All practice questions

Question 11801Question →

In an Electronic Data Interchange (EDI) workflow, a Functional Acknowledgment sent by a receiving trade partner's system confirms that the transmitted transaction has been validated and posted to the general ledger.

True

False

Show answer & explanation

Answer: False

Answer

False

A Functional Acknowledgment in Electronic Data Interchange confirms only technical transmission success and syntax compliance. Accounting validation and ledger posting require further processing within the enterprise resource planning (ERP) or accounting software.

Step-by-Step Solution

1

Examine the role of a Functional Acknowledgment in EDI operations.

Determine that a Functional Acknowledgment (such as an EDI 997 message) functions as an automated electronic receipt verifying receipt and envelope/syntax integrity.

EDI communication protocol separates document transmission confirmation from application accounting logic.

2

Analyze accounting transaction processing requirements in computerized systems.

Recognize that general ledger posting occurs only after internal application checks, such as purchase-order matching and authorization approval.

A technical message acknowledgment is generated prior to business application processing and account reconciliation.

Key Concept

Distinction between EDI transmission acknowledgment and accounting application posting controls

Question 11802Question →

Because Electronic Data Interchange (EDI) automatically transmits structured transaction data directly between a buyer's and supplier's computerized accounting systems, it eliminates the necessity of conducting a three-way matching reconciliation (comparing purchase orders, goods received notes, and electronic invoices) prior to recording accounts payable liabilities.

True

False

Show answer & explanation

Answer: False

Answer

The statement is False. Electronic Data Interchange (EDI) automates document transmission and data entry, but internal controls such as three-way matching remain vital and are performed electronically by accounting software before recognizing accounts payable.

The statement is false because Electronic Data Interchange (EDI) streamlines the transmission of business documents between trading partners, but internal accounting controls—such as reconciling the invoice against the purchase order and receiving report—must still be performed electronically by the system before updating accounts payable ledgers.

Step-by-Step Solution

1

Identify the primary function of Electronic Data Interchange (EDI) in computerized accounting.

EDI enables computer-to-computer exchange of standardized business documents (e.g., invoices, purchase orders) without human re-keying.

Understanding EDI's role clarifies that it improves speed and data accuracy during document exchange.

2

Examine the purpose of three-way matching in transaction processing.

Three-way matching validates that billed quantities and prices on the vendor invoice correspond with the authorized purchase order and actual goods received note.

This internal control prevents overpayment, fraud, and erroneous liability recognition.

3

Assess the impact of EDI on accounting internal controls.

While EDI automates document delivery, the system must still run automated verification rules (electronic three-way matching) to validate data before posting entries.

Automating document flow changes how controls are executed (from manual to automated), but does not eliminate the need for transaction validation.

Key Concept

Internal controls and automated verification in Electronic Data Interchange (EDI)

Question 11803Question →

Match each cause of discrepancy between the Cash Book and Bank Statement on the left with its corresponding effect on the unadjusted Cash Book balance relative to the Bank Statement balance on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Unpresented cheques result in a lower Cash Book balance than Bank Statement balance; Uncredited lodgements result in a higher Cash Book balance than Bank Statement balance; Direct debits result in a higher Cash Book balance than Bank Statement balance until recorded; Credit transfers result in a lower Cash Book balance than Bank Statement balance until recorded.

Unpresented cheques lower the Cash Book balance relative to the Bank Statement because the firm has already recorded the payout. Uncredited lodgements raise the Cash Book balance relative to the Bank Statement because the firm has recorded the deposit before bank clearance. Direct debits reduce the Bank Statement balance first, leaving the unadjusted Cash Book balance higher. Credit transfers increase the Bank Statement balance first, leaving the unadjusted Cash Book balance lower.

Step-by-Step Solution

1

Determine which record (Cash Book or Bank Statement) reflects the transaction first for each item.

Unpresented cheques and uncredited lodgements are recorded first in the Cash Book. Direct debits and credit transfers are recorded first on the Bank Statement.

Identifying where the initial entry occurred determines which balance has been updated prior to reconciliation.

2

Evaluate the directional effect of the transaction on the balance of the initial record.

Cheque issuance reduces Cash Book balance. Deposit lodgement increases Cash Book balance. Direct debit reduces Bank Statement balance. Credit transfer increases Bank Statement balance.

Analyzing increase vs decrease reveals the relative position of the unadjusted Cash Book balance compared to the Bank Statement balance.

Key Concept

Impact of Timing Differences on Unadjusted Cash Book and Bank Statement Balances

Question 11804Question →

Consider four individuals working in various sectors of the economy:

I. A private household cook preparing meals for a specific family.
II. A customs official clearance agent verifying export documentation at a seaport.
III. A granite quarry operator extracting raw stone blocks from a hillside.
IV. A commercial truck driver transporting processed cocoa beans to a sea terminal.

Which of the described individuals is classified under direct service occupations?

The private household cook preparing meals for a specific family

The customs official clearance agent verifying export documentation at a seaport

The granite quarry operator extracting raw stone blocks from a hillside

The commercial truck driver transporting processed cocoa beans to a sea terminal

Show answer & explanation

Answer: The private household cook preparing meals for a specific family

Answer

The private household cook preparing meals for a specific family is engaged in a direct service occupation.

The private household cook preparing meals for a specific family is directly employed by and serving an individual consumer. Because the service is personal, non-industrial, and does not involve market trade or distribution of goods, it is classified strictly as a direct service occupation.

Step-by-Step Solution

1

Analyze the broad classifications of occupation

Occupations are categorized into Industrial (Primary, Secondary/Manufacturing/Constructive), Commercial (Trade and Auxiliaries to Trade), and Services (Direct/Personal Services vs Indirect/Public Services).

Establishing clear structural boundaries prevents misclassifying commercial aids as personal services.

2

Evaluate the nature of direct services

Direct services involve non-commercial, personal services rendered directly to individuals or households for immediate personal satisfaction, paid directly by the beneficiary (e.g., domestic cooks, personal tutors, private stewards).

Direct services do not involve buying, selling, or distributing commercial commodities.

3

Classify each worker presented in the scenario

Worker I is a direct service provider; Worker II is involved in commercial services (aids to trade); Worker III is in primary/extractive industry; Worker IV is in transportation (aids to trade).

Only Worker I provides personal services directly to a consumer outside the commercial trade framework.

Key Concept

Classification of Occupations: Direct Personal Services versus Commercial Occupations

Estimated Time:1m 30s

Question 11805Question →

The following figures were extracted from the accounting records of Danjuma Manufacturing Company for the year ended 31 December 2025:

Item	Amount ( $\text{₦}$ )
Cost of raw materials consumed	140,000
Direct wages	60,000
Direct expenses	10,000
Factory overheads	45,000
Work-in-progress at 1 January 2025	25,000
Work-in-progress at 31 December 2025	18,000

What is the total cost of production for the year?

\text{₦}248,000

\text{₦}255,000

\text{₦}262,000

\text{₦}298,000

Show answer & explanation

Answer: $\text{₦}262,000$

Answer

The total cost of production for the year is

\text{₦}262,000

.

The correct answer is

\text{₦}262,000

. Prime cost (

\text{₦}140,000 + \text{₦}60,000 + \text{₦}10,000 = \text{₦}210,000

) plus factory overheads (

\text{₦}45,000

) equals

\text{₦}255,000

. Adding opening work-in-progress (

\text{₦}25,000

) and deducting closing work-in-progress (

\text{₦}18,000

) yields

\text{₦}262,000

.

Step-by-Step Solution

1

Calculate Prime Cost

\text{Prime Cost} = \text{Raw Materials Consumed} + \text{Direct Wages} + \text{Direct Expenses} = \text{₦}140,000 + \text{₦}60,000 + \text{₦}10,000 = \text{₦}210,000

.

Prime cost consists of all direct costs incurred in manufacturing.

2

Calculate Total Factory Cost before WIP adjustment

\text{Total Factory Cost} = \text{Prime Cost} + \text{Factory Overheads} = \text{₦}210,000 + \text{₦}45,000 = \text{₦}255,000

.

Factory overheads represent indirect manufacturing expenses.

3

Adjust for Opening and Closing Work-in-Progress

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP} = \text{₦}255,000 + \text{₦}25,000 - \text{₦}18,000 = \text{₦}262,000

.

Opening WIP represents unfinished goods brought forward to be completed this period, while closing WIP represents goods unfinished at year-end that must be deducted.

Key Concept

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

Question 11806Question →

Danube Maritime Plc issued $50,000$ ordinary shares of $\text{₦}2.00$ nominal value each at an issue price of $\text{₦}2.50$ per share. All shares were fully subscribed and the money was received in full. What is the correct accounting treatment for the total excess proceeds of $\text{₦}25,000$ received above the nominal value?

Credit the Share Premium Account and present it under Reserves in the Statement of Financial Position.

Credit the Profit and Loss Account as revenue profit available for dividend distribution.

Credit the Ordinary Share Capital Account to increase the total nominal share capital balance.

Debit the Bank Account and treat the amount as an administrative expense in the Income Statement.

Show answer & explanation

Answer: Credit the Share Premium Account and present it under Reserves in the Statement of Financial Position.

Answer

The total excess proceeds of ₦25,000 must be credited to the Share Premium Account and presented under Reserves in Equity within the Statement of Financial Position.

When shares are issued at a price above nominal value, the excess amount is a capital gain (receipt) known as Share Premium. This amount must be credited to the Share Premium Account and classified under Capital Reserves / Equity in the Statement of Financial Position.

Step-by-Step Solution

1

Calculate the share premium per share and total share premium

Premium per share = ₦2.50 - ₦2.00 = ₦0.50 per share. Total share premium = 50,000 × ₦0.50 = ₦25,000.

Determines the portion of proceeds that exceeds nominal value.

2

Determine double entry for the share issue

Debit Bank ₦125,000; Credit Ordinary Share Capital ₦100,000; Credit Share Premium ₦25,000.

Nominal value goes to share capital, while the excess goes to the capital reserve account.

3

Identify financial statement presentation

Share Premium is shown under Reserves (Capital Reserves / Equity section) in the Statement of Financial Position.

It is a non-distributable capital reserve under company law.

Key Concept

Accounting for Share Premium

Question 11807Question →

A business entity received an electricity bill of $\text{₦}45,000$ in December 2025 for power consumed during that month. The accountant omitted this expense from the financial statements for the year ended 31st December 2025 because the bill was paid in February 2026. Which accounting concept or convention has been violated by the accountant?

Accrual concept

Business entity concept

Going concern concept

Historical cost concept

Show answer & explanation

Answer: Accrual concept

Answer

Accrual concept

The accrual concept requires expenses incurred during an accounting period to be matched against revenues of that same period, irrespective of when cash payment is made. Omitting an unpaid utility bill incurred before year-end directly breaches this concept.

Step-by-Step Solution

1

Identify the nature of the transaction and the timing of resource consumption versus cash payment

The electricity service was consumed during December 2025, but the cash settlement took place in February 2026.

Determining when the economic activity occurred is essential for identifying the correct reporting period.

2

Apply the relevant accounting principle governing income and expense recognition timing

Under the accrual concept, expenses must be recognized in the financial statements of the period in which they are incurred.

Failing to record incurred liabilities and expenses until cash is disbursed violates accrual accounting rules.

Key Concept

Accrual / Matching Concept

Question 11808Question →

Match each accounting characteristic on the left with its corresponding branch operational practice on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Local double-entry ledger maintenance and trial balance extraction are practices of an Independent Branch. Centralized record-keeping by Head Office and mandatory daily remittance of takings are characteristics of a Dependent Branch.

Independent branches maintain complete local double-entry accounting systems and extract their own trial balance at the end of the accounting period. In contrast, dependent branches are subject to centralized control, where the head office maintains all financial records and requires daily cash takings to be remitted directly.

Step-by-Step Solution

1

Analyze the accounting autonomy of each item on the left.

Local ledger maintenance and trial balance preparation indicate full accounting independence.

Independent branches operate with full book-keeping responsibilities.

2

Analyze the head office control aspects of the remaining items.

Centralized record-keeping and compulsory daily cash remittances indicate dependent branch operations.

Dependent branches rely on head office administration and lack accounting autonomy.

Key Concept

Distinction between dependent and independent branches in branch accounting.

Question 11809Question →

During a fiscal year, a Ministry of Environment generated revenue from timber exploitation permits, fines levied on illegal logging operators, and registration fees from environmental contractors. How are these collected receipts classified in government accounting?

Recurrent non-tax revenue

Recurrent tax revenue

Capital receipts

Contingency Fund allocations

Show answer & explanation

Answer: Recurrent non-tax revenue

Answer

Recurrent non-tax revenue

In public sector accounting, revenue generated from administrative fees, licenses, user charges, court fines, and penalties is classified as recurrent non-tax revenue. These represent routine receipts arising from the regulatory and service functions of government ministries and agencies.

Step-by-Step Solution

1

Analyze the nature of the receipts collected by the ministry

The receipts consist of contractor registration fees, exploitation permits, and regulatory fines.

Identifying whether inflows stem from taxation, administrative operations, or asset transactions determines their classification.

2

Distinguish between tax revenue, non-tax revenue, and capital receipts

Taxes are compulsory levies on income, property, or goods. Non-tax revenues comprise fees, licenses, fines, and user charges from government services. Capital receipts arise from borrowings, grants, or sale of government assets.

Regulatory charges and statutory penalties fall directly under administrative recurrent non-tax revenue.

3

Formulate final classification

The collected inflows are correctly categorized as recurrent non-tax revenue.

They are ongoing, operational receipts derived from non-tax sources.

Key Concept

Classification of Government Recurrent Revenue Streams

Estimated Time:1m 0s

Question 11810Question →

A commercial bank is evaluating an application from a retail company for a short-term overdraft facility. Which of the following financial information sources is of PRIMARY importance to the bank when making this lending decision?

The cash flow statement and liquidity ratios demonstrating immediate debt repayment ability.

Detailed departmental budget reports showing internal management cost allocation plans.

Tax assessment schedules submitted to the government revenue authority.

The business owner's personal bank accounts and private asset records.

Show answer & explanation

Answer: The cash flow statement and liquidity ratios demonstrating immediate debt repayment ability.

Answer

The cash flow statement and liquidity ratios demonstrating immediate debt repayment ability.

Commercial banks and trade creditors are external users whose primary concern is solvency and liquidity. The cash flow statement and liquidity ratios provide empirical evidence of a firm's short-term financial strength and liquidity, allowing lenders to judge whether the business can pay back an overdraft facility on time.

Step-by-Step Solution

1

Identify the accounting information user group in the scenario.

The user is a commercial bank acting as a short-term creditor/lender.

Different user groups (investors, creditors, tax authorities, management) have distinct accounting information needs based on their relationship with the firm.

2

Analyze the specific financial need of a short-term lender.

Short-term creditors focus on liquidity, cash flow generation, and working capital sufficiency to guarantee prompt loan repayment.

Lenders need assurance that the business possesses enough liquid assets to service the overdraft facility on short notice.

3

Select the financial reporting source that directly fulfills this need.

The statement of cash flows and liquidity ratios provide direct evidence of debt repayment capacity.

Unlike internal budgets or tax returns, cash flow statements explicitly measure liquidity and cash movements.

Key Concept

Users of Accounting Information and Their Needs - Creditors and Lenders

Question 11811Question →

Match each electronic business concept used in accounting on the left with its correct functional description on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Electronic Data Interchange (EDI) matches with direct computer-to-computer document exchange; Electronic Funds Transfer (EFT) matches with paperless bank account money transfer; Business-to-Business (B2B) E-commerce matches with commercial transactions between business entities; Payment Gateway matches with authorizing and processing online card payments.

Each e-business term correctly aligns with its primary accounting and operational function: EDI handles structured document exchange, EFT processes direct bank money transfers, B2B represents commercial trading between enterprises, and Payment Gateway manages online payment authorizations.

Step-by-Step Solution

1

Identify Electronic Data Interchange (EDI)

EDI transfers structured electronic accounting and procurement documents directly between software systems.

EDI replaces manual paper documents with automated, standardized electronic formats between trading partners.

2

Identify Electronic Funds Transfer (EFT)

EFT transfers funds electronically between financial accounts.

EFT bypasses physical cheque processing by settling monetary obligations through interbank electronic networks.

3

Identify Business-to-Business (B2B) E-commerce

B2B represents digital commercial trading between business organizations.

B2B focuses on commercial interactions between firms rather than consumer retail sales.

4

Identify Payment Gateway

A Payment Gateway validates and processes online customer card payment details securely.

It acts as the digital infrastructure verifying transactions between merchant accounts and payment processors.

Key Concept

Electronic Business and Data Interchange in Accounting

Question 11812Question →

At the end of May 2026, a firm's petty cash book showed total disbursements of $\text{₦}18,400$ , comprising $\text{₦}6,200$ for stationery, $\text{₦}7,500$ for office cleaning, and $\text{₦}4,700$ for travelling expenses. What is the correct double entry required to record these expenditures in the general ledger?

Debit Stationery Account with

\text{₦}6,200

, Cleaning Account with

\text{₦}7,500

, and Travelling Expenses Account with

\text{₦}4,700

, and Credit Petty Cash Account with

\text{₦}18,400

Debit Petty Cash Account with

\text{₦}18,400

and Credit Main Cash Book with

\text{₦}18,400

Credit Stationery Account with

\text{₦}6,200

, Cleaning Account with

\text{₦}7,500

, and Travelling Expenses Account with

\text{₦}4,700

, and Debit Petty Cash Account with

\text{₦}18,400

Debit Stationery Account with

\text{₦}6,200

, Cleaning Account with

\text{₦}7,500

, and Travelling Expenses Account with

\text{₦}4,700

, and Credit Main Cash Book with

\text{₦}18,400

Show answer & explanation

Answer: Debit Stationery Account with $\text{₦}6,200$ , Cleaning Account with $\text{₦}7,500$ , and Travelling Expenses Account with $\text{₦}4,700$ , and Credit Petty Cash Account with $\text{₦}18,400$

Answer

Debit Stationery Account with

\text{₦}6,200

, Cleaning Account with

\text{₦}7,500

, and Travelling Expenses Account with

\text{₦}4,700

, and Credit Petty Cash Account with

\text{₦}18,400

.

Under the double entry system, the analysis columns of a Petty Cash Book serve as a book of prime entry. At the end of an accounting period, the total of each analysis column is debited to its corresponding expense account in the general ledger, while the grand total of all disbursements is credited to the Petty Cash Account to reflect the reduction in petty cash.

Step-by-Step Solution

1

Identify the purpose of posting petty cash analysis totals.

Analysis column totals represent the total expenses incurred during the period under each cost category.

To complete the double entry in the general ledger for transactions initially recorded in the petty cash book.

2

Apply the double entry rule to expense accounts.

Debit Stationery Account

\text{₦}6,200

, Cleaning Account

\text{₦}7,500

, and Travelling Expenses Account

\text{₦}4,700

.

Expenses are increased by debiting their respective ledger accounts.

3

Apply the double entry rule to the Petty Cash Account.

Credit Petty Cash Account with total disbursements of

\text{₦}18,400

.

The petty cash asset is reduced by total disbursements made during the period.

Key Concept

Ledger posting of Petty Cash Book column totals

Question 11813Question →

Folake Enterprises operates an informal accounting system. For the financial year ended 31 December 2025, the following summary of cash and bank operations was extracted from business records:

Item / Description	Amount ( $\text{N}$ )
Opening cash balance in till (1 Jan 2025)	15,000
Opening bank balance (1 Jan 2025)	45,000
Cash sales banked directly (without entering till)	380,000
Receipts from trade debtors paid directly to bank	240,000
Cash transferred from till into bank account	120,000
Cheque payments to trade creditors	210,000
Cheque payments for office rent	36,000
Cash paid from till for general operating expenses	28,000
Cash drawn from till by proprietor for personal use	42,000
Closing cash balance in till (31 Dec 2025)	18,000

What was the total cash sales figure for the year ended 31 December 2025?

\text{N}573,000

\text{N}193,000

\text{N}603,000

\text{N}453,000

Show answer & explanation

Answer: $\text{N}573,000$

Answer

The total cash sales for the year ended 31 December 2025 was

\text{N}573,000

.

To compute total cash sales, first construct the Cash Till Account. Total credit items (cash banked

\text{N}120,000

+ expenses

\text{N}28,000

+ drawings

\text{N}42,000

+ closing balance

\text{N}18,000

) equal

\text{N}208,000

. Subtracting the opening cash balance of

\text{N}15,000

gives cash sales collected in the till of

\text{N}193,000

. Adding the direct banked cash sales of

\text{N}380,000

yields the correct total cash sales of

\text{N}573,000

.

Step-by-Step Solution

1

Calculate total cash outflows and closing balance from the till cash account.

Total Outflows = Cash banked from till (

\text{N}120,000

) + General operating expenses (

\text{N}28,000

) + Personal drawings (

\text{N}42,000

) + Closing cash balance (

\text{N}18,000

) =

\text{N}208,000

.

To determine total cash generated in the till, all cash payments out of the till plus remaining closing cash must be summed.

2

Deduct opening cash balance to find cash sales received in the till.

Till Cash Receipts = Total Outflows (

\text{N}208,000

) - Opening Cash (

\text{N}15,000

) =

\text{N}193,000

.

Opening cash balance was carried forward from the previous period and did not originate from current-year sales.

3

Add cash sales banked directly to till cash receipts to get total cash sales.

Total Cash Sales = Till Cash Receipts (

\text{N}193,000

) + Direct Banked Cash Sales (

\text{N}380,000

) =

\text{N}573,000

.

Total cash sales includes both cash received through the till and cash sales deposited directly into the bank account.

Key Concept

Cash and Bank Summary Analysis for Missing Figures

Question 11814Question →

Folake Enterprise operates a general merchandise store and maintains single-entry accounting records. On 31st October 2025, a fire outbreak destroyed part of her warehouse inventory. The accounting records reveal the following financial figures for the period:

- Opening inventory (1st January 2025): ₦60,000
- Purchases during the period: ₦350,000
- Carriage inwards: ₦18,000
- Returns outwards: ₦8,000
- Goods withdrawn by proprietor for personal use (at cost): ₦10,000
- Sales revenue: ₦470,000
- Returns inwards: ₦20,000

The business sets its selling prices by applying a uniform mark-up of 25% on cost. If undamaged inventory salvaged after the fire was valued at ₦18,000, what is the estimated cost of inventory destroyed by the fire?

₦32,000

₦54,500

₦34,000

₦50,000

Show answer & explanation

Answer: ₦32,000

Answer

The estimated cost of inventory destroyed by the fire is ₦32,000.

The correct answer is ₦32,000. Converting a 25% mark-up (1/4 on cost) gives a 20% margin (1/5 on sales). Net Sales are ₦450,000 (₦470,000 - ₦20,000), making Cost of Goods Sold ₦360,000 (80% of ₦450,000). Total goods available for sale equal ₦410,000 (₦60,000 opening stock + ₦350,000 net purchases after adding carriage inwards of ₦18,000 and subtracting returns outwards of ₦8,000 and drawings of ₦10,000). The total estimated closing inventory is ₦50,000 (₦410,000 - ₦360,000). Deducting the ₦18,000 salvaged inventory leaves ₦32,000 as the cost of destroyed inventory.

Step-by-Step Solution

1

Convert Mark-up on cost to Margin on sales

Margin = Mark-up / (1 + Mark-up) = 0.25 / (1 + 0.25) = 0.25 / 1.25 = 1/5 or 20% on sales.

Mark-up is based on cost price, whereas margin is based on selling price (net sales revenue).

2

Calculate Net Sales revenue

Net Sales = Gross Sales - Returns Inwards = ₦470,000 - ₦20,000 = ₦450,000.

Returns inwards (sales returns) must be deducted from total sales revenue.

3

Calculate Cost of Goods Sold (COGS)

Gross Profit = 20% of ₦450,000 = ₦90,000. COGS = Net Sales - Gross Profit = ₦450,000 - ₦90,000 = ₦360,000.

Deducting gross profit from net sales yields the cost of goods sold.

4

Calculate Net Purchases and Total Goods Available for Sale

Net Purchases = Purchases + Carriage Inwards - Returns Outwards - Goods Withdrawn = ₦350,000 + ₦18,000 - ₦8,000 - ₦10,000 = ₦350,000. Total Goods Available for Sale = Opening Inventory + Net Purchases = ₦60,000 + ₦350,000 = ₦410,000.

Carriage inwards increases purchase cost, while returns outwards and owner drawings at cost reduce goods available for sale.

5

Calculate Total Estimated Closing Stock and Destroyed Stock

Estimated Total Closing Stock = Total Goods Available for Sale - COGS = ₦410,000 - ₦360,000 = ₦50,000. Destroyed Stock = Estimated Closing Stock - Salvaged Stock = ₦50,000 - ₦18,000 = ₦32,000.

Subtracting undamaged salvaged inventory from estimated total inventory before the fire gives the actual loss.

Key Concept

Application of Mark-up and Margin in Estimating Inventory Loss

Estimated Time:3m 0s

Question 11815Question →

Match each financial reporting practice described on the left with its corresponding governing accounting concept or convention on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The correct pairings are: (1) Recording non-current assets at acquisition price matches Historical Cost Concept; (2) Recognizing revenues and expenses when incurred matches Accrual Concept; (3) Anticipating future potential losses while recognizing profits only when realized matches Prudence Convention; (4) Treating the enterprise as a distinct unit separate from its owner matches Business Entity Concept.

Each statement directly articulates the primary definition of its paired concept: recording assets at purchase price follows the Historical Cost Concept; recognizing income/expenses in the period they occur follows the Accrual Concept; anticipating losses while delaying profit recognition until earned follows the Prudence Convention; and isolating the firm's finances from its owner follows the Business Entity Concept.

Step-by-Step Solution

1

Analyze each statement on the left to identify its primary financial accounting focus.

Statement 1 deals with asset valuation at cost; Statement 2 relates to cash flow timing versus transaction period; Statement 3 relates to conservative financial reporting of profits and losses; Statement 4 focuses on legal and accounting boundaries of the business.

Matching requires evaluating the fundamental rule underlying each practical accounting statement.

2

Map each statement to the exact governing accounting concept or convention.

Statement 1 maps to Historical Cost Concept; Statement 2 maps to Accrual Concept; Statement 3 maps to Prudence Convention; Statement 4 maps to Business Entity Concept.

Each standard definition aligns directly with one established accounting convention or concept.

Key Concept

Accounting Concepts and Conventions

Question 11816Question →

Match each accounting transaction or event listed on the left with its correct entry treatment in the General Journal (Journal Proper) on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The correct matches pair fixed asset credit purchases with debiting Office Furniture and crediting Supplier; opening entries with debiting Assets, crediting Liabilities and Capital; writing off bad debts with debiting Bad Debts and crediting Customer; and error corrections with debiting Rent and crediting Rates.

The General Journal (Journal Proper) is used for transactions that do not fit into special day books. This includes purchasing fixed assets on credit, opening entries, writing off bad debts, and rectifying ledger errors.

Step-by-Step Solution

1

Identify the proper book of original entry for credit purchases of non-current assets

Credit purchases of non-current assets do not go to the Purchases Journal; they are entered in the General Journal by debiting Office Furniture Account and crediting Supplier's Account.

The Purchases Day Book is strictly reserved for goods bought for resale.

2

Determine the accounting structure for an opening journal entry

Assets are debited, Liabilities are credited, and the difference (Assets - Liabilities) is credited to Capital Account.

Opening entries establish the initial balances of a business in the ledger based on the accounting equation.

3

Apply the double entry rule for writing off bad debts

Debit Bad Debts Account and credit Customer's Personal Account via the General Journal.

This removes the irrecoverable balance from the customer's account and recognizes an expense.

4

Analyze error correction via the General Journal

Debit Rent Account (the account that should have been debited) and credit Rates Account (the account incorrectly debited).

The General Journal is the principal book used to record rectification of errors.

Key Concept

General Journal Uses and Opening Entries

Question 11817Question →

A manufacturing business incurs a total production cost of $\text{N}250,000$ during the accounting period. If finished goods are transferred to the trading account at a market value incorporating a $20\%$ mark-up on production cost, what is the amount of manufacturing profit?

\text{N}50,000

\text{N}300,000

\text{N}41,667

\text{N}200,000

Show answer & explanation

Answer: $\text{N}50,000$

Answer

The manufacturing profit is

\text{N}50,000

.

The correct answer correctly calculates manufacturing profit as

20\%

of the cost of production (

\text{N}250,000 \times 0.20 = \text{N}50,000

).

Step-by-Step Solution

1

Identify the total cost of production and the given profit mark-up percentage.

Total Cost of Production =

\text{N}250,000

; Mark-up =

20\%

.

Manufacturing profit is earned by transferring finished goods from the manufacturing account to the trading account at market value above cost.

2

Calculate the manufacturing profit using the mark-up on production cost.

\text{Manufacturing Profit} = 20\% \times \text{N}250,000 = \text{N}50,000

.

Applying the percentage mark-up directly to the cost of production gives the profit generated during the manufacturing process.

Key Concept

Manufacturing profit is the excess of the transfer market value of finished goods over their actual cost of production.

Question 11818Question →

Alhaji Haruna operates a building materials store and keeps incomplete accounting records. On 1 January 2025, his cash in hand balance was $\text{₦}25,000$ . During the year ended 31 December 2025, his recorded cash book transactions showed: cash banked $\text{₦}520,000$ , cash paid for trade expenses $\text{₦}84,000$ , cash paid to trade creditors $\text{₦}160,000$ , cash purchases $\text{₦}110,000$ , and proprietor's cash drawings recorded in the cash book $\text{₦}45,000$ . In addition, before banking daily cash takings, the proprietor paid $\text{₦}22,000$ for carriage inwards and took $\text{₦}15,000$ for personal living expenses directly out of cash receipts. At 31 December 2025, the cash in hand balance was $\text{₦}32,000$ . What is the total cash sales amount for the year?

Show answer & explanation

Answer: 963000

Answer

The total cash receipts from sales for the year is ₦963,000.

Total cash receipts from sales are derived using the cash summary equation: Total Outflows (including unbanked payments) + Closing Cash Balance - Opening Cash Balance. Summing all outflows gives

\text{₦}956,000

. Adding the closing cash balance of

\text{₦}32,000

yields

\text{₦}988,000

. Deducting the opening cash balance of

\text{₦}25,000

leaves

\text{₦}963,000

as total cash sales.

Step-by-Step Solution

1

Calculate total cash outflows during the year

₦956,000

Total outflows include recorded payments from the cash book (₦520,000 banked + ₦84,000 expenses + ₦160,000 creditors + ₦110,000 purchases + ₦45,000 recorded drawings) plus unbanked cash takings spent directly (₦22,000 carriage + ₦15,000 unbanked drawings).

2

Add closing cash in hand balance

₦988,000

The total accounted cash requirement is the sum of all cash outflows and the remaining cash in hand at the end of the year.

3

Deduct opening cash in hand balance to find cash sales

₦963,000

Total cash received from sales equals total accounted cash requirement minus the opening cash balance brought forward.

Key Concept

Cash Summary Analysis for Missing Cash Receipts

Estimated Time:2m 0s

Question 11819Question →

Emeka and Chidi entered into a joint venture sharing profits and losses equally, maintaining no separate set of books. Emeka supplied goods valued at $\text{N}60,000$ and paid freight charges of $\text{N}4,000$ . Chidi supplied goods valued at $\text{N}40,000$ and paid selling expenses of $\text{N}6,000$ . Chidi sold all the goods for $\text{N}140,000$ and collected the full proceeds. What amount will Chidi pay to Emeka in final settlement?

\text{N}64,000

\text{N}79,000

\text{N}94,000

\text{N}49,000

Show answer & explanation

Answer: $\text{N}79,000$

Answer

Chidi will pay

\text{N}79,000

to Emeka in final settlement.

Total venture profit is

\text{N}140,000 - \text{N}110,000 = \text{N}30,000

. Emeka's half-share of profit is

\text{N}15,000

. Since Chidi collected all proceeds from sales, he owes Emeka for the goods and expenses Emeka incurred (

\text{N}64,000

) plus Emeka's share of profit (

\text{N}15,000

), giving a final settlement of

\text{N}79,000

.

Step-by-Step Solution

1

Calculate the total venture revenue and total venture expenses.

Total Revenue =

\text{N}140,000

. Total Expenses = Emeka's goods (

\text{N}60,000

) + Emeka's freight (

\text{N}4,000

) + Chidi's goods (

\text{N}40,000

) + Chidi's selling expenses (

\text{N}6,000

) =

\text{N}110,000

.

The Memorandum Joint Venture Account pools all income and costs to find the net profit or loss.

2

Calculate net profit and each venturer's share.

Net Profit =

\text{N}140,000 - \text{N}110,000 = \text{N}30,000

. Equal share for Emeka =

\text{N}30,000 \div 2 = \text{N}15,000

.

Profits are shared equally according to the agreement.

3

Determine the final balance in Emeka's personal account (Joint Venture with Emeka) maintained in Chidi's books.

Amount due to Emeka = Outlay by Emeka (

\text{N}60,000 + \text{N}4,000

) + Share of Profit (

\text{N}15,000

) =

\text{N}79,000

.

Chidi collected all sales cash (

\text{N}140,000

), so he must reimburse Emeka's expenses and pay him his share of the profit.

Key Concept

Memorandum Joint Venture Account Settlement

Question 11820Question →

Danladi Woodworks Enterprise extracted the following financial details from its records for the year ended 31st December 2025:

Cost Item	Amount (₦)	Additional Details
Factory supervisor's salary	180,000	Fully paid
Factory power and fuel	95,000	Includes ₦15,000 prepaid for the next period
Depreciation of factory machinery	65,000	Charged for the year
Factory rates and insurance	40,000	Excludes ₦10,000 accrued and unpaid at year-end
Direct wages to machine operators	300,000	Paid during the year
Office administrative salaries	120,000	Paid during the year

What is the total factory overhead cost to be charged to the Manufacturing Account for the year?

₦375,000

₦675,000

₦385,000

₦495,000

Show answer & explanation

Answer: ₦375,000

Answer

The total factory overhead cost to be charged to the Manufacturing Account is ₦375,000.

Factory overheads include all indirect costs relating to manufacturing activities. In this scenario, the supervisor's salary (₦180,000), adjusted power and fuel (₦95,000 less ₦15,000 prepaid = ₦80,000), factory machinery depreciation (₦65,000), and adjusted factory rates and insurance (₦40,000 plus ₦10,000 accrued = ₦50,000) are summed to give ₦375,000. Direct wages belong in prime cost, and office salaries belong in the profit and loss account.

Step-by-Step Solution

1

Identify and adjust factory indirect expenses

Factory power and fuel = ₦95,000 - ₦15,000 (prepaid) = ₦80,000; Factory rates and insurance = ₦40,000 + ₦10,000 (accrued) = ₦50,000.

Prepaid expenses must be deducted from paid amounts, whereas accrued expenses must be added to reflect the actual expense incurred for the accounting period.

2

Filter for factory overhead costs only

Factory supervisor's salary (₦180,000), Adjusted factory power (₦80,000), Depreciation of factory machinery (₦65,000), and Adjusted factory rates (₦50,000).

Direct wages (₦300,000) belong to Prime Cost, and Office administrative salaries (₦120,000) are non-factory operating expenses.

3

Calculate total factory overheads

₦180,000 + ₦80,000 + ₦65,000 + ₦50,000 = ₦375,000.

Summing all adjusted indirect manufacturing expenditures yields the total factory overhead.

Key Concept

Factory overheads consist of all indirect production costs incurred inside the factory, adjusted for accruals and prepayments, excluding direct costs (prime cost) and administrative/selling expenses.

Estimated Time:2m 0s

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