All practice questions

Question 11761Question →

In public sector accounting, fund accounting is utilized to segregate financial resources into self-balancing sets of accounts to ensure compliance with specific statutory limitations and legislative appropriations.

True

False

Show answer & explanation

Answer: True

Answer

The statement is True. Fund accounting is a core feature of public sector accounting designed to segregate resources into distinct, self-balancing units to ensure compliance with legal restrictions and legislative appropriations.

The statement accurately identifies the role of fund accounting in the public sector. Government accounting uses self-balancing fund accounts to separate revenue streams and ensure expenditure complies strictly with statutory mandates and legislative spending votes.

Step-by-Step Solution

1

Analyze the core purpose of fund accounting in the public sector.

Fund accounting divides government financial operations into separate self-balancing entities based on specific laws, regulations, or restrictions.

Public sector entities receive revenue designated for specific public purposes and must demonstrate adherence to those restrictions.

2

Compare fund accounting objectives with private sector entity concepts.

Unlike private sector accounting which measures total profit across a single business entity, public sector fund accounting monitors stewardship and legal compliance across multiple restricted funds.

Government accounting focuses on accountability, legislative control, and stewardship rather than profit determination.

Key Concept

Fund Accounting in Public Sector

Question 11762Question →

At the end of April 2026, the petty cash book of an enterprise reveals analysis column totals of $\text{₦}12,500$ for postage, $\text{₦}8,400$ for office cleaning, and $\text{₦}5,100$ for motor running expenses. Which of the following accounting procedures correctly completes the double entry posting of these expenses to the ledger?

Debit the individual expense accounts in the nominal ledger with their respective totals and credit the Petty Cash Account with

\text{₦}26,000

.

Credit the individual expense accounts in the nominal ledger with their respective totals and debit the Main Cash Book with

\text{₦}26,000

.

Debit the Petty Cash Account with

\text{₦}26,000

and credit the individual expense accounts in the nominal ledger with their respective totals.

Credit the Main Cash Book with

\text{₦}26,000

and debit the Sales Ledger Control Account with

\text{₦}26,000

.

Show answer & explanation

Answer: Debit the individual expense accounts in the nominal ledger with their respective totals and credit the Petty Cash Account with $\text{₦}26,000$ .

Answer

Debit the individual expense accounts in the nominal ledger with their respective totals (Postage

\text{₦}12,500

, Cleaning

\text{₦}8,400

, Motor Running Expenses

\text{₦}5,100

) and credit the Petty Cash Account with the total disbursements of

\text{₦}26,000

.

The petty cash book serves as a book of original entry. At the end of an accounting period, the totals of the analysis columns represent specific operating expenses. According to double-entry bookkeeping rules, expenses are debited to their respective nominal ledger accounts, and the total credit entry is made to the Petty Cash Account (or reflected via the credit side of the petty cash book).

Step-by-Step Solution

1

Calculate the total petty cash disbursements for the period.

Total disbursements =

\text{₦}12,500 + \text{₦}8,400 + \text{₦}5,100 = \text{₦}26,000

.

Determines the total reduction in petty cash balance.

2

Apply double entry principles for expense recording.

Expenses increase on the debit side of nominal ledger accounts.

The individual analysis column totals represent specific expenses incurred by the business.

3

Post the column totals to their respective ledger accounts.

Debit Postage Account with

\text{₦}12,500

, Cleaning Account with

\text{₦}8,400

, and Motor Running Expenses Account with

\text{₦}5,100

, while crediting Petty Cash Account with

\text{₦}26,000

.

This maintains the double entry system where total debits equal total credits.

Key Concept

Double Entry Posting of Petty Cash Analysis Columns

Question 11763Question →

Ade & Sons Enterprises extracted a trial balance at 31 December 2025 showing a Trade Debtors balance of $\text{₦}520,000$ . At year-end, additional bad debts of $\text{₦}32,000$ were identified to be written off. Furthermore, a customer whose debt of $\text{₦}18,000$ was written off in 2024 paid the full amount during the year; the cash received was correctly entered in the cash book but incorrectly credited directly to the Trade Debtors control account instead of the Bad Debts Recovered account. What is the corrected Trade Debtors balance to be shown in the Statement of Financial Position at 31 December 2025?

\text{₦}506,000

\text{₦}488,000

\text{₦}470,000

\text{₦}538,000

Show answer & explanation

Answer: $\text{₦}506,000$

Answer

The correct Trade Debtors balance to be presented in the Statement of Financial Position is

\text{₦}506,000

.

When a bad debt previously written off is recovered, the double entry is to debit Cash/Bank and credit Bad Debts Recovered Account. Crediting Trade Debtors in error understated the account balance by

\text{₦}18,000

. To rectify this,

\text{₦}18,000

must be debited back to Trade Debtors, raising the balance from

\text{₦}520,000

to

\text{₦}538,000

. Deducting the

\text{₦}32,000

current year bad debt write-off yields a net Trade Debtors balance of

\text{₦}506,000

.

Step-by-Step Solution

1

Identify the trial balance Trade Debtors figure

Unadjusted Trade Debtors =

\text{₦}520,000

.

This is the starting ledger balance extracted before year-end adjustments.

2

Correct the error regarding bad debt recovered

Adjusted Trade Debtors before write-off =

\text{₦}520,000 + \text{₦}18,000 = \text{₦}538,000

.

Crediting

\text{₦}18,000

directly to Trade Debtors was an error because recovery of previously written-off debts must be credited to Bad Debts Recovered Account. Reversing the erroneous credit requires debiting Trade Debtors by

\text{₦}18,000

.

3

Deduct new bad debts written off

Final Net Trade Debtors =

\text{₦}538,000 - \text{₦}32,000 = \text{₦}506,000

.

Bad debts written off in the current year reduce the total recoverable amount from debtors.

Key Concept

Accounting treatment of bad debts written off and bad debts recovered

Question 11764Question →

Complete the statement below regarding accounting software deployment and security features by filling in the blanks.

Fill in the blanks below

Accounting software that is hosted on remote web servers and accessed over the internet is classified as accounting software, whereas the internal security feature that limits user actions based on defined administrative roles is known as .

Show answer & explanation

Answer

The first blank is filled by 'cloud-based' (or 'cloud'), and the second blank is filled by 'access control' (or 'user access control' / 'role-based access control').

Cloud-based software is maintained on remote servers and accessible online, enabling remote real-time bookkeeping. Access control restricts user activities according to designated roles, safeguarding financial integrity.

Step-by-Step Solution

1

Identify the deployment model of accounting software hosted remotely on web servers.

Cloud-based accounting software allows users to access financial records from any location using an internet browser.

Remote hosting and web access define cloud software architecture as opposed to desktop or on-premise installation.

2

Identify the specific internal control feature that restricts transaction entry and viewing rights based on employee roles.

Access control (or user permissions/role-based access control).

Setting user access levels ensures segregation of duties and prevents unauthorized data alteration or unauthorized access to sensitive financial reports.

Key Concept

Types and Features of Accounting Software

Question 11765Question →

Obinna and Nneka are in a partnership sharing profits and losses in the ratio $3:2$ . On 1st July 2025, they agreed to revalue their business assets and liabilities. Land and Buildings (book value $\text{₦}500,000$ ) was revalued at $\text{₦}650,000$ , Plant and Machinery (book value $\text{₦}300,000$ ) was reduced to $\text{₦}240,000$ , a provision for doubtful debts of $5\%$ was created on Debtors of $\text{₦}100,000$ , and an unrecorded accrued expense of $\text{₦}15,000$ was recognized. What is Obinna's share of the revaluation profit in Naira ( $\text{₦}$ )?

Show answer & explanation

Answer: 42000

Answer

Obinna's share of the revaluation profit is ₦42,000.

The total appreciation in asset value gives a revaluation gain of ₦150,000 (Land & Buildings). Total decreases and new liabilities create revaluation losses of ₦80,000 (Plant & Machinery ₦60,000 + Provision for Doubtful Debts ₦5,000 + Accrued Expense ₦15,000). The net revaluation profit is ₦70,000 (₦150,000 - ₦80,000). Allocating this profit according to the existing ratio of 3:2 gives Obinna 3/5 × ₦70,000 = ₦42,000.

Step-by-Step Solution

1

Determine total revaluation gains

Gain on Land and Buildings = ₦150,000

Land and Buildings increased from ₦500,000 to ₦650,000.

2

Determine total revaluation losses

Total revaluation losses = ₦80,000

Sum of asset reduction (₦60,000), new provision for doubtful debts (₦5,000), and accrued expense liability (₦15,000).

3

Calculate net profit on revaluation

Net profit = ₦70,000

Revaluation gains (₦150,000) exceed revaluation losses (₦80,000) by ₦70,000.

4

Apportion net profit to Obinna using his share of the profit ratio

Obinna's share = ₦42,000

Obinna receives 3/5 of the total revaluation profit (3/5 × ₦70,000).

Key Concept

Calculation and Division of Net Profit on Partnership Revaluation

Question 11766Question →

During June 2026, Chidex Enterprises completed the following sales transactions:

• Sold trading goods on credit to K. Bello with a list price of $\text{��}150,000$ , subject to a $10\%$ trade discount.
• Sold old office equipment on credit to T. Audu for $\text{₦}45,000$ .
• Sold trading goods for cash to S. Okafor for $\text{₦}30,000$ .

What is the total amount to be recorded in the Sales Journal for the month?

\text{₦}135,000

\text{₦}150,000

\text{₦}165,000

\text{₦}180,000

Show answer & explanation

Answer: $\text{₦}135,000$

Answer

\text{₦}135,000

The Sales Journal (or Sales Day Book) is used strictly to record credit sales of inventory intended for resale. Trade discounts are deducted before recording. Therefore, only the credit sale to K. Bello (

\text{₦}150,000

less

10\%

trade discount

= \text{₦}135,000

) is entered.

Step-by-Step Solution

1

Calculate the net value of credit sales of inventory after trade discount.

Net credit sales =

\text{₦}150,000 - (0.10 \times \text{₦}150,000) = \text{₦}135,000

.

Trade discount must be deducted before entering transactions into the Sales Journal.

2

Evaluate the eligibility of non-current asset sales for the Sales Journal.

The sale of old office equipment for

\text{₦}45,000

is excluded.

The Sales Journal is exclusively for credit sales of inventory/goods. Credit sales of non-current assets are recorded in the General Journal.

3

Evaluate the eligibility of cash sales for the Sales Journal.

The cash sale of goods for

\text{₦}30,000

is excluded.

Cash sales are entered directly in the Cash Book, not the Sales Journal.

4

Sum up all eligible amounts for the Sales Journal.

Total Sales Journal entry =

\text{₦}135,000

.

Only the net credit sale of inventory is entered into the Sales Journal.

Key Concept

Scope and Entry Rules for the Sales Journal (Sales Day Book)

Question 11767Question →

On 1 January 2023, Calabar Haulage Enterprise purchased a delivery van for $₦6,000,000$ . Depreciation is charged at $20\%$ per annum using the reducing balance method. What is the journal entry required to record the depreciation expense for the year ended 31 December 2024?

Debit Profit and Loss Account

₦960,000

; Credit Provision for Depreciation Account

₦960,000

Debit Profit and Loss Account

₦1,200,000

; Credit Provision for Depreciation Account

₦1,200,000

Debit Provision for Depreciation Account

₦960,000

; Credit Profit and Loss Account

₦960,000

Debit Delivery Van Account

₦960,000

; Credit Profit and Loss Account

₦960,000

Show answer & explanation

Answer: Debit Profit and Loss Account $₦960,000$ ; Credit Provision for Depreciation Account $₦960,000$

Answer

Debit Profit and Loss Account

₦960,000

and Credit Provision for Depreciation Account

₦960,000

The correct answer properly applies the reducing balance depreciation method for the second year. Depreciation for 2023 was

₦1,200,000

, leaving a book value of

₦4,800,000

. For 2024,

20\%

of

₦4,800,000

yields

₦960,000

. To record this expense in the journal, the Profit and Loss Account is debited with

₦960,000

and the Provision for Depreciation Account is credited with

₦960,000

.

Step-by-Step Solution

1

Calculate depreciation for Year 1 (2023)

Depreciation for 2023 =

20\% \times ₦6,000,000 = ₦1,200,000

In the first year of ownership, the reducing balance method applies the depreciation percentage to the initial cost.

2

Calculate the Net Book Value at the beginning of Year 2 (1 January 2024)

Net Book Value =

₦6,000,000 - ₦1,200,000 = ₦4,800,000

Under the reducing balance method, annual depreciation is computed on the net book value (Cost minus Accumulated Depreciation).

3

Calculate depreciation for Year 2 (2024)

Depreciation for 2024 =

20\% \times ₦4,800,000 = ₦960,000

Applying the rate of

20\%

to the updated net book value of

₦4,800,000

gives the expense for 2024.

4

Determine the proper double-entry accounting treatment

Debit Profit and Loss Account

₦960,000

; Credit Provision for Depreciation Account

₦960,000

Depreciation is an expense, so it is debited to the Profit and Loss Account and credited to the Provision for Depreciation Account to accumulate total depreciation.

Key Concept

Accounting Treatment of Depreciation under the Reducing Balance Method

Question 11768Question →

Match each consignment accounting document, commission, or account term on the left with its correct definition or description on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Pro Forma Invoice pairs with the informational document sent by the principal; Account Sales pairs with the statement rendered by the agent; Del Credere Commission pairs with the additional remuneration for assuming bad debt risk; Consignment Outward pairs with the ledger account tracking dispatched goods.

In consignment transactions, ownership stays with the consignor, who sends a Pro Forma Invoice detailing the goods sent. The consignee acts as an agent, providing an Account Sales to report completed transactions, expenses, and commissions. When the consignee guarantees credit sales recovery, they earn a Del Credere Commission. The consignor tracks sent goods using the Consignment Outward account.

Step-by-Step Solution

1

Identify the primary document issued by the principal (consignor) at the time goods are dispatched.

The Pro Forma Invoice serves as an informational advice note detailing the items and estimated price sent to the agent.

Ownership remains with the principal, so a normal sales invoice is not issued.

2

Identify the accounting summary prepared by the agent (consignee) after selling the goods.

The Account Sales summarizes total receipts, allowable expenses, commission, and net remittance due to the principal.

This provides full accountability of the agency sales process.

3

Distinguish special commission types and relevant ledger account names.

Del Credere Commission shifts credit risk to the agent, while Consignment Outward records goods dispatched in the consignor's accounting system.

Del credere protects the principal against default, and Consignment Outward reflects the transfer of inventory for sale.

Key Concept

Nature and Terminology of Consignment Transactions

Question 11769Question →

In the ledger of Folake Enterprises, the Trade Debtors account showed a balance of ₦200,000 at the end of the financial year. An additional bad debt of ₦10,000 is to be written off before creating a provision for doubtful debts at 5% on the remaining debtors. What is the amount of the provision for doubtful debts to be deducted from trade debtors in the Balance Sheet?

₦10,000

₦9,500

₦9,000

₦19,000

Show answer & explanation

Answer: ₦9,500

Answer

₦9,500

To determine the provision for doubtful debts, the additional bad debt of ₦10,000 is first deducted from the gross trade debtors balance of ₦200,000, leaving net debtors of ₦190,000. Applying the 5% provision rate to ₦190,000 yields ₦9,500, which is the required provision figure to be shown as a deduction from trade debtors in the Balance Sheet.

Step-by-Step Solution

1

Calculate net trade debtors after writing off additional bad debts

₦200,000 - ₦10,000 = ₦190,000

Additional bad debts must be written off from gross debtors before computing the provision percentage.

2

Calculate the required provision for doubtful debts

5% of ₦190,000 = ₦9,500

The provision for doubtful debts is calculated as 5% of the remaining (net) trade debtors.

Key Concept

Adjustments for Bad Debts and Provision for Doubtful Debts in Final Accounts

Question 11770Question →

Apex Manufacturing Enterprise provided the following extract from its financial records for the year ended 31 December 2025:

- Opening stock of raw materials: $\text{₦}45,000$
- Purchases of raw materials: $\text{₦}180,000$
- Carriage inwards on raw materials: $\text{₦}15,000$
- Closing stock of raw materials: $\text{₦}35,000$
- Direct factory wages: $\text{₦}120,000$
- Factory power and fuel: $\text{₦}40,000$
- Depreciation of factory equipment: $\text{₦}25,000$
- Work-in-progress (1 January 2025): $\text{₦}18,000$
- Work-in-progress (31 December 2025): $\text{₦}23,000$

What is the total cost of production for the year?

Show answer & explanation

Answer: 385000

Answer

The total cost of production for the year is ₦385,000.

The correct cost of production is computed by combining raw materials consumed (₦205,000), direct wages (₦120,000), and factory overheads (₦65,000) to arrive at manufacturing costs before WIP adjustments (₦390,000), then adding opening work-in-progress (₦18,000) and deducting closing work-in-progress (₦23,000), yielding exactly ₦385,000.

Step-by-Step Solution

1

Determine the cost of raw materials consumed

Raw Materials Consumed = ₦45,000 + ₦180,000 + ₦15,000 - ₦35,000 = ₦205,000

Carriage inwards is added to raw materials purchases while closing stock of raw materials is subtracted from total materials available for use.

2

Calculate the Prime Cost

Prime Cost = Direct Materials Consumed (₦205,000) + Direct Factory Wages (₦120,000) = ₦325,000

Prime Cost consists of all direct manufacturing costs including direct raw materials and direct labor.

3

Determine Total Factory Overheads

Factory Overheads = Factory Power and Fuel (₦40,000) + Depreciation of Factory Equipment (₦25,000) = ₦65,000

Factory overheads encompass all indirect expenses incurred within the factory environment.

4

Adjust Prime Cost and Overheads for Work-in-Progress (WIP) to obtain Cost of Production

Cost of Production = Prime Cost (₦325,000) + Factory Overheads (₦65,000) + Opening WIP (₦18,000) - Closing WIP (₦23,000) = ₦385,000

Opening WIP is added because it represents partially finished goods completed in the current period, while closing WIP is deducted because it remains incomplete at year end.

Key Concept

Preparation of Manufacturing Account and Cost of Production

Question 11771Question →

A sole trader's draft Trading Account reported total Purchases of ₦540,000 and a Gross Profit of ₦210,000 at year-end. However, audit records revealed that the proprietor had taken goods costing ₦35,000 (with a retail selling price of ₦50,000) for personal family use, which had not yet been recorded in the accounting records. What are the corrected figures for total Purchases and Gross Profit after making the necessary adjustment?

Fill in the blanks below

After making the appropriate accounting adjustment at cost price, the revised total Purchases amount is ₦ and the revised Gross Profit is ₦.

Show answer & explanation

Answer

The revised total Purchases amount is ₦505,000 and the revised Gross Profit is ₦245,000.

Goods taken by a sole proprietor for personal use must be recorded at cost price (₦35,000) by debiting the Drawings account and crediting the Purchases account. Crediting Purchases reduces the total Purchases balance from ₦540,000 to ₦505,000. Because Cost of Goods Sold is consequently reduced by ₦35,000, the resulting Gross Profit increases from ₦210,000 to ₦245,000.

Step-by-Step Solution

1

Determine the correct valuation principle for inventory withdrawn by the owner.

The inventory taken for personal use must be valued at its cost price of ₦35,000, ignoring the retail selling price of ₦50,000.

Under the business entity concept and historical cost principle, the owner cannot make a profit from withdrawing goods for personal consumption.

2

Calculate the revised total Purchases figure.

Revised Purchases = ₦540,000 - ₦35,000 = ₦505,000.

Goods withdrawn for personal use are credited to the Purchases account to reduce the cost of goods available for resale.

3

Calculate the impact of the adjustment on Cost of Goods Sold and Gross Profit.

Cost of Goods Sold decreases by ₦35,000, causing Gross Profit to increase to ₦210,000 + ₦35,000 = ₦245,000.

Since Gross Profit = Sales - Cost of Goods Sold, a reduction in Cost of Goods Sold directly increases Gross Profit by the exact same amount.

Key Concept

Accounting adjustment for goods withdrawn by owner for personal use

Question 11772Question →

At 1st January 2025, Obi Stores maintained a Provision for Doubtful Debts balance of $\text{₦}42,000$ . On 31st December 2025, the Total Trade Debtors balance stood at $\text{₦}960,000$ before adjustments. The following financial events occurred at year-end:

(i) A debt of $\text{₦}40,000$ owed by Okon is to be written off as irrecoverable.
(ii) A cash recovery of $\text{₦}18,000$ was received from Musa in respect of a debt previously written off in 2023. The transaction was correctly recorded in the cash book but mistakenly credited to the Bad Debts Written Off account.
(iii) Provision for doubtful debts is to be adjusted to $5\%$ of net trade debtors.

What is the net amount to be charged as an expense to the Profit and Loss Account for the year ended 31st December 2025 in respect of bad debts written off, bad debts recovered, and provision for doubtful debts?

\text{₦}26,000

net debit

\text{₦}28,000

net debit

\text{₦}62,000

net debit

\text{₦}68,000

net debit

Show answer & explanation

Answer: $\text{₦}26,000$ net debit

Answer

\text{₦}26,000

net debit

To determine the net impact on the Profit and Loss account, bad debts written off during the year (

\text{₦}40,000

) increase expenses. The net trade debtors figure becomes

\text{₦}960,000 - \text{₦}40,000 = \text{₦}920,000

. The required provision for doubtful debts is

5\% \times \text{₦}920,000 = \text{₦}46,000

. Since the opening provision was

\text{₦}42,000

, there is an increase in provision of

\text{₦}4,000

, which is debited to P&L. Bad debts recovered of

\text{₦}18,000

represent an income (credit to P&L). Therefore, the overall net charge to P&L is

\text{₦}40,000 + \text{₦}4,000 - \text{₦}18,000 = \text{₦}26,000

net debit.

Step-by-Step Solution

1

Calculate Net Debtors balance after bad debts write-off

Net Debtors =

\text{₦}960,000 - \text{₦}40,000 = \text{₦}920,000

Bad debts written off must be deducted from gross debtors before applying the provision percentage.

2

Determine required new provision for doubtful debts and the adjustment required

New Provision =

5\% \times \text{₦}920,000 = \text{₦}46,000

. Increase in provision =

\text{₦}46,000 - \text{₦}42,000 = \text{₦}4,000

(debit to P&L).

Only the net change (increase) in provision is charged to the Profit and Loss Account.

3

Calculate net Profit and Loss Account impact of all adjustments

Net P&L Charge = Bad Debts Written Off (

\text{₦}40,000

Dr) + Provision Increase (

\text{₦}4,000

Dr) - Bad Debts Recovered (

\text{₦}18,000

Cr) =

\text{₦}26,000

net debit.

Bad debts written off and provision increases represent expenses (debits), while bad debts recovered represent revenue gain/income (credit).

Key Concept

Accounting treatment of combined Bad Debts Written Off, Bad Debts Recovered, and Provision for Doubtful Debts adjustments in final accounts.

Question 11773Question →

The financial records of Vanguard Industrial Enterprises for the year ended 31 December 2025 reveal the following details:

Item	Amount ( $\text{₦}$ )
Cost of raw materials consumed	180,000
Direct wages paid	62,000
Factory royalties	25,000
Factory overhead costs	50,000
Work-in-progress (1 January 2025)	48,000
Work-in-progress (31 December 2025)	53,000

*Note:* Direct wages of $\text{₦}8,000$ were accrued and unpaid at the end of the year.

What is the total cost of production to be transferred to the Trading Account for the year?

Show answer & explanation

Answer: 320000

Answer

The total cost of production transferred to the Trading Account for the year is 320,000.

The cost of production is determined by calculating the total manufacturing cost incurred during the period (Prime Cost of ₦275,000 plus Factory Overheads of ₦50,000 = ₦325,000), adding the opening work-in-progress (₦48,000), and subtracting the closing work-in-progress (₦53,000). Direct wages paid must first be adjusted for accrued wages (₦62,000 + ₦8,000 = ₦70,000). The final cost of production transferred to the Trading Account is ₦320,000.

Step-by-Step Solution

1

Adjust direct wages for accruals at the end of the period

Total Direct Wages = 62000 + 8000 = 70000

Accrued direct expenses must be added to direct wages paid to reflect total direct labor cost incurred during the period.

2

Calculate Prime Cost by summing direct costs

Prime Cost = 180000 + 70000 + 25000 = 275000

Prime Cost consists of raw materials consumed, direct wages, and direct factory expenses.

3

Add factory overheads to Prime Cost to get total manufacturing cost incurred

Total Manufacturing Cost = 275000 + 50000 = 325000

Factory overheads represent indirect costs incurred during production.

4

Apply Work-in-Progress (WIP) adjustments to find Cost of Production

Cost of Production = 325000 + 48000 - 53000 = 320000

Opening WIP is added because it was completed during this financial year, while Closing WIP is deducted because it remains uncompleted at year-end.

Key Concept

Valuation and Adjustment for Work-in-Progress in Manufacturing Accounts

Question 11774Question →

The following balances were extracted from the books of Zenith Manufacturing Works for the financial year ended 31 December 2025:

Item	Amount (₦)
Direct raw materials consumed	500,000
Direct factory wages paid	220,000
Accrued direct factory wages at year-end	30,000
Factory overhead expenses	180,000
Carriage outwards	40,000
Work-in-progress (1 January 2025)	80,000
Work-in-progress (31 December 2025)	30,000

What is the total cost of production to be transferred to the Trading Account for the year?

₦880,000

₦980,000

₦920,000

₦1,020,000

Show answer & explanation

Answer: ₦980,000

Answer

The total cost of production transferred to the Trading Account is ₦980,000.

The cost of production is computed by combining prime cost (direct materials consumed ₦500,000 plus total direct labour of ₦250,000) with factory overheads (₦180,000), giving total manufacturing costs of ₦930,000. Adjusting for work-in-progress by adding opening WIP (₦80,000) and deducting closing WIP (₦30,000) results in ₦980,000.

Step-by-Step Solution

1

Calculate Total Direct Labour Cost

₦220,000 + ₦30,000 = ₦250,000

Accrued direct wages at year-end must be added to direct wages paid to establish the full direct labour expense for the period.

2

Calculate Prime Cost

₦500,000 + ₦250,000 = ₦750,000

Prime Cost is the sum of direct raw materials consumed, direct labour, and direct expenses.

3

Add Factory Overheads

₦750,000 + ₦180,000 = ₦930,000

Factory overheads are indirect production costs added to Prime Cost.

4

Adjust for Opening and Closing Work-in-Progress (WIP)

₦930,000 + ₦80,000 - ₦30,000 = ₦980,000

Opening work-in-progress is added because it represents incomplete work from the previous period completed now, while closing work-in-progress is subtracted as it remains unfinished at year-end.

Key Concept

Calculation of Cost of Production in Manufacturing Accounts

Question 11775Question →

Complete the statement below regarding the presentation of fixed assets in the Balance Sheet of a sole trader.

Fill in the blanks below

In the Balance Sheet, a fixed asset is shown at its net book value, which is calculated by deducting the depreciation from its original cost.

Show answer & explanation

Answer

The net book value of a fixed asset in the Balance Sheet is calculated by deducting accumulated depreciation (or provision for depreciation) from its cost.

In the Balance Sheet, fixed assets are stated at Net Book Value (NBV), which equals historical cost minus accumulated depreciation.

Step-by-Step Solution

1

Recall the accounting relationship for presentation of fixed assets in the Balance Sheet.

Net Book Value = Cost - Accumulated Depreciation.

Fixed assets are carried in the Balance Sheet at historical cost less total cumulative depreciation charged to date.

Key Concept

Presentation of Net Book Value of Fixed Assets in Final Accounts

Estimated Time:45s

Question 11776Question →

The following transaction balances were extracted from the books of Bisi & Sons for the month of July 2026:

- Balance on Purchases Ledger Control Account at 1st July 2026 (Credit): $\text{N}24,500$
- Credit purchases for the month: $\text{N}68,000$
- Cash purchases: $\text{N}12,000$
- Discount received from suppliers: $\text{N}1,800$
- Returns outwards: $\text{N}2,400$
- Set-off against Sales Ledger Control Account: $\text{N}3,500$
- Interest charged by suppliers on overdue accounts: $\text{N}600$
- Balance on Purchases Ledger Control Account at 31st July 2026 (Credit): $\text{N}21,400$

What was the total amount paid to trade creditors during the month of July 2026?

\text{N}64,000

\text{N}62,800

\text{N}67,600

\text{N}76,000

Show answer & explanation

Answer: $\text{N}64,000$

Answer

\text{N}64,000

The correct figure of

\text{N}64,000

is derived by properly constructing the Purchases Ledger Control Account. Credit items comprise the opening balance of

\text{N}24,500

, credit purchases of

\text{N}68,000

, and interest charged of

\text{N}600

, giving a total of

\text{N}93,100

. Subtracting the known debit entries—discount received (

\text{N}1,800

), returns outwards (

\text{N}2,400

), set-off (

\text{N}3,500

), and the closing credit balance (

\text{N}21,400

) totaling

\text{N}29,100

—yields the net cash paid to creditors of

\text{N}64,000

. Cash purchases of

\text{N}12,000

are correctly ignored as they do not impact credit supplier accounts.

Step-by-Step Solution

1

Identify relevant credit side transactions

Opening credit balance (

\text{N}24,500

), credit purchases (

\text{N}68,000

), and interest charged by suppliers (

\text{N}600

). Cash purchases (

\text{N}12,000

) are excluded as they do not affect personal creditor accounts.

Control accounts only summarize transactions involving credit suppliers.

2

Calculate the total of the credit side

\text{Total Credit Side} = \text{N}24,500 + \text{N}68,000 + \text{N}600 = \text{N}93,100

.

These items increase the liability owed to trade creditors.

3

Calculate the known debit items plus closing credit balance

\text{Known Debit Items} = \text{Discount received } (\text{N}1,800) + \text{Returns outwards } (\text{N}2,400) + \text{Set-off } (\text{N}3,500) + \text{Closing credit balance } (\text{N}21,400) = \text{N}29,100

.

These items reduce total indebtedness or represent the remaining balance owed.

4

Deduct total known debit items from the credit side total to find cash paid to creditors

\text{Cash Paid to Creditors} = \text{N}93,100 - \text{N}29,100 = \text{N}64,000

.

The Purchases Ledger Control Account must balance.

Key Concept

Purchases Ledger Control Account - Determining Missing Cash Payments to Suppliers

Question 11777Question →

In integrated accounting software packages, transactions recorded in subsidiary modules such as sales, purchases, and cash management are automatically summarized and transferred to a central system component to update master account balances and generate the trial balance. Which accounting software module serves as this primary central repository?

General Ledger module

Accounts Payable module

Inventory Management module

Payroll Processing module

Show answer & explanation

Answer: General Ledger module

Answer

General Ledger module

The General Ledger module functions as the central hub of computerized accounting systems. It integrates financial data posted from sub-modules like Accounts Receivable, Accounts Payable, and Cash Management to update master account balances and compile trial balances.

Step-by-Step Solution

1

Analyze the core function described in the stem.

The requirement identifies a central module that collects summarized entries from sub-modules (sales, purchases, cash) to update account balances and produce financial reporting statements.

Understanding software architecture requires distinguishing sub-ledger modules from the main financial repository.

2

Match the requirement with the correct software module.

The General Ledger module contains the complete chart of accounts and consolidates all debit and credit entries across the business.

Subsidiary modules feed their journal summaries into the General Ledger module to extract the trial balance.

Key Concept

Core Modules of Accounting Software

Estimated Time:1m 0s

Question 11778Question →

Management accounting reports are strictly governed by statutory financial reporting standards and GAAP to ensure uniformity for internal management decision-making.

True

False

Show answer & explanation

Answer: False

Answer

False. Management accounting reports are tailored for internal decision-making and are not subject to mandatory statutory financial reporting standards or GAAP.

The statement is false because management accounting is designed exclusively for internal management use. It does not require compliance with statutory financial accounting standards or GAAP, giving management the freedom to format reports in whatever manner best aids planning and performance control.

Step-by-Step Solution

1

Identify the target user and objective of management accounting.

Management accounting focuses on internal management needs such as budgeting, cost control, and strategic planning.

Establishing the target audience helps determine whether statutory standardization is required.

2

Compare regulatory constraints across accounting branches.

Financial accounting must strictly comply with statutory accounting standards (GAAP/IFRS) for external reporting, whereas management accounting allows flexible formats based on management needs.

Differentiating regulatory scope reveals that internal reporting does not mandate statutory compliance.

3

Determine the truth value of the stem statement.

The statement claims management accounting is strictly governed by statutory standards, which is incorrect.

Concludes the true/false evaluation.

Key Concept

Regulatory flexibility and internal scope of Management Accounting versus Financial Accounting

Question 11779Question →

A cheque issued by a trading enterprise to a supplier was correctly credited in the Cash Book, but it had not yet been presented to the bank for payment at the reconciliation date. Which of the following best describes this discrepancy item?

Unpresented cheque

Uncredited lodgement

Dishonoured cheque

Standing order

Show answer & explanation

Answer: Unpresented cheque

Answer

Unpresented cheque

When a business issues a cheque to a creditor, it immediately records the outlay on the credit side of its Cash Book. If the payee has not presented the cheque to the bank by the date of reconciliation, the bank statement will not reflect the withdrawal. Such items are classified as unpresented cheques.

Step-by-Step Solution

1

Identify the nature of the transaction

The enterprise issued a cheque, which reduces the Cash Book balance and is entered on its credit side.

Payment entries in the Cash Book are recorded on the credit side upon issuing a cheque.

2

Analyze the bank statement status

The bank has not yet debited the account because the supplier has not presented the cheque for clearance.

The bank remains unaware of the transaction until clearance is initiated by the recipient.

3

Classify the cause of discrepancy

A cheque issued by the business but not yet cleared by the bank is termed an unpresented cheque.

This represents a timing difference between the Cash Book credit entry and the Bank Statement debit entry.

Key Concept

Unpresented cheques as a timing discrepancy between Cash Book and Bank Statement

Question 11780Question →

Kolawole dispatched 100 cartons of footwear to Danladi to be sold on a commission basis. Accompanying the shipment was a document detailing the description, quantity, and estimated selling price of the merchandise to serve as a guide for the consignee. Which document was sent by the consignor along with the goods?

Proforma invoice

Account sales

Sales invoice

Credit note

Show answer & explanation

Answer: Proforma invoice

Answer

Proforma invoice

In consignment accounting, a proforma invoice is prepared by the consignor and forwarded to the consignee along with the goods. It serves as a statement of information detailing the description, weight, quantity, and estimated selling price of the merchandise. Because ownership of the goods remains with the consignor, the proforma invoice does not create a debtor-creditor relationship.

Step-by-Step Solution

1

Identify the nature of the transaction and roles of the parties.

The transaction is a consignment arrangement where Kolawole acts as the principal (consignor) and Danladi acts as the agent (consignee).

Goods sent on consignment remain the legal property of the consignor until sold by the consignee.

2

Determine the appropriate document accompanying goods sent on consignment.

The document containing description, quantity, and estimated selling price used to inform the agent without demanding payment is a proforma invoice.

Since legal title is retained by the consignor, a regular sales invoice cannot be issued.

Key Concept

Proforma Invoice in Consignment Transactions

Answer

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