All practice questions

Question 11721Question →

In departmental accounting, various operational overheads are shared among departments using equitable criteria. Match each expense item listed on the left with its standard basis of apportionment on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Supervision expenses match with Number of employees in each department; Heating and air conditioning expenses match with Cubic capacity (volume of space) of each department; Depreciation of plant and machinery matches with Book value of machinery in each department; Delivery van expenses match with Sales turnover of each department.

Each overhead expense in departmental accounting must be allocated according to its direct cost driver: supervision expenses are apportioned by employee headcount; heating and air conditioning by cubic volume of space; plant depreciation by asset book value; and delivery van expenses by departmental sales turnover.

Step-by-Step Solution

1

Determine the basis for personnel supervision expenses.

Supervision is driven by staff headcount, so it matches with 'Number of employees in each department'.

Supervisory effort and costs scale with the number of workers managed in each department.

2

Determine the basis for heating and air conditioning expenses.

Environmental climate control depends on room volume, matching with 'Cubic capacity (volume of space) of each department'.

Heating or cooling energy consumption is determined by the total volume of air within the departmental physical space.

3

Determine the basis for depreciation of plant and machinery.

Asset depreciation relates to equipment worth, matching with 'Book value of machinery in each department'.

Depreciation represents the cost allocation of equipment wear based on the capital value of machinery assigned to each department.

4

Determine the basis for delivery van expenses.

Outward transit costs relate to merchandise sold, matching with 'Sales turnover of each department'.

Selling and distribution overheads are incurred in proportion to sales revenue generated by each department.

Key Concept

Bases of Apportionment for Departmental Indirect Expenses

Question 11722Question →

Although computerized accounting software automatically performs ledger balancing and trial balance extraction to eliminate arithmetic calculation errors, it does not prevent accounting errors resulting from incorrect data originally captured on source documents.

True

False

Show answer & explanation

Answer: True

Answer

The statement is True.

The statement is true because automation in computerized accounting guarantees mathematical accuracy during processing and posting, but it remains dependent on human input. Under the Garbage In, Garbage Out (GIGO) principle, if erroneous figures are keyed in from source documents, the resulting financial reports will be inaccurate regardless of software sophistication.

Step-by-Step Solution

1

Analyze the impact of system automation on mathematical processing.

Computerized accounting software automatically calculates ledger totals, posts double entries, and extracts trial balances, which eliminates human arithmetic calculation errors.

Automated code executes mathematical routines consistently and accurately.

2

Evaluate the effect of initial data entry on accounting outputs.

Errors present on source documents or introduced during keyboard entry are processed without detection by the system's calculation engine.

This behavior exemplifies the Garbage In, Garbage Out (GIGO) principle inherent in data processing.

3

Compare manual and computerized system vulnerabilities regarding input accuracy.

Both manual and computerized accounting systems remain equally dependent on accurate source document inputs.

Neither system can automatically validate the underlying factual accuracy of external source documents without separate internal control checks.

Key Concept

Garbage In, Garbage Out (GIGO) and Error Elimination in Computerized Accounting

Estimated Time:1m 0s

Question 11723Question →

Fatima, Usman, and Segun are partners sharing profits and losses in the ratio $5:3:2$ respectively. On 31st December 2025, they agreed to revalue the firm's assets and liabilities upon a structural reorganization. The revaluation details are as follows:
- Building with a book value of $\text{₦}50,000$ is revalued upwards by $20\%$ .
- Furniture with a book value of $\text{₦}20,000$ is written down to $\text{₦}15,000$ .
- Provision for doubtful debts, currently standing at $\text{₦}800$ , is to be adjusted to $5\%$ of total trade debtors of $\text{₦}30,000$ .
- An unrecorded accrued electricity bill of $\text{₦}1,300$ is to be recognized.
- Inventory valued at $\text{₦}18,000$ includes damaged items costed at $\text{₦}3,000$ , which can now be sold for only $\text{₦}1,000$ .

What is Segun's share of the net revaluation profit or loss?

\text{₦}200

profit credited to Segun's capital account

\text{₦}200

loss debited to Segun's capital account

\text{₦}160

loss debited to Segun's capital account

\text{₦}300

profit credited to Segun's capital account

Show answer & explanation

Answer: $\text{₦}200$ profit credited to Segun's capital account

Answer

\text{₦}200

profit credited to Segun's capital account

The correct answer reflects a net revaluation profit of

\text{₦}1,000

calculated by subtracting total revaluation losses of

\text{₦}9,000

(Furniture

\text{₦}5,000

, Provision Increase

\text{₦}700

, Accrued Liability

\text{₦}1,300

, Inventory Write-down

\text{₦}2,000

) from the building appreciation gain of

\text{₦}10,000

. Segun's share under the

5:3:2

ratio is

\frac{2}{10} \times \text{₦}1,000 = \text{₦}200

, which is credited to Segun's capital account.

Step-by-Step Solution

1

Calculate individual revaluation gain and loss amounts

Building Gain =

20\% \times \text{₦}50,000 = \text{₦}10,000

.
Furniture Loss =

\text{₦}20,000 - \text{₦}15,000 = \text{₦}5,000

.
Increase in Provision for Doubtful Debts =

(5\% \times \text{₦}30,000) - \text{₦}800 = \text{₦}1,500 - \text{₦}800 = \text{₦}700

.
Accrued Electricity Liability Loss =

\text{₦}1,300

.
Inventory Loss =

\text{₦}3,000 - \text{₦}1,000 = \text{₦}2,000

.

Revaluation gains increase asset values or reduce liabilities, whereas revaluation losses decrease asset values or create/increase liabilities.

2

Compute total revaluation gains, total losses, and net revaluation profit or loss

Total Revaluation Gains =

\text{₦}10,000

.
Total Revaluation Losses =

\text{₦}5,000 + \text{₦}700 + \text{₦}1,300 + \text{₦}2,000 = \text{₦}9,000

.
Net Revaluation Profit =

\text{₦}10,000 - \text{₦}9,000 = \text{₦}1,000

.

Net revaluation profit is determined by taking total credits (gains) minus total debits (losses) in the Revaluation Account.

3

Apportion net revaluation profit to Segun using the old ratio

Segun's share =

\frac{2}{5+3+2} \times \text{₦}1,000 = \frac{2}{10} \times \text{₦}1,000 = \text{₦}200

profit.

Revaluation profit belongs to existing partners in their existing profit and loss sharing ratio and is credited to their respective capital accounts.

Key Concept

Revaluation of Assets and Liabilities in Partnership

Question 11724Question →

Match each type of company listed on the left with its defining statutory characteristic or legal restriction on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Private Limited Company matches with restriction on public share subscription; Public Limited Company matches with public share invitations and no membership ceiling; Company Limited by Guarantee matches with member fixed financial undertakings instead of share capital; Unlimited Company matches with full personal liability of members for corporate debts.

Each corporate entity is matched according to its governing legal framework: Private Limited Companies restrict share transfers and public subscription; Public Limited Companies allow public share invitations without membership ceilings; Companies Limited by Guarantee rely on member guarantee commitments rather than share capital; and Unlimited Companies leave members personally liable without limit for corporate debts.

Step-by-Step Solution

1

Identify the statutory share transfer and membership constraints of a Private Limited Company.

Matches with restriction on public subscription, share transfer limitations, and statutory membership limits.

Under company regulations, private companies are prohibited from offering securities to the public.

2

Examine the public subscription and membership rules of a Public Limited Company.

Matches with public share invitations and unlimited maximum membership.

Public companies are designed to raise capital from capital markets and the general public.

3

Analyze the financial structure of a Company Limited by Guarantee.

Matches with fixed financial undertaking by members upon winding up rather than share capital.

Guaranteed companies are typically formed for non-profit purposes supported by member guarantee commitments.

4

Determine the liability profile of an Unlimited Company.

Matches with unlimited personal liability of members for corporate obligations.

Members of unlimited companies do not enjoy corporate limited liability protection upon liquidation.

Key Concept

Classification and legal characteristics of registered corporate entities under company law

Estimated Time:1m 0s

Question 11725Question →

Kresta Marine Services Plc issued $120,000$ ordinary shares of $\text{₦}1.50$ nominal value each at a premium of $10\%$ . What is the total amount, in naira ( $\text{₦}$ ), to be credited to the Share Premium Account?

Show answer & explanation

Answer: 18000

Answer

The total amount credited to the Share Premium Account is

\text{₦}18,000

.

The nominal value per share is

\text{₦}1.50

. A

10\%

premium means an excess of

\text{₦}0.15

per share above par value (

10\% \times \text{₦}1.50 = \text{₦}0.15

). For

120,000

shares, the total amount credited to the Share Premium Account is

120,000 \times \text{₦}0.15 = \text{₦}18,000

.

Step-by-Step Solution

1

Calculate the share premium value per share

Premium per share =

10\% \times \text{₦}1.50 = \text{₦}0.15

Share premium is calculated as the specified percentage of the share's nominal (face) value.

2

Determine the total share premium amount to credit to the Share Premium Account

Total Share Premium =

120,000 \times \text{₦}0.15 = \text{₦}18,000

The total premium collected across all issued shares must be credited to the Share Premium Account.

Key Concept

Accounting treatment and calculation of share premium when shares are issued above par value.

Question 11726Question →

A business lodged a customer's cheque into its bank account near the end of the month. The transaction was recorded in the Cash Book immediately, but the bank had not credited the account as of the Bank Statement date. How does this uncredited deposit affect the Cash Book balance relative to the Bank Statement balance prior to reconciliation?

The Cash Book balance is greater than the Bank Statement balance.

The Cash Book balance is less than the Bank Statement balance.

The Cash Book balance remains equal to the Bank Statement balance.

The Bank Statement balance becomes overdrawn by the amount of the cheque.

Show answer & explanation

Answer: The Cash Book balance is greater than the Bank Statement balance.

Answer

The Cash Book balance is greater than the Bank Statement balance.

When a cheque received is lodged in the bank, the debit side of the Cash Book is credited/debited (debited to increase asset balance) immediately by the business. Since the bank has not cleared or credited the amount by the statement date, the bank statement balance remains lower. Therefore, prior to bank reconciliation, the Cash Book balance is greater than the Bank Statement balance.

Step-by-Step Solution

1

Analyze the entry in the Cash Book

When a cheque is lodged, the Cash Book bank column is debited, increasing the Cash Book balance.

Cash Book entries are made at the time of transaction/lodgement.

2

Analyze the status on the Bank Statement

The bank has not yet credited the account, so the Bank Statement balance does not include this deposit.

Clearing delays cause a timing discrepancy between internal records and bank records.

3

Compare the two balances

Because the Cash Book reflects the addition while the Bank Statement does not, the Cash Book balance exceeds the Bank Statement balance.

An uncredited lodgement always results in a Cash Book balance that is higher than the Bank Statement balance prior to reconciliation.

Key Concept

Impact of uncredited deposits (lodgements in transit) on bank reconciliation

Question 11727Question →

Match each partnership revaluation transaction on the left with its corresponding double-entry accounting rule on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

1. Increase in Provision for Doubtful Debts → Debit Revaluation Account and Credit Provision for Doubtful Debts Account; 2. Reduction in Sundry Creditors → Credit Revaluation Account and Debit Sundry Creditors Account; 3. Appreciation in Plant and Machinery → Credit Revaluation Account and Debit Plant and Machinery Account; 4. Unrecorded Accrued Wages → Debit Revaluation Account and Credit Accrued Wages Account.

Each revaluation adjustment follows basic nominal account rules: gains (asset appreciation, liability reduction) are credited to the Revaluation Account, while losses (increased provisions, unrecorded liabilities) are debited to the Revaluation Account.

Step-by-Step Solution

1

Identify the nature (gain or loss) of each revaluation item

Asset appreciations and liability reductions are gains. Asset depreciations, provision increases, and unrecorded liabilities are losses.

Revaluation gains increase capital while revaluation losses decrease capital.

2

Apply double-entry rules for revaluation gains

Debit the specific asset/liability account and Credit the Revaluation Account.

The Revaluation Account acts as a nominal account where all gains are credited.

3

Apply double-entry rules for revaluation losses

Debit the Revaluation Account and Credit the specific asset/liability account.

Nominal accounts are debited with all losses and expenses.

Key Concept

Double-entry rules for posting asset and liability revaluation adjustments to the Revaluation Account.

Question 11728Question →

On 1 January 2025, the Telephone Expense Account of a trading enterprise showed an accrued balance of $\text{₦}6,500$ . During the year ended 31 December 2025, total cash paid for telephone bills was $\text{₦}92,000$ . At 31 December 2025, telephone bills owing amounted to $\text{₦}9,000$ , while prepaid telephone bills amounted to $\text{₦}4,500$ . What amount should be charged to the Profit and Loss Account for telephone expense for the year ended 31 December 2025?

\text{₦}85,000

\text{₦}90,000

\text{₦}94,000

\text{₦}103,000

Show answer & explanation

Answer: $\text{₦}90,000$

Answer

\text{₦}90,000

Under the accrual concept of accounting, revenue and expenses are recognized in the period they occur regardless of cash flow. The telephone expense to be charged to the Profit and Loss Account is computed as: Cash Paid (

\text{₦}92,000

) - Opening Accrual (

\text{₦}6,500

) + Closing Accrual (

\text{₦}9,000

) - Closing Prepayment (

\text{₦}4,500

) =

\text{₦}90,000

.

Step-by-Step Solution

1

Identify the base cash payment for telephone expense during the year

Cash Paid =

\text{₦}92,000

Cash payments form the starting point for calculating accrual-based expense.

2

Deduct opening accrued expense that relates to the previous financial period

\text{₦}92,000 - \text{₦}6,500 = \text{₦}85,500

Opening accruals represent expenses of the prior year paid during the current year.

3

Add closing accrued expense and subtract closing prepaid expense

\text{₦}85,500 + \text{₦}9,000 - \text{₦}4,500 = \text{₦}90,000

Closing accruals belong to the current year and must be included, while closing prepayments relate to the next period and must be excluded.

Key Concept

Accrual Accounting Adjustment for Operating Expenses

Estimated Time:1m 30s

Question 11729Question →

Under the separate set of books method of accounting for a joint venture, which of the following is the correct double entry to record goods supplied directly by a co-venturer from their existing business stock?

Debit Joint Venture Account and Credit Co-venturer's Personal Account

Debit Joint Bank Account and Credit Co-venturer's Personal Account

Debit Joint Venture Account and Credit Joint Bank Account

Debit Co-venturer's Personal Account and Credit Joint Venture Account

Show answer & explanation

Answer: Debit Joint Venture Account and Credit Co-venturer's Personal Account

Answer

Debit Joint Venture Account and Credit Co-venturer's Personal Account

When a co-venturer supplies goods from their existing business stock under a separate set of books, the joint venture incurs a cost (recorded by debiting the Joint Venture Account) and becomes indebted to that co-venturer (recorded by crediting the co-venturer's personal account).

Step-by-Step Solution

1

Identify the nature of the transaction

Goods are supplied directly by a co-venturer from their stock to the joint venture without involving cash from the Joint Bank Account.

Understanding whether funds or physical inventory from a venturer are involved dictates which ledger accounts are affected.

2

Determine the debit entry for the cost incurred by the venture

Debit Joint Venture Account.

All goods, materials, and expenses related to the venture are debited to the Joint Venture Account to compute overall profit or loss.

3

Determine the credit entry for the supplying venturer

Credit Co-venturer's Personal Account.

The co-venturer who supplies the goods acts as a creditor to the venture for that amount, so their personal capital/settlement account is credited.

Key Concept

Accounting entries for venturer-supplied goods under the separate set of books method

Question 11730Question →

Match the following organizational accounting operational requirements with their most suitable accounting data processing method based on system timing and updating characteristics.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Monthly payroll matches Batch Processing; flight seat booking matches Real-Time Processing; terminal entry with deferred posting matches Online Batch Processing; paper voucher record-keeping matches Manual Processing.

Each operational scenario correctly aligns with its processing method based on transaction input timing, hardware dependence, and master ledger update latency.

Step-by-Step Solution

1

Analyze monthly employee payroll processing requirements.

Payroll data is collected over time and processed together periodically at predetermined intervals without needing instant master account updates per employee.

This periodic accumulated execution defines standard Batch Processing.

2

Evaluate seat inventory reservation posting.

Flight seat availability must reflect immediately upon booking to avoid overbooking and ensure accurate record status.

Immediate transaction processing and continuous master file updating defines Real-Time Processing.

3

Examine terminal data capture with delayed master file updating.

Interactive data entry allows validation at terminal entry time, but actual updates to main ledger files occur later in a single batch overnight.

Combining online interactive input with delayed batch updating defines Online Batch Processing.

4

Determine paper petty cash record classification.

Paper vouchers summarized by hand into physical books represent human-driven accounting operations.

Processing accounting data manually without computerized hardware constitutes Manual Processing.

Key Concept

Operational characteristics and latency tradeoffs across accounting data processing methods.

Estimated Time:2m 0s

Question 11731Question →

Two merchants enter into a temporary agreement to pool funds, purchase a bulk shipment of seasonal produce, sell the goods, and share the net profit equally, with the agreement terminating automatically upon completion of the transaction. Which of the following fundamental accounting features distinguishes this business arrangement from a traditional partnership?

The non-applicability of the going concern concept due to its temporary nature for a specific venture.

The legal requirement to register a separate permanent firm name with statutory authorities before trading.

The restriction of participant roles strictly to a principal and agent relationship.

The requirement that accounting records must be kept by an external independent auditor.

Show answer & explanation

Answer: The non-applicability of the going concern concept due to its temporary nature for a specific venture.

Answer

The non-applicability of the going concern concept due to its temporary nature for a specific venture

A joint venture is a temporary business arrangement entered into by two or more persons for a specific purpose or transaction. Because it dissolves automatically once the project is completed, the going concern concept—which assumes a business will operate indefinitely—does not apply. In contrast, a standard partnership is assumed to continue operating indefinitely.

Step-by-Step Solution

1

Analyze the features of the agreement described in the stem.

The agreement is temporary, formed for a single specific transaction, and automatically terminates when completed.

This setup defines a Joint Venture.

2

Compare the core accounting principles of Joint Ventures versus traditional Partnerships.

Partnerships operate under the assumption of continuity (going concern), whereas Joint Ventures are formed without the expectation of indefinite continuation.

The going concern concept assumes an enterprise will continue operating for the foreseeable future, which is intentionally absent in a temporary joint venture.

Key Concept

Nature and Features of Joint Venture Accounts

Question 11732Question →

On 31st July 2026, the Cash Book of Adebayo Traders showed an overdrawn bank balance of $\text{NGN } 18,500$ . A comparison with the Bank Statement revealed the following items:

- Unpresented cheques: $\text{NGN } 6,200$
- Uncredited lodgements: $\text{NGN } 4,100$
- Bank charges not yet entered in the Cash Book: $\text{NGN } 850$
- Direct credit transfer from a customer: $\text{NGN } 3,500$

What is the adjusted Cash Book balance?

Overdraft of

\text{NGN } 15,850

Overdraft of

\text{NGN } 13,750

Overdraft of

\text{NGN } 21,150

Overdraft of

\text{NGN } 9,650

Show answer & explanation

Answer: Overdraft of $\text{NGN } 15,850$

Answer

Overdraft of

\text{NGN } 15,850

To arrive at the adjusted Cash Book balance, only unrecorded items like bank charges and direct credits are adjusted in the Cash Book. Starting with an overdraft of

-\text{NGN } 18,500

, adding bank charges of

\text{NGN } 850

increases the overdraft to

-\text{NGN } 19,350

. Deducting the direct credit of

\text{NGN } 3,500

reduces the overdraft balance to

-\text{NGN } 15,850

(overdraft of

\text{NGN } 15,850

).

Step-by-Step Solution

1

Identify items that require entries in the Cash Book before reconciliation

Bank charges (

\text{NGN } 850

) must be credited (increasing overdraft), and direct credit transfer (

\text{NGN } 3,500

) must be debited (reducing overdraft). Unpresented cheques and uncredited lodgements are timing differences to be placed in the Bank Reconciliation Statement.

Only items unknown to the business prior to receiving the bank statement (or errors made by the firm) are recorded in the Adjusted Cash Book.

2

Calculate the net adjustment to the overdrawn Cash Book balance

-\text{NGN } 18,500 - \text{NGN } 850 + \text{NGN } 3,500 = -\text{NGN } 15,850

An overdrawn balance is negative. Bank charges increase the liability (negative impact), while a direct credit from a customer reduces the liability (positive impact).

Key Concept

Adjusted Cash Book preparation prior to Bank Reconciliation Statement

Question 11733Question →

Koko Industrial Plc offered $100,000$ ordinary shares of $\text{₦}2.00$ nominal value each at a premium of $20\%$ . Payments were structured as follows:
- On application: $\text{₦}0.80$
- On allotment: $\text{₦}1.00$ (including the full share premium)
- On final call: $\text{₦}0.60$

If all shares were fully subscribed and allotted, what amount should be credited to the Ordinary Share Capital Account in respect of the allotment stage?

\text{₦}60,000

\text{₦}100,000

\text{₦}40,000

\text{₦}80,000

Show answer & explanation

Answer: $\text{₦}60,000$

Answer

\text{₦}60,000

The option stating

\text{₦}60,000

is correct because the allotment amount of

\text{₦}1.00

per share consists of a

\text{₦}0.40

premium (

20\%

of nominal value

\text{₦}2.00

) and a

\text{₦}0.60

capital element. For

100,000

shares, the amount credited to Ordinary Share Capital is

100,000 \times \text{₦}0.60 = \text{₦}60,000

.

Step-by-Step Solution

1

Calculate the share premium per share

\text{Share Premium per share} = 20\% \times \text{₦}2.00 = \text{₦}0.40

Share premium is computed as the given percentage applied to the nominal (face) value per share.

2

Determine the nominal (capital) portion payable on allotment per share

\text{Capital component on allotment} = \text{Total Allotment Price} - \text{Share Premium per share} = \text{₦}1.00 - \text{₦}0.40 = \text{₦}0.60

Only the face value portion of share calls/allotments is credited to the Ordinary Share Capital Account.

3

Calculate total credit to Ordinary Share Capital Account on allotment

\text{Total Share Capital Credit} = 100,000 \text{ shares} \times \text{₦}0.60 = \text{₦}60,000

Multiplying the nominal capital portion per share by the total number of allotted shares gives the total credit entry.

Key Concept

Accounting entries for issue of shares at a premium across installment stages

Question 11734Question →

The net profits of a partnership firm for the last three years were $\text{₦}70,000$ , $\text{₦}80,000$ , and $\text{₦}90,000$ . If goodwill is to be valued at $2$ years' purchase of the average annual profit of the past three years, what is the total value of the firm's goodwill in Naira?

Show answer & explanation

Answer: 160000

Answer

The total value of the firm's goodwill is

\text{₦}160,000

.

The average annual profit is calculated by taking the total profit of

\text{₦}240,000

and dividing by 3 years, giving

\text{₦}80,000

. Multiplying this average annual profit by 2 years' purchase yields

\text{₦}160,000

.

Step-by-Step Solution

1

Calculate total profits for the three-year period

Total Profit =

\text{₦}70,000 + \text{₦}80,000 + \text{₦}90,000 = \text{₦}240,000

Summing annual profits is the first step in determining average profit.

2

Calculate the average annual profit

Average Profit =

\frac{\text{₦}240,000}{3} = \text{₦}80,000

Dividing total profits by the number of years gives the mean annual profit.

3

Multiply average profit by the number of years' purchase

Goodwill =

\text{₦}80,000 \times 2 = \text{₦}160,000

Goodwill is agreed to be valued at 2 years' purchase of the average annual profit.

Key Concept

Valuation of Goodwill using the Average Profit Method

Question 11735Question →

Under the provisions of the Hire Purchase Act, a transport company hired a delivery truck for its haulage operations. Halfway through the agreed payment schedule, the company decided to discontinue the arrangement due to a downturn in business. Which of the following statements correctly describes the hirer's legal position in this situation?

The hirer has the statutory right to terminate the contract at any time before the final payment by giving written notice and paying any outstanding balance up to the statutory minimum amount.

The hirer cannot return the truck because legal ownership automatically passed to the transport company immediately upon signing the contract.

The hirer can repudiate the contract and demand a full refund of all previous installments paid by treating the business slowdown as a breach of warranty.

The hirer is legally bound to continue paying all installments until maturity and has no statutory right of early termination.

Show answer & explanation

Answer: The hirer has the statutory right to terminate the contract at any time before the final payment by giving written notice and paying any outstanding balance up to the statutory minimum amount.

Answer

The hirer has the statutory right to terminate the contract at any time before the final payment by giving written notice and paying any outstanding balance up to the statutory minimum amount.

Under the statutory provisions governing hire purchase agreements, the hirer retains the option to terminate the agreement at any point before the final installment becomes due. To exercise this right legally, the hirer must give written notice of termination to the owner and pay any accrued installments together with the amount required to bring total payments up to the statutory minimum (usually 50% of the total hire purchase price unless otherwise specified).

Step-by-Step Solution

1

Identify the key legal characteristics of a hire purchase agreement regarding termination rights.

Hire purchase agreements allow the hirer to bail (use) the goods while paying periodic installments, with an option to purchase at the end.

Understanding the distinction between a hire purchase contract and an absolute sale is necessary to determine rights upon cancellation.

2

Apply the statutory rights of the hirer under the Hire Purchase Act to the given scenario.

The hirer can terminate the agreement prior to the final payment by giving written notice and fulfilling any statutory minimum payment requirement.

The law protects the hirer from being locked into an unmanageable contract while protecting the owner through minimum payment provisions.

Key Concept

Rights and obligations of the hirer under Hire Purchase law

Question 11736Question →

Match each cause of discrepancy between the Cash Book and the Bank Statement listed on the left with its correct accounting description on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Unpresented cheques match cheques issued by the business but not yet presented to the bank; Uncredited lodgements match cheques debited in the Cash Book but not yet credited by the bank; Credit transfers match direct payments by customers into the bank account not yet in the Cash Book; Bank charges match service fees deducted by the bank not yet entered in the Cash Book.

Each discrepancy source is correctly paired with its accounting description based on whether the item is an unrecorded cash book entry or a timing difference in bank clearing.

Step-by-Step Solution

1

Analyze the nature of unpresented cheques

Unpresented cheques represent payments recorded on the credit side of the Cash Book that have not yet been debited by the bank.

They are drawn and handed over to creditors but awaiting presentation at the bank.

2

Analyze the nature of uncredited lodgements

Uncredited lodgements represent receipts entered on the debit side of the Cash Book awaiting clearance by the bank.

These deposits are made near the end of the period and take time to clear.

3

Analyze credit transfers and bank charges

Credit transfers increase the bank statement balance directly, whereas bank charges decrease it directly, prior to Cash Book updating.

Both transactions originate at the bank level and require cash book adjustment.

Key Concept

Causes of Discrepancies Between Cash Book and Bank Statement

Question 11737Question →

Under the imprest system, a petty cashier receives a cash reimbursement from the main cashier at the end of the period to restore the petty cash float to its agreed level. Which of the following represents the correct double-entry record for this reimbursement transaction?

Debit Petty Cash Account and Credit Cash/Bank Account

Debit Cash/Bank Account and Credit Petty Cash Account

Debit Expense Accounts and Credit Cash/Bank Account

Debit Petty Cash Account and Credit Capital Account

Show answer & explanation

Answer: Debit Petty Cash Account and Credit Cash/Bank Account

Answer

Debit Petty Cash Account and Credit Cash/Bank Account

When the main cashier replenishes the petty cash float, money flows from the main cash or bank account into the petty cash box. Therefore, following standard asset account rules, the Petty Cash Account is debited to show an increase in petty cash assets, and the Cash/Bank Account is credited to record the reduction in main funds.

Step-by-Step Solution

1

Identify the nature of the transaction

The transaction involves restoring the spent petty cash amount by issuing funds from the main bank or cash account to the petty cash box.

Under the imprest system, the petty cash float is topped up periodically by a cash or cheque withdrawal from the main account equal to the total spent.

2

Apply double-entry bookkeeping rules

Debit the receiving account (Petty Cash Account) and Credit the giving account (Cash/Bank Account).

Petty cash is an asset account increasing with cash received, while Cash/Bank is an asset account decreasing as funds are drawn.

Key Concept

Accounting Entry for Imprest Float Reimbursement

Question 11738Question →

A manufacturing company is planning to expand its operations and requires detailed internal cost accounts, divisional performance reports, and future cash budget projections. Which of the following user groups has direct access to this detailed, forward-looking accounting information to guide strategic operational decisions?

Management and internal directors

Trade creditors and suppliers

Financial analysts and prospective investors

Tax authorities and revenue services

Show answer & explanation

Answer: Management and internal directors

Answer

Management and internal directors are the only user group with access to detailed internal cost accounts, divisional performance reports, and forward-looking cash budget projections.

Internal management and directors require detailed, non-public management accounting reports, including divisional costs, budgets, and projections, to make strategic operational decisions.

Step-by-Step Solution

1

Analyze the nature of the accounting information described in the stem.

The requested information (internal cost accounting, divisional breakdowns, future cash budgets) is private, highly detailed, and forward-looking.

Different accounting information users require different depths and scopes of financial data based on their operational involvement.

2

Distinguish between the information privileges of internal and external users.

Internal users (managers and directors) run daily business operations and require management accounting reports. External users (creditors, tax authorities, investors) are restricted to summarized historical financial statements.

Proprietary budgets and cost structures are confidential and intended exclusively for internal planning and control.

Key Concept

Information needs of internal versus external users of accounting information

Question 11739Question →

The Ministry of Water Resources of a state government recorded the following financial disbursements during the fiscal year:

- Construction of water treatment dams: ₦45,000,000
- Monthly staff salaries and allowances: ₦12,500,000
- Purchase of water testing chemical reagents: ₦3,800,000
- Acquisition of heavy excavators: ₦18,000,000
- Routine repairs and servicing of water pumps: ₦2,200,000
- Laying of new main water pipelines: ₦25,000,000

What is the total recurrent expenditure of the ministry for the fiscal year?

Show answer & explanation

Answer: 18500000

Answer

The total recurrent expenditure of the ministry for the fiscal year is ₦18,500,000.

Recurrent expenditure includes ongoing operational costs such as staff salaries (₦12,500,000), consumable testing chemicals (₦3,800,000), and routine pump servicing (₦2,200,000). Adding these together yields ₦18,500,000. Dam construction, excavator acquisition, and pipeline laying are capital expenditures because they acquire or construct long-term public infrastructure.

Step-by-Step Solution

1

Classify disbursements into recurrent expenditure (operating costs and maintenance) and capital expenditure (asset creation and major long-term additions).

Recurrent items identified: Staff salaries (₦12,500,000), Chemical reagents (₦3,800,000), and Routine repairs of pumps (₦2,200,000). Capital items excluded: Construction of dams (₦45,000,000), Acquisition of excavators (₦18,000,000), and Laying of new main pipelines (₦25,000,000).

Recurrent expenditures are operational, short-term costs incurred in the daily running and maintenance of government services, whereas capital expenditures create non-current fixed assets or extend their working lifespan.

2

Calculate the total recurrent expenditure by summing all operational and maintenance disbursements.

Total Recurrent Expenditure = ₦12,500,000 + ₦3,800,000 + ₦2,200,000 = ₦18,500,000.

Summing the classified operational costs provides the total recurrent expenditure funded from the Consolidated Revenue Fund.

Key Concept

Recurrent expenditure in public sector accounting covers operational costs, wages, consumables, and routine maintenance necessary for daily public operations, funded primarily through the Consolidated Revenue Fund.

Question 11740Question →

Apex Maritime Enterprises operates three operational units—Freight Forwarding, Warehousing, and Marine Insurance—under a single facility. Match each objective of preparing departmental accounts on the left with its corresponding management action or decision on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Evaluating segment profitability matches ascertaining whether the Warehousing unit generates a net surplus; comparing operational efficiency matches analyzing the ratio of operating expenses to gross profit across divisions; formulating manager reward systems matches distributing performance incentives based on net profit contribution; and determining segment expansion or closure matches discontinuing the non-viable Marine Insurance unit while allocating additional capital to Freight Forwarding.

Departmental accounting serves four primary management functions: it measures segment profitability by isolating net surpluses, enables comparative efficiency analysis through cost ratios, provides an objective basis for manager bonus systems, and provides financial evidence for strategic decisions regarding expanding or discontinuing specific operational units.

Step-by-Step Solution

1

Define the purpose of evaluating segment profitability.

Segment profitability measures whether a specific department yields a net profit or loss by comparing its direct revenue to direct and allocated costs.

Preparing departmental trading and profit & loss accounts enables business owners to calculate the standalone profit contribution of each section.

2

Identify how comparative operational efficiency is assessed.

Management compares financial ratios (such as expense-to-gross profit ratios) across different internal departments.

Side-by-side comparison reveals which departmental managers control costs effectively and maximize resource utilization.

3

Relate departmental accounting to managerial remuneration.

Performance-based bonuses are tied directly to the net profit generated by the specific department managed by that individual.

Isolating departmental results prevents efficient managers from being penalized by the poor performance of other departments.

4

Connect departmental records to capital allocation and closure decisions.

Unprofitable units are flagged for restructuring or closure, while highly profitable units receive additional expansion funds.

Without departmental accounts, profitable units might unknowingly subsidize failing units, masking overall operational inefficiencies.

Key Concept

Objectives and Reasons for Departmental Accounts

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