All practice questions

Question 11861Question →

Alhaji Bello consigned $1,000$ packages of goods to Chidi with instructions to sell them at a minimum benchmark price of ₦ $1,500$ per package. Chidi sold $400$ packages for cash at ₦ $1,800$ each and $600$ packages on credit at ₦ $2,000$ each. The consignment agreement stipulates an ordinary commission of $5\%$ on total sales, a del-credere commission of $2.5\%$ on credit sales, and an overriding commission of $10\%$ on any surplus sales value realized above the minimum benchmark price. What is the total commission payable to Chidi in Naira?

Show answer & explanation

Answer: 168000

Answer

The total commission payable to Chidi is ₦168,000.

Total sales generated are

₦1,920,000

(

₦720,000

cash +

₦1,200,000

credit). Ordinary commission at

5\%

equals

₦96,000

. Del-credere commission at

2.5\%

on credit sales of

₦1,200,000

equals

₦30,000

. Overriding commission at

10\%

on the surplus of

₦420,000

over the benchmark price of

₦1,500,000

equals

₦42,000

. Combining these three amounts yields a total commission of

₦168,000

.

Step-by-Step Solution

1

Calculate cash sales, credit sales, and total sales revenue

Cash Sales =

400 \times ₦1,800 = ₦720,000

; Credit Sales =

600 \times ₦2,000 = ₦1,200,000

; Total Sales =

₦1,920,000

Determining gross revenue is necessary to compute ordinary and overriding commissions.

2

Calculate Ordinary Commission

5\% \times ₦1,920,000 = ₦96,000

Ordinary commission is earned on overall gross sales value.

3

Calculate Del-Credere Commission

2.5\% \times ₦1,200,000 = ₦30,000

Del-credere commission is calculated specifically on credit sales.

4

Calculate Overriding Commission

Benchmark Minimum Value =

1,000 \times ₦1,500 = ₦1,500,000

; Surplus Realized =

₦1,920,000 - ₦1,500,000 = ₦420,000

; Overriding Commission =

10\% \times ₦420,000 = ₦42,000

Overriding commission rewards the agent for securing a selling price higher than the minimum threshold specified by the consignor.

5

Sum up all commission elements

₦96,000 + ₦30,000 + ₦42,000 = ₦168,000

The total payout to the consignee is the sum of ordinary, del-credere, and overriding commissions.

Key Concept

Consignee's Commission: Ordinary, Del-Credere, and Overriding Commission Computation

Question 11862Question →

Bello Hardware Stores keeps single-entry accounting records. On 31st December 2025, a burglary occurred at the storehouse. The following financial details were extracted from the business records for the year 2025:

- Opening inventory (1st January 2025): $\text{₦}75,000$
- Total purchases: $\text{��}410,000$
- Carriage inwards: $\text{₦}25,000$
- Returns outwards: $\text{₦}15,000$
- Total sales revenue: $\text{₦}480,000$
- Goods withdrawn by proprietor for personal use (at cost): $\text{₦}12,000$
- Goods destroyed by rainwater prior to the theft (at cost): $\text{₦}18,000$
- Undamaged stock remaining after the burglary: $\text{₦}33,000$

If the business sells all goods at a uniform mark-up of $25\%$ on cost, what is the cost value of the stock stolen during the burglary?

₦48,000

₦72,000

₦28,000

₦108,000

Show answer & explanation

Answer: ₦48,000

Answer

The cost value of the stolen stock is ₦48,000.

To find the stolen stock value, first convert the 25% (1/4) mark-up on cost to a 20% (1/5) margin on sales. Calculate Cost of Goods Sold as 80% of sales revenue (₦480,000 × 0.80 = ₦384,000). Next, find net purchases (₦410,000 + ₦25,000 - ₦15,000 = ₦420,000) and adjust total available goods by subtracting non-sale reductions at cost (₦75,000 + ₦420,000 - ₦12,000 - ₦18,000 = ₦465,000). Subtract COGS from available goods to get expected closing inventory of ₦81,000. Finally, deduct undamaged stock (₦33,000) from expected closing inventory to arrive at the stolen stock cost of ₦48,000.

Step-by-Step Solution

1

Calculate Net Purchases

Net Purchases = ₦410,000 + ₦25,000 - ₦15,000 = ₦420,000

Carriage inwards adds to purchase cost while returns outwards reduce total purchases.

2

Calculate total goods available for sale before loss and drawings

Adjusted Goods Available = ₦75,000 (Opening Stock) + ₦420,000 (Net Purchases) - ₦12,000 (Drawings) - ₦18,000 (Water Loss) = ₦465,000

Goods withdrawn by the owner and goods destroyed prior to theft must be removed from stock available for normal sales at cost.

3

Convert mark-up to margin to determine Cost of Goods Sold (COGS)

Margin = Mark-up / (1 + Mark-up) = (1/4) / (1 + 1/4) = 1/5 or 20%. COGS = Sales × (1 - Margin) = ₦480,000 × (1 - 0.20) = ₦384,000

Mark-up is based on cost while margin is based on selling price. A 25% (1/4) mark-up equals a 20% (1/5) profit margin on sales revenue.

4

Calculate expected closing stock before theft

Expected Closing Stock = Goods Available (₦465,000) - COGS (₦384,000) = ₦81,000

Expected closing inventory represents the cost of goods that should be remaining in the store.

5

Calculate stolen stock value

Stolen Stock = Expected Closing Stock (₦81,000) - Undamaged Stock (₦33,000) = ₦48,000

The difference between expected inventory and actual physical stock recovered equals the stolen stock.

Key Concept

Conversion of mark-up to margin to estimate cost of goods sold and missing stock under single-entry systems.

Estimated Time:3m 0s

Question 11863Question →

Under the 1999 Constitution of the Federal Republic of Nigeria (as amended), financial transactions across government entities are subject to specific oversight mechanisms. Which public financial officer is constitutionally empowered to audit all public offices and accounts of the Federation and submit reports directly to the National Assembly, but is statutorily restricted from directly auditing the books of government statutory corporations?

The Auditor-General for the Federation

The Accountant-General of the Federation

The Permanent Secretary as the Accounting Officer

The Chairman of the Public Accounts Committee

Show answer & explanation

Answer: The Auditor-General for the Federation

Answer

The Auditor-General for the Federation

Section 85 of the 1999 Constitution grants the Auditor-General for the Federation independent authority to audit all public accounts of federal offices and courts, submitting reports directly to the National Assembly. Section 85(3) explicitly restricts the officer from directly auditing statutory corporations or government agencies, requiring instead that such bodies be audited by external auditors appointed from a list provided by the Auditor-General.

Step-by-Step Solution

1

Analyze the constitutional duties assigned to key public financial officers under Section 85 of the 1999 Constitution of Nigeria.

Identify that the Auditor-General for the Federation holds the mandate for external auditing of federal public offices and reports directly to the National Assembly.

Section 85(2) establishes the independence and direct reporting line of the Auditor-General to the legislature.

2

Evaluate statutory restrictions regarding government parastatals and statutory corporations.

Confirm that under Section 85(3), the Auditor-General cannot directly audit statutory corporations, but appoints/approves external auditors and comments on audited statements.

This preserves operational autonomy for statutory corporations while maintaining overall state audit oversight.

Key Concept

Constitutional mandate and statutory boundaries of the Auditor-General for the Federation in Nigerian public sector accounting.

Estimated Time:2m 0s

Question 11864Question →

Zentith Global Plc had a gross profit of ₦120,000 for the financial year ended 31 December 2025. Total administrative expenses paid during the year amounted to ₦35,000, which excludes an accrued electricity bill of ₦5,000 at the end of the year. What is the net profit before taxation for the year?

₦80,000

₦85,000

₦90,000

₦155,000

Show answer & explanation

Answer: ₦80,000

Answer

The net profit before taxation is ₦80,000.

Under the accruals concept, expenses incurred during the financial period must be recognized regardless of whether payment has been made. The accrued electricity expense of ₦5,000 is added to the ₦35,000 expenses paid, bringing total administrative expenses to ₦40,000. Subtracting total expenses of ₦40,000 from the gross profit of ₦120,000 yields the correct net profit before taxation of ₦80,000.

Step-by-Step Solution

1

Calculate total administrative expenses including accruals

Total Expenses = ₦35,000 + ₦5,000 = ₦40,000

Accrued expenses incurred during the accounting period must be added to expenses paid under the accruals concept.

2

Deduct total expenses from gross profit to find net profit before tax

Net Profit = ₦120,000 - ₦40,000 = ₦80,000

Net profit is calculated by subtracting total operating expenses from gross profit.

Key Concept

Accrual principle adjustment in Company Statement of Profit or Loss

Question 11865Question →

Match each transaction described on the left with its correct accounting treatment in a single-column or two-column cash book on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Direct payment of monthly office utility bill by standing order matches 'Entered on the credit side of the Bank column'; Cash received from cash sales deposited directly into the bank account matches 'Entered on the debit side of the Bank column'; Capital contribution of cash brought into the business till matches 'Entered on the debit side of the Cash column'; Purchase of office machinery on credit terms matches 'Omitted from the Cash Book and recorded in the General Journal'.

Each transaction is matched based on the double-entry rule for cash books. Money leaving the bank (standing order) is credited to the Bank column. Money entering the bank directly (sales banked immediately) is debited to the Bank column. Money entering the cash till (capital introduced) is debited to the Cash column. Non-cash transactions (credit purchases) are excluded from cash books altogether.

Step-by-Step Solution

1

Determine the impact of standing order utility payments on bank funds.

Bank balance decreases.

Outflows from bank accounts are credited to the Bank column.

2

Determine the impact of immediate banking of sales proceeds.

Bank balance increases.

Direct bank receipts are debited to the Bank column.

3

Analyze capital introduced in physical cash into the business till.

Cash balance increases.

Cash inflows are debited to the Cash column.

4

Identify whether credit purchases belong in the Cash Book.

Non-cash transaction.

Cash books only record cash and bank transactions; credit purchases are entered in the General Journal or Purchases Journal.

Key Concept

Recording Rules and Scope of Single-Column and Two-Column Cash Books

Question 11866Question →

Mr. Adebayo, a timber merchant who operates an incomplete records system, extracted the following details regarding his trade creditors for the year ended 31 December 2025:

Transaction Details	Amount (₦)
Trade creditors balance at 1 January 2025	64,000
Cheque payments to suppliers	310,000
Discount received	8,500
Returns outwards	12,500
Contra settlement with sales ledger	5,000
Trade creditors balance at 31 December 2025	78,000

What is the total credit purchases for the year?

₦308,000

₦333,000

₦345,000

₦350,000

Show answer & explanation

Answer: ₦350,000

Answer

The total credit purchases for the year is ₦350,000.

To find the missing total credit purchases figure, a Purchases Ledger (Creditors) Control Account is reconstructed. All transactions reducing the liability—payments by cheque (₦310,000), discount received (₦8,500), returns outwards (₦12,500), contra settlement (₦5,000), and the closing balance (₦78,000)—are posted to the debit side, giving a sum of ₦414,000. Subtracting the opening balance of ₦64,000 yields credit purchases of ₦350,000.

Step-by-Step Solution

1

Identify the items that reduce creditors (Debit entries in the Purchases Ledger Control Account)

Cheque payments (₦310,000) + Discount received (₦8,500) + Returns outwards (₦12,500) + Contra set-off (₦5,000) + Closing balance (₦78,000)

Creditors are liability accounts; items that decrease the liability are recorded on the debit side along with the closing balance.

2

Calculate the total of the debit side of the Purchases Ledger Control Account

310,000 + 8,500 + 12,500 + 5,000 + 78,000 = ₦414,000

The control account debit side total must equal the credit side total.

3

Deduct the opening creditors balance from the total debit side to find credit purchases

₦414,000 - 64,000 = ₦350,000

Credit purchases increase creditors liability and represent the missing credit side entry.

Key Concept

Reconstruction of Purchases Ledger Control Account to calculate missing credit purchases

Question 11867Question →

At 31st December 2024, the books of Folake Trading Enterprise showed Trade Receivables of $\text{₦}120,000$ and an existing Provision for Doubtful Debts of $\text{₦}4,500$ . An additional bad debt of $\text{₦}8,000$ was discovered and is to be written off before creating a $5\%$ provision for doubtful debts on the remaining receivables. What amount (in Naira) should be charged to the Profit and Loss Account as the provision for doubtful debts for the year?

Show answer & explanation

Answer: 1100

Answer

The amount to be charged to the Profit and Loss Account as an expense for provision for doubtful debts is

\text{₦}1,100

.

The trade receivables remaining after writing off the additional bad debt of

\text{₦}8,000

is

\text{₦}112,000

. Calculating

5\%

on

\text{₦}112,000

gives a required provision of

\text{₦}5,600

. Since the existing provision brought forward is

\text{₦}4,500

, the net adjustment required is an increase of

\text{₦}5,600 - \text{₦}4,500 = \text{₦}1,100

, which is debited to the Profit and Loss Account.

Step-by-Step Solution

1

Calculate net trade receivables after writing off additional bad debts

\text{₦}120,000 - \text{₦}8,000 = \text{₦}112,000

New bad debts must be deducted from total trade receivables before calculating the new provision percentage.

2

Compute the required closing provision for doubtful debts

5\% \times \text{₦}112,000 = \text{₦}5,600

The provision percentage applies to net trade receivables.

3

Determine the increase in provision to be charged as expense

\text{₦}5,600 - \text{₦}4,500 = \text{₦}1,100

Only the difference between the new provision required and the existing provision is charged to the Profit and Loss Account.

Key Concept

Adjustment of Provision for Doubtful Debts with Additional Bad Debts

Question 11868Question →

Tunde and Wole are partners in a business sharing profits and losses in the ratio of $3:2$ . They agree to admit Musa into the partnership for a $\frac{1}{6}$ share of future profits. On Musa's admission, goodwill is valued at $\text{₦}60,000$ . If goodwill is raised in the old profit-sharing ratio and immediately written off in the new profit-sharing ratio, what is the net adjustment to Tunde's capital account?

Net credit of

\text{₦}6,000

Net debit of

\text{₦}6,000

Net credit of

\text{₦}36,000

Net debit of

\text{₦}10,000

Show answer & explanation

Answer: Net credit of $\text{₦}6,000$

Answer

Net credit of

\text{₦}6,000

When goodwill of

\text{₦}60,000

is raised in the old ratio (

3:2

), Tunde's capital account is credited with

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

. When goodwill is written off in the new ratio (

3:2:1

), Tunde's capital account is debited with

\frac{3}{6} \times \text{₦}60,000 = \text{₦}30,000

. The net difference is a credit of

\text{₦}6,000

.

Step-by-Step Solution

1

Calculate the new profit-sharing ratio among Tunde, Wole, and Musa

Musa's share =

\frac{1}{6}

. Remaining share =

1 - \frac{1}{6} = \frac{5}{6}

. Tunde's new share =

\frac{3}{5} \times \frac{5}{6} = \frac{3}{6}

. Wole's new share =

\frac{2}{5} \times \frac{5}{6} = \frac{2}{6}

. New ratio =

3:2:1

.

The new ratio is required to write off goodwill across all partners.

2

Calculate Tunde's credit share when raising goodwill in the old ratio (

3:2

)

Tunde's credit =

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

Credit.

Goodwill raised belongs to existing partners in their old profit-sharing ratio.

3

Calculate Tunde's debit share when writing off goodwill in the new ratio (

3:2:1

)

Tunde's debit =

\text{₦}60,000 \times \frac{3}{6} = \text{₦}30,000

Debit.

When written off, goodwill is debited to all partners in the new profit-sharing ratio.

4

Determine the net adjustment for Tunde

Net position =

\text{₦}36,000 \text{ (Credit)} - \text{₦}30,000 \text{ (Debit)} = \text{₦}6,000 \text{ Credit}

.

Comparing the credit and debit amounts yields the net change in Tunde's capital account.

Key Concept

Accounting treatment of goodwill upon admission of a partner by raising and writing off goodwill

Estimated Time:1m 30s

Question 11869Question →

Under the public sector financial control framework in Nigeria, which officer is constitutionally empowered to audit the accounts of all federal ministries, departments, and agencies and submit reports directly to the National Assembly?

The Auditor-General for the Federation

The Accountant-General of the Federation

The Permanent Secretary as the Accounting Officer

The Minister of Finance

Show answer & explanation

Answer: The Auditor-General for the Federation

Answer

The Auditor-General for the Federation

Under Section 85 of the 1999 Constitution of Nigeria, the Auditor-General for the Federation has the statutory responsibility to audit all public accounts of the Federation and report findings directly to the National Assembly, maintaining independence from the executive branch.

Step-by-Step Solution

1

Identify the key function described in the stem

The function required is conducting independent external audits of public accounts and submitting audit reports to the National Assembly.

Constitutional provisions stipulate an independent officer outside executive control to ensure accountability to the legislature.

2

Distinguish between executive financial management and legislative audit reporting

The Accountant-General maintains and compiles financial records, while the Auditor-General independently examines those records post-execution.

Separation of duties prevents officers who manage funds from auditing their own financial operations.

Key Concept

Statutory responsibilities of public financial officers under Section 85 of the 1999 Constitution of Nigeria

Question 11870Question →

A freight logistics company compiles detailed internal performance reports analyzing the unit expense of fuel, labor, and vehicle maintenance per kilometer across different transportation routes to evaluate operational efficiency and establish profitable service tariffs. Which branch of accounting is primarily responsible for generating this unit cost analysis?

Cost Accounting

Financial Accounting

Tax Accounting

Public Sector Accounting

Show answer & explanation

Answer: Cost Accounting

Answer

Cost Accounting is the branch responsible for generating detailed internal unit cost breakdowns and operational cost analysis.

Cost Accounting is specifically designed to collect, process, and present cost data relating to specific operational units, products, or services (such as cost per kilometer). This detailed internal data helps managers control expenses and set appropriate pricing tariffs.

Step-by-Step Solution

1

Identify the nature of the information described in the scenario

The scenario describes internal reports detailing unit costs of fuel, labor, and vehicle maintenance per kilometer to establish pricing and evaluate efficiency.

Determining whether information is meant for internal operational control or external reporting clarifies the required branch of accounting.

2

Map the task requirements to the appropriate specialization of accounting

The branch of accounting that focuses on calculating, analyzing, and controlling unit costs of products or services is Cost Accounting.

Cost Accounting provides detailed quantitative data regarding operational expenses per unit of output or service.

Key Concept

Branches of Accounting - Cost Accounting vs. Other Specializations

Question 11871Question →

Enugu Head Office operates a dependent branch in Aba, supplying all goods at cost price. For the year ended 31 December 2025, the following details were extracted from the books:

Transaction	Amount (₦)
Stock at branch (1 January 2025)	15,000
Goods sent to branch	120,000
Goods returned to head office	5,000
Cash sales	85,000
Credit sales	40,000
Branch operating expenses	12,000
Stock at branch (31 December 2025)	18,000

What is the net profit earned by the Aba branch for the year ended 31 December 2025?

Show answer & explanation

Answer: 1000

Answer

The net profit earned by the Aba branch for the year ended 31 December 2025 is ₦1,000.

Total revenue is ₦125,000 (cash sales ₦85,000 + credit sales ₦40,000). Cost of goods sold is ₦112,000 (opening stock ₦15,000 + net goods sent ₦115,000 - closing stock ₦18,000). Gross profit is ₦13,000 (₦125,000 - ₦112,000). Subtracting branch expenses of ₦12,000 gives a net profit of ₦1,000.

Step-by-Step Solution

1

Calculate Total Turnover (Sales) generated by the branch

Total Sales = ₦85,000 + ₦40,000 = ₦125,000

Branch sales comprise both cash sales remitted and credit sales made during the accounting year.

2

Calculate Net Goods Sent to Branch

Net Goods Sent = ₦120,000 - ₦5,000 = ₦115,000

Goods returned by the branch to Head Office reduce the total cost of inventory supplied to the branch.

3

Determine Cost of Goods Sold (COGS)

COGS = Opening Stock (₦15,000) + Net Goods Sent (₦115,000) - Closing Stock (₦18,000) = ₦112,000

COGS is calculated by adding net purchases/deliveries to opening stock and deducting closing stock.

4

Compute Gross Profit and Net Profit

Gross Profit = ₦125,000 - ₦112,000 = ₦13,000; Net Profit = ₦13,000 - ₦12,000 = ₦1,000

Deducting cost of sales from turnover yields gross profit, and subtracting branch expenses yields net profit.

Key Concept

Branch Trading and Profit Calculation at Cost Price

Question 11872Question →

An auditing firm is examining the accounting records of a commercial enterprise operating two regional divisions. Division A maintains a complete set of double-entry accounting books, extracts its own trial balance at year-end, and maintains a reciprocal Head Office Account. Division B forwards all operational vouchers and daily cash receipts directly to head office, where all ledger postings and profit computations are performed centrally. Which statement accurately describes the accounting procedure required to incorporate Division A's financial records into the overall head office financial statements?

Division A's trial balance items are incorporated into the head office ledger after reconciling the reciprocal Head Office and Branch accounts and eliminating inter-office balances.

Division A's operational profit is calculated by head office using a Memorandum Branch Trading and Profit and Loss Account based solely on cash remittances received.

Division A's transactions are ignored at year-end because independent branches operate as legally separate corporate entities whose accounts cannot be combined with head office.

Division A passes adjustment entries exclusively for stock reserves and unrealized profit, while head office directly posts all individual revenue and expense vouchers.

Show answer & explanation

Answer: Division A's trial balance items are incorporated into the head office ledger after reconciling the reciprocal Head Office and Branch accounts and eliminating inter-office balances.

Answer

Division A's trial balance items are incorporated into the head office ledger after reconciling the reciprocal Head Office and Branch accounts and eliminating inter-office balances.

An independent branch maintains a complete set of double-entry books and prepares its own trial balance at the end of the accounting period. To integrate the branch results into the overall enterprise financial statements, head office reconciles the reciprocal accounts (Head Office Account in branch books and Branch Account in head office books), adjusts for items in transit, eliminates the reciprocal balances, and combines the assets, liabilities, revenues, and expenses.

Step-by-Step Solution

1

Identify the branch classifications for Division A and Division B based on their record-keeping practices.

Division A is an independent branch (maintains full double-entry books and extracts its own trial balance), whereas Division B is a dependent branch (relies on head office centralized bookkeeping).

Independent branches keep autonomous accounting records, whereas dependent branch accounting is managed entirely at head office.

2

Analyze the financial statement incorporation mechanism for an independent branch.

The independent branch submits its trial balance to head office. Head office reconciles cash-in-transit and goods-in-transit to align the reciprocal Branch Account and Head Office Account.

Reciprocal accounts must agree before inter-company/inter-branch balances can be eliminated during final accounts preparation.

3

Select the correct accounting procedure for Division A.

The correct procedure involves combining Division A's trial balance figures with head office balances after eliminating reciprocal balances.

This reflects standard independent branch accounting consolidation.

Key Concept

Distinction Between Dependent and Independent Branch Accounting Treatments

Question 11873Question →

The trial balance of Kalu Enterprises as at 31st December 2025 showed Trade Debtors of $₦520,000$ and an existing Provision for Doubtful Debts of $₦22,000$ .

The following additional information is provided at year-end:
1. An additional debt of $₦40,000$ is confirmed irrecoverable and must be written off.
2. A dishonoured cheque of $₦20,000$ from a debtor was recorded in the cash book but not yet posted to the debtors ledger.
3. A amount of $₦5,000$ was received in cash during the year for a debt written off in 2024, but no entry has been made in the books.
4. Provision for doubtful debts is to be adjusted to $5\%$ of net trade debtors.

Calculate the net amount to be charged to the Profit and Loss Account for bad and doubtful debts for the year ended 31st December 2025 (in ₦).

Show answer & explanation

Answer: 38000

Answer

The net amount to be charged to the Profit and Loss Account for bad and doubtful debts is ₦38,000.

To find the net charge to the Profit and Loss Account, first update Trade Debtors by adding the dishonoured cheque (

₦520,000 + ₦20,000 = ₦540,000

) and deducting the additional bad debt (

₦540,000 - ₦40,000 = ₦500,000

). The required provision is

5\% \times ₦500,000 = ₦25,000

. Comparing this with the existing provision of

₦22,000

gives an increase of

₦3,000

. The net charge to Profit and Loss is the sum of additional bad debt (

₦40,000

) plus provision increase (

₦3,000

) minus bad debt recovered (

₦5,000

), yielding

₦38,000

.

Step-by-Step Solution

1

Calculate the updated trade debtors balance prior to bad debt write-off

Gross Debtors =

₦520,000 + ₦20,000 = ₦540,000

A dishonoured cheque increases the amount owed by trade debtors and must be added back to the trial balance figure.

2

Deduct additional bad debts to find net debtors subject to provision

Adjusted Trade Debtors =

₦540,000 - ₦40,000 = ₦500,000

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

3

Compute the required new provision for doubtful debts balance

New Provision =

5\% \times ₦500,000 = ₦25,000

The provision rate applies to the collectible debtors balance after all bad debt adjustments.

4

Determine the net change in the provision for doubtful debts account

Increase in Provision =

₦25,000 - ₦22,000 = ₦3,000

Since the required provision (

₦25,000

) exceeds the existing provision (

₦22,000

), an increase of

₦3,000

is debited to the Profit and Loss Account.

5

Combine all bad debts items to calculate the net charge to Profit and Loss Account

Net P&L Charge =

₦40,000 \text{ (Bad Debt)} + ₦3,000 \text{ (Provision Increase)} - ₦5,000 \text{ (Bad Debt Recovered)} = ₦38,000

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

Key Concept

Adjustments for bad debts, dishonoured cheques, bad debts recovered, and provision for doubtful debts in final accounts

Question 11874Question →

The following balances were extracted from the books of Unity Town Development Union on 1st January 2025:

Item	Amount (₦)
Civic Hall Building	1,200,000
Furniture and Equipment	350,000
Cash at Bank	180,000
Subscriptions in Arrears	25,000
Prepaid Hall Insurance	15,000
Accrued Electricity Bills	40,000
Subscriptions Received in Advance	30,000

What is the value of the union's Accumulated Fund as of 1st January 2025?

₦1,700,000

₦1,710,000

₦1,840,000

₦1,730,000

Show answer & explanation

Answer: ₦1,700,000

Answer

The Accumulated Fund of Unity Town Development Union as of 1st January 2025 is ₦1,700,000.

The accumulated fund is determined by computing the net value of total assets over total liabilities at a specific date. Summing the assets gives ₦1,200,000 + ₦350,000 + ₦180,000 + ₦25,000 + ₦15,000 = ₦1,770,000. Summing liabilities yields ₦40,000 + ₦30,000 = ₦70,000. Subtracting liabilities from assets results in ₦1,770,000 - ₦70,000 = ₦1,700,000.

Step-by-Step Solution

1

Identify and sum all assets of the non-profit organization as of 1st January 2025

Total Assets = Civic Hall Building (₦1,200,000) + Furniture and Equipment (₦350,000) + Cash at Bank (₦180,000) + Subscriptions in Arrears (₦25,000) + Prepaid Hall Insurance (₦15,000) = ₦1,770,000

Assets represent all economic resources owned by or owed to the union.

2

Identify and sum all liabilities of the non-profit organization as of 1st January 2025

Total Liabilities = Accrued Electricity Bills (₦40,000) + Subscriptions Received in Advance (₦30,000) = ₦70,000

Liabilities represent obligations owed by the union to external parties or members.

3

Calculate the Accumulated Fund using the formula: Accumulated Fund = Total Assets - Total Liabilities

Accumulated Fund = ₦1,770,000 - ₦70,000 = ₦1,700,000

Accumulated fund functions as the capital equivalent for a non-profit organization.

Key Concept

Calculation of Accumulated Fund in Non-Profit Accounting

Estimated Time:1m 30s

Question 11875Question →

On 1 January 2024, Aba Commercial Ventures had a Machinery account balance at cost of $₦8,000,000$ and a Provision for Depreciation on Machinery credit balance of $₦1,200,000$ . Depreciation is charged annually at $15\%$ using the reducing balance method. What is the total balance of the Provision for Depreciation on Machinery account to be carried forward as at 31 December 2024?

Show answer & explanation

Answer: 2220000

Answer

The total balance of the Provision for Depreciation on Machinery account as at 31 December 2024 is

₦2,220,000

.

To determine the closing Provision for Depreciation balance on 31 December 2024 under the reducing balance method, first compute the opening net book value by subtracting opening provision from cost (

₦8,000,000 - ₦1,200,000 = ₦6,800,000

). Next, calculate the 2024 depreciation charge of

15\%

on

₦6,800,000

, which equals

₦1,020,000

. Finally, add this current charge to the opening provision of

₦1,200,000

to obtain the closing balance of

₦2,220,000

.

Step-by-Step Solution

1

Determine the opening net book value of the machinery on 1 January 2024.

Net Book Value =

₦8,000,000 - ₦1,200,000 = ₦6,800,000

.

Under the reducing balance method, annual depreciation is calculated on the net book value (Cost minus Accumulated Depreciation) at the start of the period.

2

Calculate the current year's depreciation charge for 2024.

Depreciation for 2024 =

15\% \times ₦6,800,000 = ₦1,020,000

.

Applying the fixed rate of

15\%

to the net book value yields the annual provision expense.

3

Determine the accumulated Provision for Depreciation balance at year-end.

Closing Provision =

₦1,200,000 + ₦1,020,000 = ₦2,220,000

.

The provision for depreciation account accumulates total depreciation over time, so the current year expense is added to the opening balance.

Key Concept

Accounting Treatment of Provision for Depreciation under the Reducing Balance Method

Question 11876Question →

The following balances were extracted from the accounting records of Plateau Manufacturing Ltd for the financial year ended 31 December 2025:

Accounting Item	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	180,000
Carriage inwards on raw materials	12,000
Closing inventory of raw materials	35,000
Direct wages paid (₦5,000 accrued at year end)	90,000
Direct factory expenses	28,000
Factory supervisor's salary	40,000
Depreciation of factory plant	35,000
Factory power and fuel	22,000
Opening work-in-progress	18,000
Closing work-in-progress	24,000

What is the total Cost of Production for the year?

Show answer & explanation

Answer: 416000

Answer

The Cost of Production for the year is ₦416,000.

The Cost of Production is ₦416,000. It is derived by first calculating Raw Materials Consumed (₦45,000 + ₦180,000 + ₦12,000 - ₦35,000 = ₦202,000). Adding Direct Labor inclusive of accruals (₦90,000 + ₦5,000 = ₦95,000) and Direct Expenses (₦28,000) yields a Prime Cost of ₦325,000. Adding total Factory Overheads (₦40,000 + ₦35,000 + ₦22,000 = ₦97,000) gives total factory costs of ₦422,000. Finally, adjusting for Work-in-Progress (+ ₦18,000 Opening WIP - ₦24,000 Closing WIP) gives ₦416,000.

Step-by-Step Solution

1

Calculate Cost of Raw Materials Consumed

₦202,000

Raw materials consumed equals opening raw materials inventory (��45,000) plus purchases (₦180,000) plus carriage inwards (₦12,000) minus closing raw materials inventory (₦35,000).

2

Calculate Prime Cost

₦325,000

Prime Cost is the sum of raw materials consumed (₦202,000), total direct wages incurred including year-end accruals (₦90,000 paid + ₦5,000 accrued = ₦95,000), and direct expenses (₦28,000).

3

Calculate Total Factory Overheads

₦97,000

Factory Overheads comprise indirect manufacturing expenses: factory supervisor salary (₦40,000), plant depreciation (₦35,000), and factory power and fuel (₦22,000).

4

Adjust for Work-in-Progress to determine Cost of Production

₦416,000

Cost of Production is Prime Cost (₦325,000) plus Factory Overheads (₦97,000) plus Opening Work-in-Progress (₦18,000) minus Closing Work-in-Progress (₦24,000).

Key Concept

Calculation of Manufacturing Account components including Prime Cost, Factory Overheads, and Work-in-Progress adjustments.

Question 11877Question →

Apex Trading Company Plc extracted the following financial balances for the year ended 31 December 2025:

- Gross profit: ₦850,000
- Salaries and wages: ₦180,000
- Rent and rates paid: ₦60,000 (including ₦10,000 prepaid for the next financial year)
- Debenture interest paid: ₦15,000 (the total annual interest expense due is ₦25,000)
- Provision for corporate taxation: ₦110,000

What is the net profit after taxation for the company?

₦465,000

₦485,000

₦495,000

₦595,000

Show answer & explanation

Answer: ₦485,000

Answer

The net profit after taxation for the company is ��485,000.

The net profit after taxation is computed by deducting all relevant operating expenses and finance costs adjusted for accruals and prepayments from gross profit, followed by the deduction of corporate taxation. Adjusted rent expense is ₦50,000 (₦60,000 - ₦10,000 prepayment), and total debenture interest charged is ₦25,000. Total expenses equal ₦255,000 (₦180,000 + ₦50,000 + ₦25,000). Deducting ₦255,000 from gross profit of ₦850,000 gives a net profit before tax of ₦595,000. Finally, subtracting the ₦110,000 tax provision leaves ₦485,000.

Step-by-Step Solution

1

Calculate adjusted rent expense

₦60,000 - ₦10,000 = ₦50,000

Prepaid rent must be subtracted from rent paid to arrive at the actual expense incurred for the accounting period.

2

Determine total debenture interest expense

₦25,000

The full annual interest accrued must be recognized in the statement of profit or loss regardless of cash paid.

3

Calculate net profit before taxation

₦850,000 - (₦180,000 + ₦50,000 + ₦25,000) = ₦595,000

Deduct total operating expenses (salaries, adjusted rent, and debenture interest) from gross profit.

4

Calculate net profit after taxation

₦595,000 - ₦110,000 = ₦485,000

Deduct corporate taxation provision from net profit before tax to get the final net profit after tax.

Key Concept

Preparation of Company Statement of Profit or Loss

Question 11878Question →

Calabar Head Office operates a dependent branch in Uyo, invoicing all goods at cost price. For the year ended 31 December 2025, the following records were extracted from the branch accounting books:

Transaction Details	Amount (₦)
Stock at branch (1 January 2025)	45,000
Branch debtors (1 January 2025)	28,000
Goods sent to branch	320,000
Goods returned by branch to head office	12,000
Cash received from branch debtors	215,000
Cash sales at branch	140,000
Credit sales at branch	230,000
Returns inwards from branch debtors	5,000
Bad debts written off at branch	3,000
Discount allowed to branch debtors	4,000
Branch operating expenses paid by head office	38,000
Stock at branch (31 December 2025)	58,000

Based on the information provided, what is the net profit earned by the Uyo branch for the year ended 31 December 2025?

Show answer & explanation

Answer: 25000

Answer

The net profit earned by the Uyo branch for the year ended 31 December 2025 is ₦25,000.

The correct net profit is computed by preparing the Branch Account in the Head Office ledger. The Branch Account is credited with cash remitted (₦355,000), closing stock (₦58,000), and closing debtors (₦31,000), totaling ₦444,000. It is debited with opening stock (₦45,000), opening debtors (₦28,000), net goods sent to branch (₦308,000), and expenses paid by head office (₦38,000), totaling ₦419,000. The surplus of credits over debits represents the net profit of ₦25,000.

Step-by-Step Solution

1

Calculate the closing balance of Branch Debtors Account

Closing Debtors = ₦31,000

Branch Debtors Account is debited with opening debtors (₦28,000) and credit sales (₦230,000), and credited with cash received (₦215,000), returns inwards (₦5,000), bad debts (₦3,000), and discount allowed (₦4,000). Balancing the account yields ₦31,000.

2

Calculate total cash remitted from branch to Head Office

Total Cash Remitted = ₦355,000

In a dependent branch system, all cash collected (cash sales of ₦140,000 plus collections from debtors of ₦215,000) is remitted directly to the head office.

3

Calculate net cost of goods supplied to the branch

Net Goods Sent = ₦308,000

Goods sent to branch (₦320,000) minus goods returned by branch to head office (₦12,000) gives the net inventory supplied at cost.

4

Compile the Branch Account to compute branch net profit

Net Profit = ₦25,000

Credit side (Cash Remitted ₦355,000 + Closing Stock ₦58,000 + Closing Debtors ₦31,000 = ₦444,000) minus Debit side (Opening Stock ₦45,000 + Opening Debtors ₦28,000 + Net Goods Sent ₦308,000 + Operating Expenses ₦38,000 = ₦419,000) leaves a net profit balance of ₦25,000.

Key Concept

Accounting for Dependent Branches at Cost Price

Question 11879Question →

A manufacturing enterprise provided the following figures for the financial year ended 31 December 2025:

Item	Amount
Direct manufacturing costs	$\text{₦}180,000$
Factory overhead expenses	$\text{₦}65,000$
Work-in-progress (1 January 2025)	$\text{₦}22,000$
Work-in-progress (31 December 2025)	$\text{₦}18,000$

What is the total cost of production transferred to the trading account?

\text{₦}241,000

\text{₦}245,000

\text{₦}249,000

\text{₦}263,000

Show answer & explanation

Answer: $\text{₦}249,000$

Answer

The total cost of production transferred to the trading account is

\text{₦}249,000

.

The cost of production is computed as: Total Manufacturing Costs (Direct Costs + Factory Overheads) + Opening Work-in-Progress - Closing Work-in-Progress. Substituting the given amounts:

\text{₦}180,000 + \text{₦}65,000 + \text{₦}22,000 - \text{₦}18,000 = \text{₦}249,000

.

Step-by-Step Solution

1

Calculate total manufacturing cost incurred before WIP adjustment.

\text{Direct Costs} + \text{Factory Overheads} = \text{₦}180,000 + \text{₦}65,000 = \text{₦}245,000

Prime costs and factory overheads combine to form total incurred cost during the production period.

2

Adjust for Opening Work-in-Progress (WIP).

\text{₦}245,000 + \text{₦}22,000 = \text{₦}267,000

Opening WIP represents goods partially completed in the previous period that were completed during the current period.

3

Deduct Closing Work-in-Progress (WIP).

\text{Cost of Production} = \text{₦}267,000 - \text{₦}18,000 = \text{₦}249,000

Closing WIP represents uncompleted goods at year-end, which must be carried forward to the next period.

Key Concept

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

Estimated Time:1m 30s

Question 11880Question →

Match each data security threat in accounting systems listed in Column A with its correct description or characteristic in Column B.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Phishing matches deceptive emails designed to trick staff into revealing credentials; Ransomware matches malicious software that encrypts financial records for ransom; Unauthorized Access matches unpermitted entry into accounting software; Data Corruption matches alteration or loss of accounting data due to system or hardware failures.

Each security threat is correctly matched to its core operating mechanism: Phishing uses fake messages to obtain credentials, Ransomware encrypts records for ransom, Unauthorized Access involves entry without permissions, and Data Corruption represents hardware/software failure causing file degradation.

Step-by-Step Solution

1

Identify the definition of Phishing in accounting IT security.

Phishing is social engineering using fraudulent emails to steal user credentials.

Match Phishing with deceptive messages attempting credential theft.

2

Identify the definition of Ransomware.

Ransomware holds files hostage by encrypting financial records until a ransom is paid.

Match Ransomware with malicious software demanding payment for decryption keys.

3

Define Unauthorized Access.

Unauthorized access is entry into accounting systems without proper approval.

Match Unauthorized Access with entry into software by unapproved personnel.

4

Define Data Corruption.

Data corruption refers to damaged or unreadable accounting files resulting from system errors, crashes, or malware.

Match Data Corruption with alteration or loss of accounting records.

Key Concept

Classification of IT threats in computerized accounting systems

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept