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Question 11741Question →

An unforeseen emergency requires immediate public expenditure for which no financial provision exists in the current Appropriation Act. Which government fund provides the advance for this expenditure, and by what legal mechanism is the fund replenished?

Contingencies Fund, replenished through a Supplementary Appropriation Act

Consolidated Revenue Fund, replenished through direct deductions from statutory allocations

Capital Development Fund, replenished by transferring unspent recurrent budgetary balances

Special Fund, replenished through short-term emergency borrowing from the central bank

Show answer & explanation

Answer: Contingencies Fund, replenished through a Supplementary Appropriation Act

Answer

The Contingencies Fund provides the advance for urgent, unforeseen expenditures, and it is replenished through a Supplementary Appropriation Act passed by the legislature.

The Contingencies Fund is legally established to meet urgent and unforeseen expenditures for which no provision exists in the main Appropriation Act. When money is disbursed from this fund, the legislature must subsequently pass a Supplementary Appropriation Act to authorize the expenditure and restore the fund balance.

Step-by-Step Solution

Identify the fund designated for emergency unbudgeted expenditure

Under public sector accounting rules and constitutional provisions, the Contingencies Fund is specifically set up to handle urgent, unbudgeted emergencies.

General operational funds like the Consolidated Revenue Fund require prior legislative appropriation, whereas the Contingencies Fund allows temporary emergency advances.

Determine the statutory mechanism for fund replenishment

Monies drawn from the Contingencies Fund must be replaced by introducing and passing a Supplementary Appropriation Bill in the legislature.

This maintains constitutional control over public funds while ensuring the Contingencies Fund balance is restored for future emergencies.

Key Concept

Contingencies Fund authorization and replenishment rules

Question 11742Question →

Folake dispatched a batch of merchandise to Ibrahim to be sold on her behalf. Prior to the sale of the merchandise, an accounting audit was conducted at year-end. Which of the following statements correctly describes the legal relationship between Folake and Ibrahim and the ownership status of the unsold merchandise?

Folake is the principal and retains legal ownership of the merchandise, while Ibrahim acts as an agent holding possession.

Ibrahim becomes the legal owner of the merchandise immediately upon taking physical custody at his premises.

Folake and Ibrahim become equal partners sharing joint ownership of the merchandise.

Ibrahim is a trade debtor who owes Folake the full value of the merchandise upon receipt of the proforma invoice.

Show answer & explanation

Answer: Folake is the principal and retains legal ownership of the merchandise, while Ibrahim acts as an agent holding possession.

Answer

Folake is the principal and retains legal ownership of the merchandise, while Ibrahim acts as an agent holding possession.

In consignment accounting, the transaction is governed by the law of agency. The consignor acts as the principal who retains legal ownership of the goods until they are sold, while the consignee acts as an agent holding custody and carrying out sales under the principal's instructions.

Step-by-Step Solution

Analyze the nature of the transaction

The arrangement represents a consignment transaction where goods are sent to be sold on behalf of the sender.

Consignment involves sending goods to an agent for sale without transferring ownership.

Determine legal title versus physical possession

Folake (consignor/principal) holds legal title, while Ibrahim (consignee/agent) holds physical possession.

Under agency rules, ownership remains with the principal until the agent executes a sale to an external buyer.

Key Concept

Principal-Agent Relationship and Legal Title in Consignment

Question 11743Question →

In a computerized accounting architecture, match each system component on the left with its primary operational role on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

System Software pairs with operating platforms managing hardware resources; Application Software pairs with specialized programs executing accounting tasks; Data Files pair with electronic repositories holding financial records; Procedures pair with documented rules and user instructions.

Each element aligns directly with its fundamental role in computer system architecture: System Software acts as the operating system layer; Application Software performs financial data processing tasks; Data Files store financial records electronically; and Procedures govern operational standards and user access policies.

Step-by-Step Solution

Identify the foundational role of operating system utilities

System Software provides the base environment that manages computer hardware.

Without system software, accounting programs cannot execute on physical hardware.

Distinguish accounting application software from system utilities

Application Software carries out functional accounting tasks such as invoicing and ledger updates.

Accounting packages are tailored application programs built to perform specific financial calculations.

Identify the storage layer of the accounting system

Data Files contain the structured accounting database entries.

Financial accounting inputs must be stored in data files for reporting and auditing.

Classify operational controls and guidelines

Procedures represent the operational directives and authorization guidelines.

Internal control guidelines and operating manuals form the procedure component of a computerized accounting system.

Key Concept

Components of Computerized Accounting Systems

Estimated Time:1m 15s

Question 11744Question →

Harmony Youth Association received $\text{N}70,000$ in cash as subscription fees from its members during the financial year. At the end of the year, subscriptions amounting to $\text{N}8,000$ remained due but unpaid. What is the total subscription income to be credited to the Income and Expenditure Account for the year?

\text{N}62,000

\text{N}70,000

\text{N}78,000

\text{N}8,000

Show answer & explanation

Answer: $\text{N}78,000$

Answer

\text{N}78,000

Under the accrual concept of accounting, subscription income recognized in the Income and Expenditure Account must reflect all revenue belonging to the financial year. This is calculated as subscriptions received in cash (

\text{N}70,000

) plus subscriptions in arrears at the end of the year (

\text{N}8,000

), yielding a total subscription income of

\text{N}78,000

Step-by-Step Solution

Identify the total subscription cash received during the year.

Cash received =

\text{N}70,000

This is the initial cash inflow recognized in the Receipts and Payments Account.

Add the subscriptions due but unpaid (in arrears) at the end of the year.

\text{N}70,000 + \text{N}8,000 = \text{N}78,000

Under the accrual concept, income earned during the period must be recognized regardless of whether cash has been received.

Key Concept

Accounting Treatment of Subscriptions under Accrual Basis

Question 11745Question →

BlueWave Ltd issued $2,500$ , $12\%$ debentures of $\text{₦}200$ each at par on 1st July 2024. Interest is payable semi-annually on 31st December and 30th June. What is the amount of debenture interest payable for the period ending 31st December 2024, in Naira ( $\text{₦}$ )?

Show answer & explanation

Answer: 30000

Answer

The debenture interest payable for the period ending 31st December 2024 is ₦30,000.

The correct answer is obtained by calculating the total nominal value (

2,500 \times \text{₦}200 = \text{₦}500,000

), finding the annual interest (

12\% \times \text{₦}500,000 = \text{₦}60,000

), and then apportioning it for 6 months (July to December), which equals ₦30,000.

Step-by-Step Solution

Determine total nominal value of debentures

₦500,000

Multiply the total number of debentures issued by the nominal value per debenture (

2,500 \times \text{₦}200

Calculate annual debenture interest

₦60,000

Apply the stated annual coupon rate of 12% to the total nominal value of ₦500,000.

Time-apportion interest for the 6-month period

₦30,000

Multiply the annual interest amount by

\frac{6}{12}

to account for the duration from 1st July to 31st December 2024.

Key Concept

Debenture Interest Time Apportionment

Question 11746Question →

Tunde & Sons dispatched 400 crates of beverages to Obinna Enterprises to be sold on a commission basis under a standard consignment arrangement. Before Obinna Enterprises made any sales, the business went into liquidation due to insolvency. In accounting and law, how should the liquidator treat the 400 unsold crates of beverages?

Return the entire stock to Tunde & Sons, because legal ownership remains with the consignor regardless of physical possession.

Include the stock in Obinna Enterprises' pool of assets to settle general creditors, because physical possession transfers liability to the consignee.

Record the stock as a current asset of Obinna Enterprises subject to a court distribution order among all trade creditors.

Distribute the stock equally between the consignor and consignee under joint venture profit-sharing principles.

Show answer & explanation

Answer: Return the entire stock to Tunde & Sons, because legal ownership remains with the consignor regardless of physical possession.

Answer

Return the entire stock to Tunde & Sons, because legal ownership remains with the consignor regardless of physical possession.

In a consignment transaction, the legal relationship established is that of principal (consignor) and agent (consignee). Title and ownership of the goods remain entirely with the consignor until the goods are sold to an external buyer. Consequently, if the consignee becomes insolvent, unsold consignment goods held on the premises are not part of the consignee's assets and must be surrendered back to the consignor.

Step-by-Step Solution

Identify the nature of the transaction

The transaction between Tunde & Sons and Obinna Enterprises is a consignment (principal-agent relationship), not an outright sale.

Goods sent on consignment are held by the consignee merely as an agent (bailee).

Determine ownership and title to goods

Title, ownership, and risk in consigned goods remain strictly with the consignor (Tunde & Sons) until sold to a third party.

Physical possession by the consignee does not pass ownership or title.

Apply insolvency accounting principles

Unsold consignment goods do not belong to the consignee and cannot form part of the consignee's insolvency estate.

The liquidator must return third-party property held on bailment to the rightful owner (consignor).

Key Concept

Principal-Agent Relationship and Ownership Rights in Consignment

Estimated Time:1m 30s

Question 11747Question →

A manufacturing enterprise operates two separate financial evaluation units:

Unit I: Focuses on compiling internal, forward-looking budget forecasts, cost-volume-profit analysis, and tailored performance reports to aid executive directors in operational planning and decision-making.
Unit II: Conducts an independent, objective examination of the enterprise's accounting books and internal control mechanisms to determine whether the financial statements present a true and fair view to shareholders.

Which branches of accounting correspond to Unit I and Unit II, respectively?

Management Accounting and Auditing

Cost Accounting and Financial Accounting

Financial Accounting and Tax Accounting

Management Accounting and Bookkeeping

Show answer & explanation

Answer: Management Accounting and Auditing

Answer

Management Accounting for Unit I and Auditing for Unit II

Unit I produces internal, forward-looking, non-statutory information tailored for executive management decision-making, which defines Management Accounting. Unit II carries out an independent inspection of financial records to express an opinion on whether the statements convey a true and fair view, which defines Auditing.

Step-by-Step Solution

Analyze the primary objective and user target of Unit I

Unit I deals with internal budget forecasts, cost-volume-profit analysis, and decision-oriented reports for internal management.

Management Accounting is the specialized branch dedicated to providing internal management with information for planning, control, and decision-making.

Analyze the primary objective and user target of Unit II

Unit II performs an independent examination of financial records and internal controls to report a true and fair view to external shareholders.

Auditing is the branch specifically tasked with the independent verification and evaluation of financial statements to ensure reliability and statutory compliance.

Pair the identified branches in sequential order

Unit I corresponds to Management Accounting and Unit II corresponds to Auditing.

Matching both units sequentially confirms the combination of Management Accounting and Auditing.

Key Concept

Distinction between Management Accounting and Auditing branches of accounting

Question 11748Question →

Zenith Apex Logistics Plc issued $150,000$ ordinary shares of $\text{₦}2.00$ nominal value each at a premium of $15\%$ . Payments were payable as follows:
- On Application: $\text{₦}0.50$ per share
- On Allotment: $\text{₦}1.00$ per share (including the full premium)
- On First and Final Call: $\text{₦}0.80$ per share

Applications were received for $200,000$ shares. Applications for $20,000$ shares were rejected and money refunded immediately. The surplus application money from the remaining applicants was transferred to offset the amount due on allotment. Calculate the net cash amount (in $\text{₦}$ ) received by the company on allotment.

Show answer & explanation

Answer: 135000

Answer

The net cash amount received by Zenith Apex Logistics Plc on allotment is ₦135,000.

The company offered 150,000 shares. Out of 200,000 applications, 20,000 were rejected (refunded), leaving 180,000 shares for 150,000 issued shares. The excess application money is 30,000 shares × ₦0.50 = ₦15,000. Total allotment due is 150,000 shares × ₦1.00 = ₦150,000. Subtracting the ₦15,000 surplus already received leaves ₦135,000 net cash received on allotment.

Step-by-Step Solution

Determine the number of shares considered for pro-rata allotment after refunds

200,000 applied shares - 20,000 rejected shares = 180,000 shares

Rejected applications are refunded immediately and do not contribute to excess application money.

Calculate the excess application money transferred to the allotment stage

(180,000 shares - 150,000 issued shares) × ₦0.50 = 30,000 × ₦0.50 = ₦15,000

Money received on excess shares during the application stage is retained to reduce the cash required on allotment.

Calculate the total gross amount receivable on allotment

150,000 shares × ₦1.00 = ₦150,000

Allotment money includes the nominal allotment portion plus the full premium per share.

Compute the net cash received on allotment

₦150,000 (total due on allotment) - ₦15,000 (surplus application money) = ₦135,000

Net cash received is the total amount due on allotment less the pre-paid excess application funds applied.

Key Concept

Pro-rata Allotment and Treatment of Excess Application Money

Estimated Time:2m 30s

Question 11749Question →

A trader paid $\text{N}85,000$ for electricity during the financial year ended 31 December 2025. Additional records indicate that electricity worth $\text{N}15,000$ was owing at the end of the year. What amount should be charged to the Profit and Loss Account for electricity for the year?

Show answer & explanation

Answer: 100000

Answer

The amount to be charged to the Profit and Loss Account for electricity is N100,000.

According to the accrual concept of accounting, net income for an accounting period must reflect all expenses incurred during that period regardless of whether payment has been made. The electricity consumed but unpaid at year-end (N15,000) must be added to the cash paid (N85,000), giving a total charge of N100,000 to the Profit and Loss Account.

Step-by-Step Solution

Identify cash paid for the expense during the accounting period

N85,000

This is the amount actually disbursed during the financial year.

Add the accrued expense at the end of the financial year

N85,000 + N15,000 = N100,000

Under the accruals concept, expenses incurred but not yet paid must be added to the cash paid to determine the true expense for the period.

Key Concept

Adjustment for Accrued Expenses

Question 11750Question →

The following operational details were extracted from the accounts of Zaria Leathercrafts Enterprise for the financial year:

Operational Item	Amount (₦)
Opening inventory of raw materials	50,000
Purchases of raw materials	240,000
Carriage inwards on raw materials	18,000
Closing inventory of raw materials	38,000
Direct factory wages	160,000
Royalties paid on production	30,000
Factory supervisor salary	75,000
Depreciation of factory machinery	40,000

What is the prime cost of production for the period?

Show answer & explanation

Answer: 460000

Answer

The prime cost of production for the period is ₦460,000.

Prime Cost is the sum of all direct manufacturing costs. It is calculated by adding the cost of raw materials consumed (₦50,000 + ₦240,000 + ₦18,000 - ₦38,000 = ₦270,000), direct factory wages (₦160,000), and direct expenses such as royalties (₦30,000), giving a total of ₦460,000. Indirect expenses like factory supervisor salary and depreciation of machinery are factory overheads and are excluded.

Step-by-Step Solution

Calculate the cost of raw materials consumed

₦270,000

Raw materials consumed is computed as opening stock of raw materials (₦50,000) plus purchases (₦240,000) plus carriage inwards on raw materials (₦18,000) minus closing stock of raw materials (₦38,000).

Identify direct cost components

Direct wages = ₦160,000; Direct expenses (royalties) = ₦30,000

Direct costs are expenses directly traceable to the physical unit produced. Royalties and direct wages are direct costs, while supervisor salaries and machinery depreciation are indirect factory overheads.

Sum direct materials, direct wages, and direct expenses

₦460,000

Prime Cost = Raw Materials Consumed + Direct Wages + Direct Expenses = ₦270,000 + ₦160,000 + ₦30,000 = ₦460,000.

Key Concept

Prime Cost Calculation in Manufacturing Accounts

Question 11751Question →

A commercial enterprise operates several regional outlets. Each outlet buys inventory autonomously from local suppliers, maintains a complete set of double-entry ledgers, and extracts its own trial balance at the close of the financial period. Which accounting treatment correctly reflects the financial relationship between the head office and these regional outlets?

The head office maintains a reciprocal branch account in its ledger, while each outlet prepares individual financial statements for periodic integration.

The head office records all routine branch transactions centrally in a Branch Stock Account to ascertain individual outlet operating profits.

The regional outlets are treated as internal sales departments, eliminating the necessity to reconcile inter-entity balances at the end of the accounting period.

Capital assets acquired independently by the outlets are debited directly to the head office Purchases Journal as operational cost.

Show answer & explanation

Answer: The head office maintains a reciprocal branch account in its ledger, while each outlet prepares individual financial statements for periodic integration.

Answer

The head office maintains a reciprocal branch account in its ledger, while each outlet prepares individual financial statements for periodic integration.

Because the outlets maintain complete double-entry ledgers, purchase inventory independently, and extract trial balances, they operate as independent branches. Under independent branch accounting, the head office maintains a reciprocal branch account in its books while the branch maintains a reciprocal head office account, allowing separate financial statements to be prepared and later consolidated.

Step-by-Step Solution

Analyze the operational and record-keeping features given in the stem scenario.

The outlets maintain complete double-entry books, possess local purchasing authority, and extract trial balances independently, identifying them as independent branches.

Autonomous bookkeeping and purchasing authority distinguish independent branches from dependent branches.

Determine the appropriate accounting relationship between head office and independent branches.

Independent branches keep self-balancing ledgers featuring a reciprocal Head Office Account, which mirrors the Branch Account kept in the head office books.

Reciprocal accounting entries enable both entities to track inter-branch transactions independently prior to year-end financial statement consolidation.

Key Concept

Independent Branch Accounting and Reciprocal Accounts

Question 11752Question →

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

Click a left item, then click its matching right item

Show answer & explanation

Answer

Nominal Accounts Omission pairs with the major drawback of excluding revenue and expense accounts; Cash Book and Personal Ledgers pairs with the primary feature of maintaining only cash and debtor/creditor records; Trial Balance Extraction Failure pairs with the inability to verify arithmetical accuracy due to non-dual entries; and Statement of Affairs pairs with the substitutive financial statement used to compute capital and profit.

In a single entry system, bookkeepers maintain unsystematic records strictly centered around cash transactions and personal debtor/creditor accounts. Nominal accounts (income and expenses) are omitted, which causes the major limitation of being unable to extract a trial balance to verify arithmetical accuracy. As a result, businesses rely on a Statement of Affairs to compute capital and ascertain net profit based on changes in net assets.

Step-by-Step Solution

Identify the key features of the single entry system.

Single entry focuses predominantly on recording cash flows and personal accounts (debtors and creditors).

Impersonal accounts (real and nominal) are largely ignored.

Identify the primary limitations of single entry bookkeeping.

Omission of nominal accounts prevents checking arithmetical accuracy via a trial balance.

Without complete double entries, debit balances do not equal credit balances in a ledger.

Determine how financial position and profit are ascertained under single entry.

A Statement of Affairs is drawn up to estimate net asset positions and ascertain capital.

Trading and Profit & Loss accounts cannot be prepared directly without complete nominal account records.

Key Concept

Features, Limitations, and Profit Estimation under Single Entry Bookkeeping

Estimated Time:1m 30s

Question 11753Question →

Match each user of accounting information with their primary specific information requirement.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Debenture Holders and Long-term Lenders match with 'Assessment of long-term solvency, interest coverage, and security of capital.' Tax Authorities match with 'Verification of assessable profit to determine corporate tax liability accurately.' Internal Management matches with 'Detailed departmental budgets, cost reports, and variance analyses for operational control.' Trade Creditors and Suppliers match with 'Evaluation of short-term liquidity and promptness of trade debt settlement.'

Each user of accounting statements has a distinct role and decision-making purpose. Long-term lenders examine solvency and interest coverage to assess safety of loan principal. Tax authorities need profit figures to collect corporate income tax. Internal management needs granular operational cost and variance data to control day-to-day business activities. Trade creditors focus on working capital and liquidity to decide on granting credit for purchases.

Step-by-Step Solution

Classify each user group as internal or external stakeholders.

Internal Management is an internal user; Lenders, Tax Authorities, and Trade Creditors are external users.

Internal users require detailed management accounts, whereas external users rely on financial accounting statements.

Analyze the financial focus of each group.

Long-term lenders focus on long-term debt repayment capability, tax authorities focus on tax compliance, management focuses on operational efficiency, and trade suppliers focus on short-term liquidity.

Different user groups have distinct decisions to make based on financial information.

Pair each user group with its corresponding financial information requirement.

All left items correctly linked to their corresponding right items.

Each pair correctly matches user intention with the accounting metrics suited for that specific decision.

Key Concept

Users of Accounting Information and Their Specific Needs

Question 11754Question →

A retail enterprise operates two outlets, Branch X and Branch Y. Branch X receives all inventory directly from head office, remits all revenue daily to the head office central bank account, and relies entirely on head office to maintain its accounting records. Branch Y purchases inventory from external local suppliers on credit, maintains its own complete double-entry ledger system, and extracts an annual trial balance. Which of the following accounting features correctly distinguishes Branch X from Branch Y?

Branch X is a dependent branch whose transactions are recorded in the Head Office ledger, whereas Branch Y is an independent branch that maintains a Head Office Account in its own ledger.

Branch X is an independent branch because its profit is calculated at head office, whereas Branch Y is a dependent branch because it has the authority to make local purchases.

Both branches are classified as independent branches because both interact directly with retail customers and generate operating profits.

Branch X maintains a Head Office Account in its own ledger for invoice price adjustments, whereas Branch Y maintains a Goods Sent to Branch Account in its ledger.

Show answer & explanation

Answer: Branch X is a dependent branch whose transactions are recorded in the Head Office ledger, whereas Branch Y is an independent branch that maintains a Head Office Account in its own ledger.

Answer

Branch X is a dependent branch whose transactions are recorded in the Head Office ledger, whereas Branch Y is an independent branch that maintains a Head Office Account in its own ledger.

Dependent branches (such as Branch X) do not keep a complete set of accounting books; their financial records are maintained at the head office. Conversely, independent branches (such as Branch Y) maintain a complete set of double-entry books, extract their own trial balance, and maintain a Head Office Account in their local ledger to record inter-unit transactions.

Step-by-Step Solution

Analyze the operational and record-keeping features of Branch X.

Branch X relies entirely on head office for stock supply, cash remittance, and ledger accounting, which defines a dependent branch.

Dependent branches do not maintain complete books of account; all primary accounts are maintained by the head office.

Analyze the operational and record-keeping features of Branch Y.

Branch Y has local purchasing power, maintains a full double-entry ledger, and extracts its own trial balance, which defines an independent branch.

Independent branches operate as self-contained accounting units and prepare their own trial balance before final consolidation.

Determine the reciprocal accounting entry relationship.

The head office maintains a Branch Account for Branch X. For Branch Y, the branch maintains a Head Office Account in its own ledger while the head office maintains a Branch Ledger Account.

Reciprocal ledger accounts reflect the inter-company accounting relationship existing between head office and autonomous independent branches.

Key Concept

Distinction Between Dependent and Independent Branches

Question 11755Question →

Match each manufacturing accounting transaction or component adjustment on the left with its correct financial treatment or resulting calculation on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Direct costs adjustments add

₦40,000

to Prime Cost; factory overheads and Work-in-Progress net to adding

₦110,000

to Prime Cost; market value transfer equals

₦600,000

debited to Trading Account; and provision for unrealized profit equals

₦15,000

Each item accurately maps to its double-entry or financial statement presentation rule: direct expenses and direct labor additions increase Prime Cost; factory overheads combined with opening WIP minus closing WIP adjust Prime Cost to arrive at Cost of Production; transfer at market value includes manufacturing profit debited to Trading Account; and unrealized profit on closing inventory is isolated using the margin ratio derived from mark-up.

Step-by-Step Solution

Calculate Prime Cost adjustments

Direct carriage (

₦15,000

) and accrued direct labor (

₦25,000

) are direct expenses and direct wages respectively. Adding them gives

₦40,000

added to Prime Cost components.

Direct costs form part of Prime Cost before adding overheads.

Calculate net overhead and Work-in-Progress adjustment to Prime Cost

\text{Factory Overheads} + \text{Opening WIP} - \text{Closing WIP} = ₦120,000 + ₦35,000 - ₦45,000 = ₦110,000

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

Determine market value transfer of completed goods

\text{Market Value} = ₦500,000 + (0.20 \times ₦500,000) = ₦600,000

Finished goods transferred at market value are debited to the Trading Account at Cost of Production plus Manufacturing Profit.

Calculate provision for unrealized profit on closing inventory

\text{Margin} = \frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = 20\%

\text{Unrealized profit} = 20\% \times ₦75,000 = ₦15,000

Closing inventory at market value must be reduced by the profit element to state it at actual production cost on the Balance Sheet.

Key Concept

Preparation of Manufacturing Account and Cost of Production

Question 11756Question →

At 1 January 2025, Progressive Scholars Club held the following financial positions:

Item	Amount (₦)
Clubhouse building	500,000
Equipment	120,000
Cash at bank	45,000
Subscriptions received in advance	15,000
Accrued electricity bill	10,000

What is the value of the club's accumulated fund at 1 January 2025 in Naira?

Show answer & explanation

Answer: 640000

Answer

The accumulated fund of Progressive Scholars Club at 1 January 2025 is ₦640,000.

The accumulated fund of a non-profit organization equals Total Assets minus Total Liabilities at a given date. Adding the clubhouse building (₦500,000), equipment (₦120,000), and cash at bank (₦45,000) gives total assets of ₦665,000. Adding subscriptions received in advance (₦15,000) and accrued electricity (₦10,000) gives total liabilities of ₦25,000. Subtracting total liabilities from total assets gives ₦665,000 - ₦25,000 = ₦640,000.

Step-by-Step Solution

Identify and calculate total assets

Total Assets = ₦500,000 + ₦120,000 + ₦45,000 = ₦665,000

Clubhouse building, equipment, and cash at bank are all economic resources owned by the club.

Identify and calculate total liabilities

Total Liabilities = ₦15,000 + ₦10,000 = ₦25,000

Subscriptions received in advance (unearned income) and accrued electricity bills (amounts owed) are obligations of the club.

Subtract total liabilities from total assets to determine the accumulated fund

Accumulated Fund = ₦665,000 - ₦25,000 = ₦640,000

The accumulated fund represents the net surplus of assets over liabilities for a non-profit organization.

Key Concept

Calculation of Accumulated Fund

Question 11757Question →

Chief Okafor operates a trading business and maintains records only for cash transactions and personal accounts of debtors and creditors, omitting entries for operating expenses and fixed assets in his ledger. Which of the following is a major limitation resulting directly from this incomplete bookkeeping practice?

An extraction of a trial balance to verify the arithmetical accuracy of the ledger is impossible.

The business automatically loses its separate entity status, rendering the owner unable to keep personal money separate from business cash.

The business is legally prohibited from engaging in credit sales or credit purchases with external trade parties.

The net profit can only be computed by subtracting owner drawings directly from opening capital.

Show answer & explanation

Answer: An extraction of a trial balance to verify the arithmetical accuracy of the ledger is impossible.

Answer

An extraction of a trial balance to verify the arithmetical accuracy of the ledger is impossible.

Under a single entry bookkeeping system, double entry rules are not strictly followed. Because nominal accounts (revenues and expenses) and real accounts are omitted, ledger accounts do not contain matching debit and credit entries. Consequently, a trial balance cannot be extracted to test the arithmetical accuracy of the books.

Step-by-Step Solution

Identify the structural features of the single entry system in the scenario

The business maintains only cash records and personal accounts, omitting nominal accounts (expenses and revenues) and real accounts.

Single entry bookkeeping does not record the dual aspect (debit and credit) for every transaction.

Evaluate the impact of missing dual entries on trial balance extraction

Without dual recording for nominal and real accounts, there is no equality between total debits and total credits.

A trial balance can only be extracted when every transaction has equal debit and credit entries.

Key Concept

Limitations of Single Entry System - Trial Balance Infeasibility

Estimated Time:1m 0s

Question 11758Question →

The following financial records were extracted from the books of Evergreen Cultural Society at the beginning of the financial year on 1st January 2025:

- Library Equipment: $\text{N}450,000$
- Furniture: $\text{N}200,000$
- Cash at Bank: $\text{N}80,000$
- Subscriptions Received in Advance: $\text{N}30,000$
- Accrued Rent: $\text{N}15,000$

What is the Accumulated Fund of the society as of 1st January 2025?

₦685,000

₦730,000

₦745,000

₦775,000

Show answer & explanation

Answer: ₦685,000

Answer

The Accumulated Fund of the society as of 1st January 2025 is ₦685,000.

The correct answer is derived by subtracting the total liabilities (Subscriptions Received in Advance of ₦30,000 + Accrued Rent of ₦15,000 = ₦45,000) from total assets (Library Equipment of ₦450,000 + Furniture of ₦200,000 + Cash at Bank of ₦80,000 = ₦730,000), giving ₦685,000.

Step-by-Step Solution

Calculate Total Assets

Total Assets = Library Equipment + Furniture + Cash at Bank =

\text{N}450,000 + \text{N}200,000 + \text{N}80,000 = \text{N}730,000

Accumulated fund relies on establishing total asset value.

Calculate Total Liabilities

Total Liabilities = Subscriptions Received in Advance + Accrued Rent =

\text{N}30,000 + \text{N}15,000 = \text{N}45,000

Subscriptions received in advance and accrued expenses represent obligations of the non-profit entity.

Compute Accumulated Fund

Accumulated Fund = Total Assets - Total Liabilities =

\text{N}730,000 - \text{N}45,000 = \text{N}685,000

Accumulated fund represents the net equity of a non-profit organization.

Key Concept

Calculation of Accumulated Fund for Non-Profit Organizations

Estimated Time:1m 0s

Question 11759Question →

A trader received $₦120,000$ cash as rent from subletting part of his warehouse during the financial year ended 31 December 2025. On 1 January 2025, rent received in advance was $₦15,000$ . At 31 December 2025, rent accrued was $₦18,000$ while rent received in advance was $₦10,000$ . What is the amount of rent income to be credited to the Profit and Loss Account for the year?

₦143,000

₦128,000

₦107,000

��97,000

Show answer & explanation

Answer: $₦143,000$

Answer

₦143,000

is credited to the Profit and Loss Account.

Under the accruals concept, income credited to the Profit and Loss Account must reflect income earned during the accounting period, regardless of when cash is received. Opening rent received in advance (

₦15,000

) relates to the current year and is added. Closing accrued rent (

₦18,000

) was earned in the current year and is added. Closing rent received in advance (

₦10,000

) belongs to the next period and is deducted. Therefore,

₦120,000 + ₦15,000 + ₦18,000 - ₦10,000 = ₦143,000

Step-by-Step Solution

Identify the base cash received during the financial year.

Cash received =

₦120,000

This is the total cash collected for rent during the accounting period.

Add income earned in the current period (opening prepaid income and closing accrued income).

Add opening prepaid income (

₦15,000

) + closing accrued income (

₦18,000

) = +

₦33,000

Rent received in advance at the start of the year was earned this year, and rent accrued at year-end was earned this year but not yet received.

Deduct income received in advance at year-end.

Deduct closing prepaid income = -

₦10,000

Rent received in advance at year-end belongs to the subsequent financial year and must be excluded under the accruals concept.

Compute total Rent Income for the Profit and Loss Account.

₦120,000 + ₦15,000 + ₦18,000 - ₦10,000 = ₦143,000

This represents the exact total income earned for the financial year.

Key Concept

Accrued and Prepaid Income Adjustment

Estimated Time:1m 30s

Question 11760Question →

On 14 April 2026, Chidi transferred ₦50,000 from the business cash till into the business bank account. Which of the following describes the correct double entry recording in Chidi's two-column cash book?

Debit the bank column and credit the cash column

Credit the bank column and debit the cash column

Debit the bank column and credit the capital account in the ledger

Debit the discount allowed column and credit the bank column

Show answer & explanation

Answer: Debit the bank column and credit the cash column

Answer

Debit the bank column and credit the cash column.

Transferring cash from the cash till into the bank account increases the bank asset and decreases the physical cash asset. In a two-column cash book, this is recorded by debiting the bank column (receipt into bank) and crediting the cash column (payment out of cash) as a contra entry.

Step-by-Step Solution

Identify the nature of the transaction

The transaction involves moving money internally from cash to bank.

Both cash and bank accounts are contained within the two-column cash book.

Apply double entry principles for asset accounts

The Bank account gains money (debit asset increases), and the Cash account loses money (credit asset decreases).

An increase in an asset is debited, while a decrease in an asset is credited.

Record the entry in the two-column cash book

Record ₦50,000 in the debit Bank column and ₦50,000 in the credit Cash column marked with a folio reference 'C' (Contra).

A transaction involving both cash and bank columns of the same cash book is a contra entry requiring no further posting to individual ledger accounts.

Key Concept

Contra Entry in a Two-Column Cash Book

Estimated Time:1m 0s

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