extracted using the profit margin on transfer price, calculated as

\frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = 0.20

.

2

Calculate opening provision for unrealized profit

Opening Provision =

\text{N}8,000

Transferred goods in opening stock =

80\% \times \text{N}50,000 = \text{N}40,000

. Opening provision =

20\% \times \text{N}40,000 = \text{N}8,000

.

3

Calculate closing provision for unrealized profit

Closing Provision =

\text{N}10,500

Transferred goods in closing stock =

75\% \times \text{N}70,000 = \text{N}52,500

. Closing provision =

20\% \times \text{N}52,500 = \text{N}10,500

.

4

Compute the net change in provision debited to General Profit & Loss Account

Net Increase =

\text{N}2,500

The net adjustment debited to the General P&L Account is the difference between the required closing provision and the existing opening provision:

\text{N}10,500 - \text{N}8,000 = \text{N}2,500

.

Key Concept

Provision for Unrealized Profit on Inter-departmental Transfers

Question 11690Question →

Efe and Kemi are partners sharing profits and losses in the ratio of $3:1$ . They admit Segun into the firm, giving him a $\frac{1}{5}$ share of future profits. The firm's goodwill is valued at $\text{₦}60,000$ , and the partners agree that goodwill will be raised and immediately written off. What is the net entry required in Efe's capital account?

Net credit of

\text{₦}9,000

Net debit of

\text{₦}9,000

Net credit of

\text{₦}45,000

Net debit of

\text{₦}36,000

Show answer & explanation

Answer: Net credit of $\text{₦}9,000$

Answer

The correct adjustment is a net credit of

\text{₦}9,000

to Efe's capital account.

When goodwill is created and immediately written off upon admitting a new partner, the firm credits existing partners in the old ratio (

3:1

) and debits all partners in the new ratio (

3:1:1

). Efe receives a credit of

\text{₦}45,000

(

\frac{3}{4} \times \text{₦}60,000

) and a debit of

\text{₦}36,000

(

\frac{3}{5} \times \text{₦}60,000

). The difference results in a net credit of

\text{₦}9,000

.

Step-by-Step Solution

1

Determine the new profit-sharing ratio

Segun's share =

\frac{1}{5}

. Remaining share =

1 - \frac{1}{5} = \frac{4}{5}

. Efe's new share =

\frac{3}{4} \times \frac{4}{5} = \frac{3}{5}

. Kemi's new share =

\frac{1}{4} \times \frac{4}{5} = \frac{1}{5}

. The new ratio among Efe, Kemi, and Segun is

3:1:1

.

Goodwill write-off must be shared among all partners in their new profit-sharing ratio.

2

Calculate goodwill credited to Efe when raised

Credit to Efe =

\frac{3}{4} \times \text{₦}60,000 = \text{₦}45,000

.

Goodwill is initially raised by crediting existing partners in their old profit-sharing ratio (

3:1

).

3

Calculate goodwill debited to Efe when written off

Debit to Efe =

\frac{3}{5} \times \text{₦}60,000 = \text{₦}36,000

.

Goodwill is written off by debiting all partners in their new profit-sharing ratio (

3:1:1

).

4

Determine the net adjustment for Efe

Net entry = Credit of

\text{₦}45,000

- Debit of

\text{₦}36,000

= Net credit of

\text{₦}9,000

.

Subtracting the debit from the credit gives the net capital account entry.

Key Concept

Accounting treatment of goodwill upon admission of a partner when goodwill is raised and written off.

Question 11691Question →

During the nineteenth century, the rapid expansion of joint-stock companies following the Industrial Revolution created a need for independent verification of financial statements to safeguard distant investors. Which of the following developments occurred as a direct result of this evolution?

The establishment of formal professional accounting bodies to regulate financial reporting and auditing standards.

The initial invention of the double-entry system of recording business transactions.

The merging of a business owner's personal assets with corporate transactions for taxation purposes.

The complete replacement of manual record-keeping with automated computational systems.

Show answer & explanation

Answer: The establishment of formal professional accounting bodies to regulate financial reporting and auditing standards.

Answer

The establishment of formal professional accounting bodies to regulate financial reporting and auditing standards.

The growth of public limited companies during the Industrial Revolution separated company ownership from day-to-day management. Absentee investors required independent assurance that financial statements were reliable, which directly led to the formation of formal professional accounting bodies to regulate standards and certify auditors.

Step-by-Step Solution

1

Analyze the historical context provided in the stem

Identified the 19th-century post-Industrial Revolution era characterized by joint-stock companies and separation of ownership from management.

Large corporate entities required independent oversight to assure absentee shareholders that financial reports were accurate.

2

Evaluate the historical consequences of corporate expansion on the accounting profession

Recognized that the need for standardized auditing and professional ethics led directly to the formation of organized accounting societies and professional bodies.

Distinguishing between simple bookkeeping recording and analytical public accounting/auditing created the modern accounting profession.

Key Concept

Impact of the Industrial Revolution and Joint-Stock Companies on the Development of the Accounting Profession

Estimated Time:1m 0s

Question 11692Question →

The following financial information was extracted from the books of Metro Philharmonic Society for the year ended 31st December 2025:

Cash Receipts and Payments Summary:
- Subscriptions received: $\text{₦}1,250,000$
- Rent paid for hall: $\text{₦}360,000$
- Printing and stationery expenses paid: $\text{₦}85,000$
- Proceeds from annual concert: $\text{₦}640,000$
- Direct expenses of annual concert: $\text{₦}290,000$
- Purchase of new musical instruments on 1st July 2025: $\text{₦}500,000$
- Life membership fees received: $\text{₦}200,000$

Additional Adjustments and Notes:
1. Subscriptions accrued on 1st January 2025 were $\text{₦}60,000$ , while subscriptions accrued on 31st December 2025 were $\text{₦}95,000$ . Subscriptions received in advance on 1st January 2025 were $\text{₦}40,000$ , and subscriptions received in advance on 31st December 2025 were $\text{₦}70,000$ .
2. Rent prepaid on 31st December 2025 was $\text{₦}40,000$ , and rent accrued on 1st January 2025 was $\text{��}30,000$ .
3. Stock of stationery on 1st January 2025 was $\text{₦}15,000$ , and on 31st December 2025 was $\text{₦}22,000$ . Creditors for stationery unpaid on 31st December 2025 amounted to $\text{₦}18,000$ .
4. According to the society's constitution, $25\%$ of life membership fees received should be recognized as income in the Income and Expenditure Account, while the balance is capitalized.
5. Musical instruments held on 1st January 2025 were valued at cost at $\text{₦}1,200,000$ . Depreciation is charged at $10\%$ per annum on cost, pro-rated for additions.

What is the net surplus to be credited to the Accumulated Fund in the Income and Expenditure Account for the year ended 31st December 2025?

Show answer & explanation

Answer: 1124000

Answer

The net surplus for the year ended 31st December 2025 is ₦1,124,000.

To calculate the net surplus, all cash transactions must be adjusted to an accrual basis for revenue income and expenditure. Total income comprises subscription income (₦1,255,000), net concert proceeds (₦350,000), and the 25% revenue allocation of life membership fees (₦50,000), totaling ₦1,655,000. Total expenditure comprises adjusted rent (₦290,000), consumed stationery cost (₦96,000), and pro-rated depreciation on musical instruments (₦145,000), totaling ₦531,000. Subtracting total expenditure from total income gives a net surplus of ₦1,124,000.

Step-by-Step Solution

1

Calculate Subscription Income for the period using accrual adjustments

₦1,255,000

Adjust cash subscriptions for opening/closing accrued and prepaid amounts: 1,250,000 - 60,000 + 95,000 + 40,000 - 70,000.

2

Determine total revenue income credited to the Income and Expenditure Account

₦1,655,000

Combine Subscription Income (1,255,000), Net Concert Profit (640,000 - 290,000 = 350,000), and 25% revenue portion of Life Membership Fees (50,000).

3

Determine total revenue expenses charged to the Income and Expenditure Account

₦531,000

Sum Rent Expense (360,000 - 40,000 - 30,000 = 290,000), Stationery Expense (15,000 + 85,000 + 18,000 - 22,000 = 96,000), and pro-rated Depreciation (120,000 + 25,000 = 145,000).

4

Subtract total expenses from total income to arrive at the net surplus

₦1,124,000

Net Surplus = Total Revenue Income (1,655,000) - Total Expenditure (531,000) = 1,124,000.

Key Concept

Accrual adjustments and capitalization rules in the Income and Expenditure Account for Non-Profit Organizations

Question 11693Question →

Match each depreciation method with its correct operational characterization or calculation basis.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Straight-Line Method matches with charging an equal annual expense based on depreciable cost; Reducing Balance Method matches with applying a fixed rate to net book value; Revaluation Method matches with finding the difference between opening value plus additions and closing assessed value; Sum-of-the-Years'-Digits Method matches with applying a diminishing fraction to depreciable cost.

Each depreciation method is correctly matched to its fundamental accounting definition: Straight-Line distributes depreciable cost equally; Reducing Balance applies a percentage to net book value; Revaluation measures change in value of loose assets; and Sum-of-the-Years'-Digits uses a decreasing fraction based on asset life.

Step-by-Step Solution

1

Analyze Straight-Line Method

Identified as allocating uniform annual depreciation over useful life based on cost less residual value.

Straight-line assumes uniform asset utility across time.

2

Analyze Reducing Balance Method

Identified as applying a fixed percentage rate to decreasing carrying amounts (net book value).

Depreciation decreases each period as net book value drops.

3

Analyze Revaluation Method

Identified as comparing opening asset balance plus additions against physical revaluation at year-end.

Suited for small, non-homogeneous assets like loose tools.

4

Analyze Sum-of-the-Years'-Digits Method

Identified as an accelerated method using diminishing fractional multipliers of useful years.

Front-loads depreciation expenses into earlier years of asset usage.

Key Concept

Depreciation Methods and Operational Calculations

Estimated Time:1m 30s

Question 11694Question →

A multinational logistics firm requires an accounting software solution that allows its internal software development team full access to alter the underlying source code to integrate proprietary fleet-tracking algorithms and dynamically adapt to changing cross-border tax regulations. The firm is willing to bear the high initial development cost and complete responsibility for system maintenance and security. Which type of accounting software is most suitable for this organization?

Bespoke software

Customized off-the-shelf software

Standard off-the-shelf software

Cloud-based accounting software

Show answer & explanation

Answer: Bespoke software

Answer

Bespoke software is the most suitable choice because it provides total access to the underlying source code and allows complete customization from scratch.

Bespoke software (also known as tailor-made or custom-written software) is designed and programmed specifically to fulfill the unique requirements of a single business entity. It provides full control over system architecture and source code, making it the only option that permits internal developers to rewrite underlying code logic.

Step-by-Step Solution

1

Analyze the business requirements specified in the scenario.

The organization needs complete source code access, integration of unique algorithms, and is willing to bear high development costs and ongoing maintenance responsibility.

Identifying core functional and technical constraints determines the appropriate software deployment category.

2

Compare accounting software types against the requirement for full source code modification.

Off-the-shelf and cloud-based systems keep source code proprietary to vendors. Only bespoke software is written specifically for the client with full code access.

Bespoke software is custom-built from the ground up, allowing internal developers to alter core programming logic.

Key Concept

Classification and features of accounting software (Bespoke vs. Customized vs. Off-the-shelf vs. Cloud)

Question 11695Question →

Tunde and Obinna entered into a joint venture to trade in commodities, maintaining no separate set of books. Tunde purchased goods for $\text{N}40,000$ and paid freight charges of $\text{N}5,000$ . Obinna sold all the goods for $\text{N}60,000$ . What is the total profit generated by the joint venture as shown in the Memorandum Joint Venture Account?

\text{N}15,000

\text{N}20,000

\text{N}55,000

\text{N}105,000

Show answer & explanation

Answer: $\text{N}15,000$

Answer

\text{N}15,000

The Memorandum Joint Venture Account combines all revenue and costs of the venture. Subtracting total costs (purchase cost

\text{N}40,000

+ freight

\text{N}5,000 = \text{N}45,000

) from total revenue (

\text{N}60,000

) gives the net profit of

\text{N}15,000

.

Step-by-Step Solution

1

Calculate total revenue from sales made by the joint venture.

Total Revenue =

\text{N}60,000

Sales proceeds received by Obinna represent the total joint venture revenue.

2

Calculate total costs and expenses incurred by all co-venturers.

Total Costs =

\text{N}40,000 + \text{N}5,000 = \text{N}45,000

Under the Memorandum method, purchases and all direct expenses incurred by co-venturers are summed to determine total venture cost.

3

Deduct total costs from total revenue to compute net venture profit.

Net Profit =

\text{N}60,000 - \text{N}45,000 = \text{N}15,000

Memorandum Joint Venture Profit = Total Sales Revenue - Total Venture Costs.

Key Concept

Calculation of total profit under the Memorandum Joint Venture method

Estimated Time:45s

Question 11696Question →

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

- Opening stock of raw materials: $\text{₦}38,000$
- Purchases of raw materials: $\text{₦}215,000$
- Carriage inwards on raw materials: $\text{₦}12,000$
- Closing stock of raw materials: $\text{₦}45,000$
- Direct factory labor wages: $\text{₦}125,000$
- Factory indirect overhead expenses: $\text{₦}80,000$
- Opening Work-in-Progress (WIP): $\text{₦}34,000$
- Total Cost of Production transferred to Trading Account: $\text{₦}438,000$

What is the value of the closing Work-in-Progress (WIP) at the end of the financial year?

Show answer & explanation

Answer: 21000

Answer

The valuation of Closing Work-in-Progress (WIP) is ₦21,000.

To find the Closing Work-in-Progress (WIP), we first calculate the cost of raw materials consumed (

\text{Opening Raw Materials} + \text{Purchases} + \text{Carriage Inwards} - \text{Closing Raw Materials} = \text{₦}38,000 + \text{₦}215,000 + \text{₦}12,000 - \text{₦}45,000 = \text{₦}220,000

). Adding direct labor wages of

\text{₦}125,000

yields a Prime Cost of

\text{₦}345,000

. Including factory indirect overhead expenses of

\text{₦}80,000

gives total factory costs of

\text{₦}425,000

. Since

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP}

, substituting the values gives

\text{₦}438,000 = \text{₦}425,000 + \text{₦}34,000 - \text{Closing WIP}

, resulting in a closing WIP valuation of

\text{₦}21,000

.

Step-by-Step Solution

1

Calculate the Cost of Raw Materials Consumed

₦220,000

Raw materials consumed equals opening raw material inventory plus purchases and carriage inwards minus closing raw material inventory:

\text{₦}38,000 + \text{₦}215,000 + \text{₦}12,000 - \text{₦}45,000 = \text{₦}220,000

.

2

Determine the Prime Cost

₦345,000

Prime cost is the sum of raw materials consumed and direct factory labor wages:

\text{₦}220,000 + \text{₦}125,000 = \text{₦}345,000

.

3

Compute Total Factory Manufacturing Cost prior to Work-in-Progress adjustments

₦425,000

Adding factory indirect overhead expenses to the prime cost gives:

\text{₦}345,000 + \text{₦}80,000 = \text{₦}425,000

.

4

Reconcile Work-in-Progress (WIP) to determine Closing WIP

₦21,000

Using the accounting relationship

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP}

, we get

\text{₦}438,000 = \text{₦}425,000 + \text{₦}34,000 - \text{Closing WIP}

, which solves to

\text{Closing WIP} = \text{₦}459,000 - \text{₦}438,000 = \text{₦}21,000

.

Key Concept

Valuation and Adjustment for Work-in-Progress (WIP)

Estimated Time:2m 30s

Question 11697Question →

A petty cashier is assigned a weekly imprest float of $\text{₦}20,000$ . During the week, petty expenses incurred for office transport and stationery amounted to $\text{₦}14,500$ . What is the amount needed to reimburse the petty cashier at the end of the week to restore the imprest float?

\text{₦}5,500

\text{₦}14,500

\text{₦}20,000

\text{₦}34,500

Show answer & explanation

Answer: $\text{₦}14,500$

Answer

\text{₦}14,500

Under the imprest system, the petty cashier is refunded the exact total amount of disbursements incurred during the period to bring the petty cash balance back to the agreed imprest float level.

Step-by-Step Solution

1

Identify the total petty cash expenses disbursed during the week

Total spent =

\text{₦}14,500

The imprest system operates by reimbursing the petty cashier an amount equal to the total expenses paid out during the period.

2

Determine the required reimbursement amount

Reimbursement amount =

\text{₦}14,500

Restoring the float to its original level of

\text{₦}20,000

requires topping up the remaining balance (

\text{₦}20,000 - \text{₦}14,500 = \text{₦}5,500

) with the spent amount of

\text{₦}14,500

.

Key Concept

Imprest System Reimbursement Rule

Question 11698Question →

A sole trader paid $\text{₦}250,000$ for personal residential rent using funds directly from the firm's bank account. The bookkeeper debited the business rent expense account and credited the bank account. Which fundamental accounting concept has been violated, and how should this transaction be correctly recorded?

The business entity concept has been violated; the amount should be debited to the drawings account and credited to the bank account.

The going concern concept has been violated; the amount should be capitalized as a long-term business asset because the owner and sole proprietorship share the same legal identity.

The scope of bookkeeping has been violated; personal transactions paid via bank transfers must be omitted entirely from all accounting records.

The accrual concept has been violated; the payment must be treated as a prepaid operational expense in the statement of financial position.

Show answer & explanation

Answer: The business entity concept has been violated; the amount should be debited to the drawings account and credited to the bank account.

Answer

The business entity concept has been violated; the amount should be debited to the drawings account and credited to the bank account.

The business entity concept establishes that a business unit is treated as a separate entity from its owner(s) for accounting purposes. Personal expenses of the owner settled with business money are withdrawals of capital (drawings) and must be debited to the drawings account rather than debited to business expense accounts.

Step-by-Step Solution

1

Analyze the nature of the transaction

The expenditure of

\text{₦}250,000

was incurred for personal residential accommodation, making it a personal transaction of the owner.

Identifying whether an expense is business or personal is necessary to apply entity rules correctly.

2

Apply the appropriate accounting concept

The business entity concept requires treating the business entity as distinct from its owner, meaning personal expenses paid from business funds must be classified as drawings.

Charging personal expenses to business rent overstates operational expenses and understates net profit.

3

Determine the correct double entry

Debit Drawings Account (to reduce equity/owner's capital) and Credit Bank Account (to reflect cash outflow).

Drawings reflect owner withdrawals from the entity and keep profit calculations accurate.

Key Concept

Business Entity Concept and Treatment of Drawings

Question 11699Question →

Match each share forfeiture and re-issue transaction on the left with its corresponding double-entry accounting treatment on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The correct pairings match each transaction event with its appropriate double-entry journal posting: Forfeiture of shares requires debiting Share Capital Account and crediting both Calls-in-Arrears Account and Forfeited Shares Account; Discount allowed on re-issue requires debiting Forfeited Shares Account and crediting Share Capital Account; Transfer of remaining surplus after re-issue requires debiting Forfeited Shares Account and crediting Capital Reserve Account.

Each corporate transaction event correctly corresponds to its standardized double-entry posting rule under company financial accounting principles.

Step-by-Step Solution

1

Determine double-entry for share forfeiture

Debit Share Capital Account (called-up value), Credit Calls-in-Arrears Account (unpaid calls), and Credit Forfeited Shares Account (amount paid).

Cancels the issued nominal capital of defaulting shareholders and isolates the money already paid.

2

Determine double-entry for discount on re-issue

Debit Forfeited Shares Account and Credit Share Capital Account for the discount amount.

The discount granted on re-issuing forfeited shares cannot exceed the amount forfeited and is charged against the Forfeited Shares Account.

3

Determine double-entry for capital profit transfer

Debit Forfeited Shares Account and Credit Capital Reserve Account.

Any unutilized balance in the Forfeited Shares Account after re-issuing all forfeited shares is a non-recurring capital profit.

Key Concept

Journal Entries for Forfeiture and Re-issue of Shares

Question 11700Question →

Match each goodwill accounting method or transaction scenario on the left with its correct valuation basis or ledger treatment on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Average Profit Method matches with valuation based on mean past profits multiplied by an agreed number of years' purchase; Super Profit Method matches with valuation based on earnings achieved over and above normal expected profit; Private Payment of Goodwill matches with no journal entry is recorded in the partnership books; Goodwill Written Off matches with debited to partners' capital accounts in their new profit-sharing ratio.

Each valuation method and accounting scenario is paired directly with its defining rule: Average Profit relies on mean past earnings, Super Profit calculates earnings exceeding normal returns, Private Payment bypasses firm accounts completely, and Goodwill Written Off is debited to partners' capital accounts using the new profit-sharing ratio.

Step-by-Step Solution

1

Identify the basic valuation formulas for goodwill.

Average profit uses mean earnings of previous years, while super profit measures profit above the normal expected rate of return.

These are the fundamental conceptual definitions tested in partnership accounting.

2

Determine the book entry required when goodwill premium is paid privately.

No journal entry is made in the firm's books.

Private transactions between individuals do not affect the financial position or accounts of the partnership firm.

3

Determine the accounting treatment for writing off goodwill.

Debit partners' capital accounts using the new profit-sharing ratio.

Goodwill is raised using the old profit-sharing ratio and eliminated/written off using the new profit-sharing ratio.

Key Concept

Valuation methods and accounting treatments of goodwill in partnership accounts

Estimated Time:1m 0s

Answer

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