All practice questions

Question 11921Question →

Peter and Paul are partners in a trading firm sharing profits and losses in the ratio of $3:2$ . They admit Grace into the partnership, granting her a $\frac{1}{5}$ share of the total profits. What is the new profit-sharing ratio of Peter, Paul, and Grace?

12 : 8 : 5

3 : 2 : 1

2 : 2 : 1

9 : 6 : 5

Show answer & explanation

Answer: $12 : 8 : 5$

Answer

The new profit-sharing ratio of Peter, Paul, and Grace is

12 : 8 : 5

.

When Grace is admitted with a

\frac{1}{5}

share, the total remaining profit available to Peter and Paul is

1 - \frac{1}{5} = \frac{4}{5}

. Peter's new share is

\frac{3}{5} \times \frac{4}{5} = \frac{12}{25}

, Paul's new share is

\frac{2}{5} \times \frac{4}{5} = \frac{8}{25}

, and Grace's share expressed with the same denominator is

\frac{5}{25}

. Combining these gives the new ratio of

12 : 8 : 5

.

Step-by-Step Solution

1

Calculate the remaining profit share after admitting Grace

Remaining share =

1 - \frac{1}{5} = \frac{4}{5}

Grace is given a

\frac{1}{5}

share of the total firm's profit.

2

Calculate Peter's new share of profit

Peter's share =

\frac{3}{5} \times \frac{4}{5} = \frac{12}{25}

Peter retains his relative proportion of

\frac{3}{5}

out of the remaining

\frac{4}{5}

share.

3

Calculate Paul's new share of profit

Paul's share =

\frac{2}{5} \times \frac{4}{5} = \frac{8}{25}

Paul retains his relative proportion of

\frac{2}{5}

out of the remaining

\frac{4}{5}

share.

4

Express Grace's share with a common denominator of 25

Grace's share =

\frac{1}{5} = \frac{5}{25}

A common denominator is required to establish the ratio.

5

Write the new profit-sharing ratio

Peter : Paul : Grace =

12 : 8 : 5

Comparing the numerators

\frac{12}{25} : \frac{8}{25} : \frac{5}{25}

gives

12 : 8 : 5

.

Key Concept

Calculation of New Profit Sharing Ratio on Admission of a New Partner

Question 11922Question →

Chidi, Ngozi, and Ibrahim are partners sharing profits and losses in the ratio $2:2:1$ respectively. Upon Chidi's retirement, the firm's assets and liabilities are revalued, resulting in a net revaluation profit of $\text{₦}15,000$ . What amount in Naira ( $\text{₦}$ ) will be credited to Chidi's capital account as his share of the revaluation profit?

Show answer & explanation

Answer: 6000

Answer

The amount credited to Chidi's capital account as his share of the revaluation profit is ₦6,000.

Upon a partner's retirement, any gain on the revaluation of assets and liabilities is credited to all existing partners in their old profit-sharing ratio (

2:2:1

). Chidi's share is calculated as

\frac{2}{5} \times \text{₦}15,000 = \text{₦}6,000

.

Step-by-Step Solution

1

Calculate total shares in the profit-sharing ratio

2 + 2 + 1 = 5 total shares

To determine the proportion of profits and losses assigned to each partner.

2

Calculate Chidi's share of the revaluation profit

(2 / 5) * ₦15,000 = ₦6,000

The retiring partner is entitled to their share of revaluation profit calculated using the old profit-sharing ratio prior to retirement.

Key Concept

Distribution of Revaluation Profit on Partner Retirement

Question 11923Question →

Kojo, a sole trader in electronics, maintains single-entry accounting records. For the year ended 31st December 2025, the following information was extracted from his records:

- Inventory at 1st January 2025: $\text{₦}75,000$
- Total Purchases: $\text{₦}430,000$
- Carriage Inwards: $\text{₦}25,000$
- Returns Outwards: $\text{₦}10,000$
- Total Sales Revenue: $\text{₦}600,000$

Goods are sold at a uniform mark-up of $25\%$ on cost.

What is the estimated value of Kojo's closing inventory as at 31st December 2025?

₦15,000

₦40,000

₦60,000

₦70,000

Show answer & explanation

Answer: ₦40,000

Answer

The estimated value of closing inventory as at 31st December 2025 is ₦40,000.

A mark-up of 25% on cost is equivalent to a 20% margin on sales revenue (

\frac{1}{4}

mark-up converts to

\frac{1}{5}

margin). Applying 20% to the total sales of ₦600,000 gives a gross profit of ₦120,000, leaving Cost of Goods Sold (COGS) at ₦480,000. Total Cost of Goods Available for Sale equals Opening Stock (₦75,000) plus Net Purchases (₦420,000) plus Carriage Inwards (₦25,000), giving ₦520,000. Subtracting COGS (₦480,000) from ₦520,000 yields the correct closing inventory of ₦40,000.

Step-by-Step Solution

1

Convert the mark-up percentage to profit margin on sales

\text{Margin} = \frac{\text{Mark-up}}{1 + \text{Mark-up}} = \frac{0.25}{1 + 0.25} = \frac{0.25}{1.25} = 0.20 \text{ (or } 20\%\text{)}

Mark-up is based on cost, whereas gross margin is expressed as a fraction of sales revenue.

2

Calculate Cost of Goods Sold (COGS)

\text{COGS} = \text{Sales} \times (1 - \text{Margin}) = \text{₦}600,000 \times (1 - 0.20) = \text{₦}480,000

Deducting the gross profit element from total sales revenue yields the cost of goods sold.

3

Compute Total Cost of Goods Available for Sale

\text{Goods Available} = \text{Opening Stock} + (\text{Purchases} - \text{Returns Outwards}) + \text{Carriage Inwards} = \text{₦}75,000 + (\text{₦}430,000 - \text{₦}10,000) + \text{₦}25,000 = \text{₦}520,000

Carriage inwards increases the cost of inventory acquired, while returns outwards reduce net purchases.

4

Determine Closing Inventory

\text{Closing Inventory} = \text{Goods Available for Sale} - \text{COGS} = \text{₦}520,000 - \text{₦}480,000 = \text{₦}40,000

Subtracting the cost of goods sold from total cost of goods available gives the remaining unsold inventory.

Key Concept

Relationship between Mark-up and Margin in Inventory Estimation

Estimated Time:2m 0s

Question 11924Question →

A business operates an imprest system with a fixed petty cash float of $\text{₦}45,000$ . At the end of June 2026, petty cash vouchers revealed total disbursements of $\text{₦}36,000$ , consisting of office stationery $\text{₦}12,400$ , travelling expenses $\text{₦}15,600$ , and cleaning expenses $\text{₦}8,000$ . Which double entry is required in the main accounting books to reimburse the petty cashier and restore the float?

Debit Petty Cash Account

\text{₦}36,000

; Credit Bank Account

\text{₦}36,000

Debit Bank Account

\text{₦}36,000

; Credit Petty Cash Account

\text{₦}36,000

Debit Petty Cash Account

\text{₦}9,000

; Credit Bank Account

\text{₦}9,000

Debit Stationery Account

\text{₦}12,400

, Travelling Account

\text{₦}15,600

, Cleaning Account

\text{₦}8,000

; Credit Bank Account

\text{₦}36,000

Show answer & explanation

Answer: Debit Petty Cash Account $\text{₦}36,000$ ; Credit Bank Account $\text{₦}36,000$

Answer

Debit Petty Cash Account ₦36,000; Credit Bank Account ₦36,000

Under the imprest system, the petty cashier is reimbursed for exact total expenses paid during the period. Since total disbursements equal ₦36,000, issuing a cheque from the main bank account requires debiting the Petty Cash Account (to restore funds) and crediting the Bank Account (for funds drawn).

Step-by-Step Solution

1

Calculate total petty cash disbursements

Total expenses paid =

\text{₦}12,400 + \text{₦}15,600 + \text{₦}8,000 = \text{₦}36,000

Under the imprest system, the amount reimbursed must exactly equal the total cash spent during the period.

2

Determine double entry for reimbursing petty cash float from bank

Debit Petty Cash Account

\text{₦}36,000

(receiving asset), Credit Bank Account

\text{₦}36,000

(paying asset)

Reimbursement increases petty cash balance back to the float level of ₦45,000 by drawing funds from the bank.

Key Concept

Accounting entry for restoring the petty cash imprest float

Question 11925Question →

Danladi Enterprises consigned $200$ crates of fruit juice to Segun at an agreed benchmark selling price of ₦ $5,000$ per crate. Segun's terms of remuneration comprise 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 revenue realized above the benchmark price. During the period, Segun sold $120$ crates for cash and $80$ crates on credit, all at a uniform price of ₦ $6,000$ per crate. What is the total commission payable to Segun?

₦92,000

��110,000

₦72,000

₦192,000

Show answer & explanation

Answer: ₦92,000

Answer

The total commission payable to Segun is ₦92,000.

The correct total commission of ₦92,000 is determined by adding ordinary commission of ₦60,000 (5% of total sales ₦1,200,000), del-credere commission of ₦12,000 (2.5% of credit sales ₦480,000), and overriding commission of ₦20,000 (10% of the ₦200,000 excess realized over the benchmark price of ₦1,000,000).

Step-by-Step Solution

1

Calculate cash sales, credit sales, and total sales revenue

Cash sales = 120 × ₦6,000 = ₦720,000; Credit sales = 80 × ₦6,000 = ₦480,000; Total sales = ₦720,000 + ₦480,000 = ₦1,200,000.

Establishing individual revenue components is necessary to apply the respective commission rates.

2

Calculate the Ordinary Commission

Ordinary Commission = 5% of ₦1,200,000 = ₦60,000.

Ordinary commission is calculated on total sales revenue.

3

Calculate the Del-Credere Commission

Del-Credere Commission = 2.5% of ₦480,000 = ₦12,000.

Unless stated otherwise, del-credere commission is computed specifically on credit sales.

4

Calculate the Overriding Commission

Benchmark value = 200 × ₦5,000 = ₦1,000,000. Surplus revenue = ₦1,200,000 - ₦1,000,000 = ₦200,000. Overriding Commission = 10% of ₦200,000 = ₦20,000.

Overriding commission is granted on the excess price realized over the specified benchmark price.

5

Sum all commission types to determine total remuneration

Total Commission = ₦60,000 + ₦12,000 + ₦20,000 = ₦92,000.

Combining ordinary, del-credere, and overriding commissions yields total commission payable.

Key Concept

Consignee Commission Types and Computation

Question 11926Question →

Zainab, Tariq, and Usman are in a partnership sharing profits and losses in the ratio $5:3:2$ respectively. Tariq decides to retire from the firm on December 31, 2025. On this date, Tariq's Capital Account shows a credit balance of $\text{₦}120,000$ , while his Current Account has a debit balance of $\text{₦}15,000$ .

Additional adjustments agreed upon retirement are:
1. Land and Buildings (book value $\text{₦}200,000$ ) are revalued upward by $20\%$ .
2. Motor Vehicles (book value $\text{₦}80,000$ ) are revalued downward by $15\%$ .
3. Goodwill is valued at $\text{₦}60,000$ , and Tariq's share is to be credited to his account without maintaining a Goodwill Account in the books.
4. The General Reserve standing at $\text{₦}50,000$ is to be shared among the partners in their profit-sharing ratio.

What is the net total amount payable to Tariq upon his retirement?

\text{₦}146,400

\text{₦}161,400

\text{₦}176,400

\text{₦}150,000

Show answer & explanation

Answer: $\text{₦}146,400$

Answer

The net total amount payable to Tariq upon his retirement is

\text{₦}146,400

.

The net amount payable to the retiring partner is computed by taking the opening capital balance (Credit

\text{₦}120,000

), adding his share of revaluation profit (

\text{₦}8,400

), goodwill (

\text{₦}18,000

), and general reserve (

\text{₦}15,000

), and deducting his debit current account balance (

\text{₦}15,000

), yielding

\text{₦}146,400

.

Step-by-Step Solution

1

Calculate net profit on revaluation of assets

Appreciation on Land & Buildings =

20\% \times \text{₦}200,000 = +\text{₦}40,000

.
Depreciation on Motor Vehicles =

15\% \times \text{₦}80,000 = -\text{₦}12,000

.
Net Revaluation Profit =

\text{₦}40,000 - \text{₦}12,000 = \text{₦}28,000

.

Revaluation gain or loss must consider all asset value changes before determining the net profit to distribute.

2

Determine Tariq's share of Revaluation Profit, Goodwill, and General Reserve

Profit sharing ratio =

5:3:2

(Tariq's share =

\frac{3}{10}

).
- Tariq's share of Revaluation Profit =

\frac{3}{10} \times \text{₦}28,000 = \text{₦}8,400

.
- Tariq's share of Goodwill =

\frac{3}{10} \times \text{₦}60,000 = \text{₦}18,000

.
- Tariq's share of General Reserve =

\frac{3}{10} \times \text{₦}50,000 = \text{₦}15,000

.

Accumulated reserves, unrecorded goodwill share, and revaluation profits belong to partners in their old profit-sharing ratio.

3

Compute total credits due to Tariq

Capital Account Balance (Credit) =

\text{₦}120,000

.
Total Credits =

\text{₦}120,000 + \text{₦}8,400 + \text{₦}18,000 + \text{₦}15,000 = \text{₦}161,400

.

Summing all credit balances and entitlement shares gives the gross claim.

4

Deduct Current Account Debit Balance to determine net settlement figure

Net Settlement =

\text{₦}161,400 - \text{₦}15,000 = \text{₦}146,400

.

A debit balance in a partner's current account represents indebtedness to the firm and must be deducted from the total capital entitlement.

Key Concept

Partnership Retirement Settlement

Question 11927Question →

A coastal meteorological station situated at latitude $10^\circ\text{N}$ records a high mean annual temperature exceeding $27^\circ\text{C}$ and an annual rainfall total of $2{}800\text{ mm}$ . The station receives heavy precipitation for ten months of the year, but experiences a brief, distinct dry period of two months where precipitation falls slightly below $60\text{ mm}$ per month. Despite this dry season, soil moisture reserves remain high enough to support dense tropical rainforest growth. Which Köppen climate classification code and underlying atmospheric control mechanism account for these observed conditions?

Climate code

Am

, where seasonal wind reversals driven by differential land-sea heating produce intense onshore monsoon rainfall that compensates for the short dry season.

Climate code

Aw

, where persistent dry continental trade winds dominate the wet season and suppress cloud formation for ten months of the year.

Climate code

Af

, where continuous frontogenesis along the polar front causes uniform precipitation with no dry months.

Climate code

Cs

, where the southward shift of subtropical high-pressure cells generates maximum rainfall during the high-sun summer season.

Show answer & explanation

Answer: Climate code $Am$ , where seasonal wind reversals driven by differential land-sea heating produce intense onshore monsoon rainfall that compensates for the short dry season.

Answer

The correct answer is Climate code

Am

, where seasonal wind reversals driven by differential land-sea heating produce intense onshore monsoon rainfall that compensates for the short dry season.

The Tropical Monsoon climate (

Am

) is defined by a high total annual precipitation that compensates for a short dry season where monthly rainfall drops below

60\text{ mm}

. The major controlling mechanism is the seasonal reversal of winds (monsoon wind system) caused by differential heating between oceans and landmasses, bringing abundant maritime moisture onshore.

Step-by-Step Solution

1

Analyze the rainfall and temperature profile of the meteorological station.

High annual temperature (

>27^\circ\text{C}

), very high annual precipitation (

2{}800\text{ mm}

), and a brief 2-month dry season (

<60\text{ mm}

per month).

Identifying temperature and monthly precipitation thresholds is the first step in Köppen climate classification.

2

Determine the Köppen climate code based on empirical criteria.

The criteria match Tropical Monsoon (

Am

), where high overall precipitation compensates for a short dry spell, allowing rainforest vegetation to persist.

Köppen defines

Am

by high total annual rainfall despite having one or more months with less than

60\text{ mm}

of rain.

3

Identify the primary climatic control mechanism for this region.

Seasonal wind reversals resulting from thermal pressure differences between landmasses and oceans during high-sun periods bring moist maritime air inland.

Monsoon circulation (

Am

) is primarily driven by seasonal shifts in pressure gradient and wind direction.

Key Concept

Köppen Tropical Monsoon (

Am

) Climate Classification and Atmospheric Controls

Question 11928Question →

Ibrahim and Kemi are partners sharing profits and losses in the ratio $3:2$ . On 1st January 2026, they agreed to revalue their firm's assets and liabilities as follows:

- Building (book value $\text{₦}500,000$ ) revalued to $\text{₦}620,000$
- Furniture (book value $\text{₦}150,000$ ) revalued to $\text{₦}120,000$
- Provision for doubtful debts of $5\%$ created on trade debtors of $\text{₦}100,000$
- An unrecorded accrued electricity bill of $\text{₦}15,000$ recognized

What is the amount credited to Ibrahim's capital account as his share of the revaluation profit?

\text{₦}42,000

\text{₦}28,000

\text{₦}45,000

\text{₦}70,000

Show answer & explanation

Answer: $\text{₦}42,000$

Answer

\text{₦}42,000

is credited to Ibrahim's capital account as his share of revaluation profit.

Revaluation gain from Building appreciation is

\text{₦}120,000

. Revaluation losses comprise Furniture depreciation (

\text{₦}30,000

), Provision for Doubtful Debts (

\text{₦}5,000

), and unrecorded electricity liability (

\text{₦}15,000

), totaling

\text{₦}50,000

. Subtracting total losses from total gain yields a net revaluation profit of

\text{₦}70,000

. Ibrahim's

3/5

share of this net profit equals

\text{₦}42,000

.

Step-by-Step Solution

1

Calculate gains and losses on revaluation

Gain on Building =

\text{₦}620,000 - \text{₦}500,000 = \text{₦}120,000

. Loss on Furniture =

\text{₦}150,000 - \text{₦}120,000 = \text{₦}30,000

. Provision for Doubtful Debts =

5\% \times \text{₦}100,000 = \text{₦}5,000

. Unrecorded Liability =

\text{₦}15,000

.

Increases in assets are gains (credited), while decreases in assets and increases in liabilities are losses (debited) in the Revaluation Account.

2

Determine the net revaluation profit

Total Revaluation Gain =

\text{₦}120,000

. Total Revaluation Loss =

\text{₦}30,000 + \text{₦}5,000 + \text{₦}15,000 = \text{₦}50,000

. Net Revaluation Profit =

\text{₦}120,000 - \text{₦}50,000 = \text{₦}70,000

.

Net revaluation profit equals total credits minus total debits in the Revaluation Account.

3

Allocate net revaluation profit to Ibrahim using the old profit-sharing ratio

Ibrahim's share =

\frac{3}{3+2} \times \text{₦}70,000 = \frac{3}{5} \times \text{₦}70,000 = \text{₦}42,000

.

Revaluation profit or loss belongs to existing partners in their agreed profit-sharing ratio.

Key Concept

Revaluation Account Profit Allocation

Question 11929Question →

Match each settlement pattern observed on a topographical map extract on the left with its primary physical or socio-economic site factor on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Linear settlement along a contour line matches with spring-line site where groundwater emerges at a specific elevation; Compact nucleated settlement at a road junction matches with nodal site advantage fostering commercial activities and transport convergence; Dispersed settlement across a dissected plateau matches with topographic fragmentation forcing farmsteads to locate on scattered arable patches; Radial settlement pattern matches with ribbon development along multiple transport routes radiating from a focal hub.

Each settlement pattern correctly corresponds to its underlying geographic control: contour-aligned linear settlements reflect spring-line water availability; junction-nucleated settlements rely on nodal transport convergence; plateau-dispersed settlements are dictated by fragmented terrain; and radial settlements grow outward along arterial roads radiating from a central hub.

Step-by-Step Solution

1

Examine the linear settlement aligned along a hill slope contour line.

Recognize that settlement alignment following a constant elevation contour indicates reliance on a spring-line water source.

Spring lines emerge along permeable-impermeable rock interfaces, drawing homesteads linearly along that specific contour line.

2

Analyze the compact building cluster at the road junction.

Identify this as a nodal settlement driven by accessibility and commercial activity.

Intersections act as nodes where transportation routes meet, concentrating economic services and housing.

3

Assess the dispersed homestead arrangement on the plateau.

Associate isolated buildings with rugged relief and land fragmentation.

Uneven topography and divided farmlands prevent dense clustering, prompting families to live directly on their scattered plots.

4

Evaluate the star-shaped settlement spreading from a central town.

Link this pattern to radial expansion along main outgoing transit corridors.

Roads radiating from a central commercial hub encourage linear building growth outwards along each route.

Key Concept

Interpretation of Settlement Patterns and Site/Situation Factors on Topographical Maps

Estimated Time:1m 30s

Question 11930Question →

In public sector financial control and audit, specific statutory procedures must be followed to authorize, execute, and inspect government expenditure. Arrange the following steps in the correct chronological order from initial legislative approval to final external oversight.

Drag items to arrange them in the correct order

Show answer & explanation

Answer

The correct sequence for public sector financial control and audit execution is: Enactment of the Appropriation Act → Issuance of General Warrant by the Minister of Finance → Release of Departmental Warrants to Accounting Officers → Internal pre-payment audit verification of payment vouchers → Submission of audit report by the Auditor-General to the Public Accounts Committee.

Public financial control operates strictly through a linear hierarchy: statutory legislative authorization (Appropriation Act), executive treasury release (General Warrant), departmental expenditure delegation (Departmental Warrant), ex-ante internal departmental control (pre-audit voucher verification), and ex-post external oversight (Auditor-General reporting to the Public Accounts Committee).

Step-by-Step Solution

1

Identify the foundational legislative authority.

The Appropriation Act passed by the Legislature provides legal authority for government spending.

Under public sector financial control rules, no money can be withdrawn from the Consolidated Revenue Fund without statutory legislative approval.

2

Determine executive treasury authorization flow.

The Minister of Finance issues the General Warrant to the Accountant-General.

The General Warrant operationalizes the approved budget, directing the Accountant-General to release funds to government agencies.

3

Trace delegation of spending limits to line ministries.

Departmental Warrants are allocated to Accounting Officers (Permanent Secretaries).

Accounting Officers require specific departmental warrant authorization before incurring commitments against operational sub-heads.

4

Examine internal departmental control prior to payment.

Payment vouchers are prepared and undergo internal pre-audit verification.

Departmental internal audit units must verify payment vouchers prior to cash disbursement to prevent regularities and budget overspending.

5

Identify ex-post external audit oversight.

The Auditor-General submits audit findings to the Public Accounts Committee (PAC).

Independent external audit review occurs after financial year-end, submitting statutory findings directly to the legislature for parliamentary scrutiny.

Key Concept

Public Sector Financial Control and Audit Hierarchy

Question 11931Question →

A sole trader paid $\text{N}640,000$ for advertising during the year ended 31 December 2025. On 1 January 2025, advertising paid in advance was $\text{N}50,000$ . At the end of the financial year on 31 December 2025, accrued advertising amounted to $\text{N}75,000$ , while prepaid advertising was $\text{N}30,000$ . What is the total advertising expense to be charged to the Profit and Loss Account for the year ended 31 December 2025?

Show answer & explanation

Answer: 735000

Answer

The total advertising expense to be charged to the Profit and Loss Account for the year ended 31 December 2025 is

\text{N}735,000

.

According to the accrual concept of accounting, revenue and expenses are recognized in the period to which they relate, not necessarily when cash is received or paid. The formula to calculate the expense charged to the Profit and Loss Account is: Cash Paid + Opening Prepayments - Opening Accruals + Closing Accruals - Closing Prepayments. Substituting the given values gives

640,000 + 50,000 + 75,000 - 30,000 = \text{N}735,000

.

Step-by-Step Solution

1

Record total cash paid during the financial period

Cash paid =

\text{N}640,000

This is the base cash disbursement for advertising in 2025.

2

Add opening prepayment from 1 January 2025

Adjusted subtotal =

640,000 + 50,000 = \text{N}690,000

Prepayments made in the previous year belong to the current year's expense under the accrual principle.

3

Add closing accrual on 31 December 2025

Adjusted subtotal =

690,000 + 75,000 = \text{N}765,000

Accrued expenses incurred during the current financial year must be recognized regardless of whether payment has occurred.

4

Subtract closing prepayment on 31 December 2025

Final Profit and Loss Charge =

765,000 - 30,000 = \text{N}735,000

Prepayments made in the current year cover the subsequent financial period and must be excluded from the current year's Profit and Loss Account.

Key Concept

Adjustments for opening/closing accruals and prepayments to determine the accurate period expense under accrual accounting.

Question 11932Question →

An enterprise owner wants to determine whether a newly assigned duty falls under the scope of bookkeeping or accounting. Which of the following activities is uniquely a function of accounting rather than bookkeeping?

Interpreting financial statements to evaluate business profitability and performance

Posting daily sales transactions from source documents into subsidiary ledgers

Recording cash receipts and payments in the two-column cash book

Extracting the trial balance to verify the mathematical accuracy of ledger balances

Show answer & explanation

Answer: Interpreting financial statements to evaluate business profitability and performance

Answer

Interpreting financial statements to evaluate business profitability and performance is uniquely a function of accounting.

Accounting involves the analysis, synthesis, interpretation, and presentation of financial results to support managerial decision-making, distinguishing it from bookkeeping which focuses strictly on routine recording and balancing.

Step-by-Step Solution

1

Define the boundary of bookkeeping activities

Bookkeeping encompasses recording, posting, and balancing routine daily financial transactions (source documents, journals, ledgers, and trial balance).

It forms the primary procedural baseline of the accounting cycle.

2

Define the boundary of accounting activities

Accounting begins where bookkeeping ends; it includes analyzing, interpreting, and presenting financial reports to aid decision-making.

Accounting requires specialized analytical judgment beyond clerical recording.

3

Compare the option activities against the definitions

Only financial statement interpretation and evaluation require analytical accounting judgment.

Posting, recording cash entries, and extracting a trial balance are clerical bookkeeping duties.

Key Concept

Scope difference between Bookkeeping and Accounting

Estimated Time:1m 0s

Question 11933Question →

During a routine security review of an automated corporate accounting system, an auditor discovers that financial data transmitted between remote branch operations and the central ledger server was intercepted and modified in transit by an unauthorized entity. Which security threat was experienced in this scenario, and what primary control measure directly protects accounting data against such transit-level compromise?

A phishing attack, which is primarily mitigated by conducting periodic staff awareness training on email verification.

A ransomware infection, which is primarily mitigated by maintaining daily off-site database backups.

A man-in-the-middle data interception attack, which is primarily mitigated by enforcing strong cryptographic network encryption protocols.

A logic bomb vulnerability, which is primarily mitigated by implementing routine hard drive defragmentation schedules.

Show answer & explanation

Answer: A man-in-the-middle data interception attack, which is primarily mitigated by enforcing strong cryptographic network encryption protocols.

Answer

The threat experienced is a man-in-the-middle data interception attack, and the primary preventive control measure is enforcing strong cryptographic network encryption protocols.

Intercepting and altering active accounting data transmissions between remote branch terminals and central servers describes a man-in-the-middle network attack. Implementing cryptographic network encryption protocols protects data confidentiality and integrity by ensuring intercepted packets cannot be read or altered by unauthorized entities.

Step-by-Step Solution

1

Analyze the nature of the security incident described in the accounting system context.

The incident involves unauthorized interception and tampering of live financial records during network transit between remote terminals and the central server.

Identifying whether the threat target is user credentials, system files at rest, or active network transit determines the exact threat category.

2

Categorize the security threat.

Interception and manipulation of data packets while in movement across communications channels is classified as a man-in-the-middle (MitM) data interception attack.

Unlike static malware or social engineering, MitM specifically exploits unencrypted transit routes.

3

Determine the appropriate IT control measure to mitigate network data transit threats.

End-to-end network encryption protocols render intercepted data unreadable and tamper-evident to unauthorized third parties.

Encryption transforms plain financial data into unreadable ciphertext during transmission across public or private networks.

Key Concept

Data Security Threats and Network Controls in Computerized Accounting Systems

Question 11934Question →

Complete the statement describing the standard double-entry bookkeeping procedure for writing off an irrecoverable debt.

Fill in the blanks below

When an amount owed by a trade customer is determined to be uncollectible and written off at the financial year-end, the accounting entry requires debiting the Account and crediting the Account.

Show answer & explanation

Answer

The first blank is 'Bad Debts' and the second blank is 'Debtors' (or 'Trade Debtors').

Writing off an irrecoverable debt increases expenses (debited to Bad Debts Account) and reduces trade receivables (credited to Debtors Account).

Step-by-Step Solution

1

Determine which account reflects the loss incurred from uncollectible debts.

The Bad Debts Account is recognized as an expense account and must be debited.

Losses and expenses are debited according to the fundamental rules of double-entry bookkeeping.

2

Determine which account is reduced as a consequence of writing off the debt.

The Debtors (Trade Receivables) Account is credited.

Assets decrease on the credit side, so reducing the amount owed by customers requires a credit entry.

Key Concept

Double Entry for Bad Debts Written Off

Question 11935Question →

Apex Global Resources Plc has an issued share capital of 3,000,000 ordinary shares of $\text{₦}1.00$ each fully paid. The Share Premium account currently has a credit balance of $\text{₦}800,000$ . The company decides to make a bonus issue of 1 new share for every 5 ordinary shares held, utilizing the Share Premium account. What is the remaining balance in the Share Premium account after the capitalization for the bonus issue?

\text{₦}200,000

\text{₦}600,000

\text{₦}640,000

\text{₦}0

Show answer & explanation

Answer: $\text{₦}200,000$

Answer

The remaining balance in the Share Premium account after the bonus issue is

\text{₦}200,000

.

The company issues

600,000

bonus shares (1 for 5 of

3,000,000

) at a nominal value of

\text{₦}1.00

each, requiring

\text{₦}600,000

from reserves. Deducting

\text{₦}600,000

from the initial Share Premium credit balance of

\text{₦}800,000

leaves a remaining balance of

\text{₦}200,000

.

Step-by-Step Solution

1

Calculate the total number of bonus shares issued.

\text{Bonus Shares} = \frac{1}{5} \times 3,000,000 = 600,000 \text{ shares}

The bonus issue ratio is 1 new share for every 5 ordinary shares currently held.

2

Determine the monetary value of the bonus shares to be capitalized.

\text{Capitalized Amount} = 600,000 \text{ shares} \times \text{₦}1.00 = \text{₦}600,000

Bonus shares are capitalized at their nominal (par) value using available capital reserves.

3

Compute the remaining balance in the Share Premium account.

\text{Remaining Balance} = \text{₦}800,000 - \text{₦}600,000 = \text{₦}200,000

Deducting the amount capitalized for the bonus issue from the opening Share Premium balance gives the unutilized balance.

Key Concept

Capitalization of Reserves for Bonus Issues

Question 11936Question →

Suleiman Merchants consigned $500$ crates of goods to Danjuma Traders to sell on their behalf. The agreed commission structure was: an ordinary commission of $5\%$ on total sales, an overriding commission of $15\%$ on any excess sales proceeds realized above the target price of ₦ $4,000$ per crate, and a del-credere commission of $2.5\%$ on credit sales. During the consignment period, Danjuma Traders sold $300$ crates for cash at ₦ $4,500$ per crate and $150$ crates on credit at ₦ $4,800$ per crate. A credit customer subsequently defaulted, creating a bad debt of ₦ $96,000$ . What is the total commission in Naira (₦) earned by Danjuma Traders?

Show answer & explanation

Answer: 162000

Answer

The total commission earned by Danjuma Traders is ₦162,000.

Total commission earned by Danjuma Traders comprises Ordinary Commission (

5\%

of ₦

2,070,000 =

₦

103,500

), Overriding Commission (

15\%

of excess ₦

270,000 =

₦

40,500

), and Del-Credere Commission (

2.5\%

of credit sales ₦

720,000 =

₦

18,000

). Adding these together gives ₦

103,500 + 40,500 + 18,000 = \text{₦}162,000

. Note that bad debt affects the net profit of the consignee but does not reduce the contractually earned commission amount.

Step-by-Step Solution

1

Calculate Cash Sales, Credit Sales, and Total Sales

Cash Sales =

300 \times \text{₦}4,500 = \text{₦}1,350,000

Credit Sales =

150 \times \text{₦}4,800 = \text{₦}720,000

Total Sales = \text{₦}1,350,000 + \text{₦}720,000 = \text{₦}2,070,000$

Sales revenues are required to compute the percentage commissions.

2

Determine target price value and excess sales proceeds

Total units sold =

300 + 150 = 450

crates
Target sales value =

450 \times \text{₦}4,000 = \text{₦}1,800,000

Excess sales proceeds = \text{₦}2,070,000 - \text{₦}1,800,000 = \text{₦}270,000$

Overriding commission applies specifically to the extra price realized beyond the ₦4,000 per crate target price.

3

Compute Ordinary Commission

Ordinary Commission =

5\% \times \text{₦}2,070,000 = \text{₦}103,500

Ordinary commission is earned on total sales.

4

Compute Overriding Commission

Overriding Commission =

15\% \times \text{₦}270,000 = \text{₦}40,500

Overriding commission is earned on the surplus sales proceeds realized above the target price.

5

Compute Del-Credere Commission

Del-Credere Commission =

2.5\% \times \text{₦}720,000 = \text{₦}18,000

Del-credere commission is calculated on credit sales to compensate the consignee for bearing the risk of bad debts.

6

Calculate Total Commission

Total Commission = \text{₦}103,500 + \text{₦}40,500 + \text{₦}18,000 = \text{₦}162,000$

Adding the three commission components yields the total commission earned by the consignee.

Key Concept

Computation of Ordinary, Overriding, and Del-Credere Commissions in Consignment Accounts

Question 11937Question →

Zainab Retail Outlets extracted a Trade Debtors balance of $\text{₦}100,000$ at the end of the financial year. The business policy requires writing off bad debts of $\text{₦}10,000$ , maintaining a provision for doubtful debts at $5\%$ on net debtors, and creating a $2\%$ provision for discount on debtors. What is the amount of the provision for discount on debtors to be recognized?

\text{₦}1,800

\text{₦}1,710

\text{₦}2,000

\text{₦}1,700

Show answer & explanation

Answer: $\text{₦}1,710$

Answer

\text{₦}1,710

To calculate the provision for discount on debtors, accounting principles require a strict sequence: first subtract bad debts written off from gross debtors (

\text{₦}100,000 - \text{₦}10,000 = \text{₦}90,000

), then calculate and subtract the provision for doubtful debts (

5\% \times \text{₦}90,000 = \text{₦}4,500

), leaving

\text{₦}85,500

. Applying the

2\%

discount rate to

\text{₦}85,500

gives

\text{₦}1,710

.

Step-by-Step Solution

1

Deduct bad debts written off from gross trade debtors

\text{₦}100,000 - \text{₦}10,000 = \text{₦}90,000

Bad debts must be written off first to arrive at net recoverable debtors.

2

Calculate and deduct provision for doubtful debts on remaining debtors

Provision for doubtful debts =

5\% \times \text{₦}90,000 = \text{₦}4,500

. Net debtors eligible for discount =

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

Discount is offered only to debtors expected to pay, so doubtful debts must be excluded prior to computing discount provision.

3

Calculate provision for discount on debtors

Provision for discount on debtors =

2\% \times \text{₦}85,500 = \text{₦}1,710

The

2\%

rate is applied to the net expected collectible debtors.

Key Concept

Accounting Order of Adjustments for Debtors

Estimated Time:1m 30s

Question 11938Question →

The following information relates to the bar operations of Harmony Social Club for the year ended 31 December 2025:

Item	Amount (₦)
Bar inventory (1 January 2025)	25,000
Bar inventory (31 December 2025)	30,000
Cash paid to bar creditors	140,000
Bar creditors (1 January 2025)	18,000
Bar creditors (31 December 2025)	24,000
Returns outward to bar suppliers	5,000
Bar takings (sales)	220,000
Bar steward's salary paid	12,000
Bar license fee paid	8,000
Depreciation of bar equipment	4,000

Additional information:
1. Bar steward's salary owing at 31 December 2025 was ₦3,000.
2. Bar license fee paid includes ₦2,000 prepaid for the 2026 financial year.

Calculate the net profit from bar trading operations (in ₦) to be transferred to the Income and Expenditure Account for the year ended 31 December 2025.

Show answer & explanation

Answer: 59000

Answer

The net profit from bar trading operations to be transferred to the Income and Expenditure Account is ₦59,000.

The net bar profit of ₦59,000 is calculated by deriving net purchases (₦141,000), computing the cost of goods sold (₦136,000), determining the gross profit (₦84,000), and deducting adjusted operating expenses (₦25,000).

Step-by-Step Solution

1

Calculate total purchases from bar creditors

Total Purchases = ₦146,000

Purchases are calculated by taking cash paid to creditors plus closing creditors minus opening creditors:

140,000 + 24,000 - 18,000 = 146,000

.

2

Calculate net purchases by deducting returns outward

Net Purchases = ₦141,000

Returns outward are deducted from total purchases:

146,000 - 5,000 = 141,000

.

3

Calculate Cost of Bar Goods Sold

Cost of Goods Sold = ₦136,000

Cost of goods sold combines opening inventory, net purchases, and closing inventory:

25,000 + 141,000 - 30,000 = 136,000

.

4

Determine Bar Gross Profit

Bar Gross Profit = ₦84,000

Gross profit is calculated by subtracting Cost of Goods Sold from Bar Takings:

220,000 - 136,000 = 84,000

.

5

Adjust and sum all bar operating expenses

Total Bar Expenses = ₦25,000

Expenses include accrued steward's salary (

12,000 + 3,000 = 15,000

), prepaid license fee (

8,000 - 2,000 = 6,000

), and depreciation (

4,000

):

15,000 + 6,000 + 4,000 = 25,000

.

6

Subtract total expenses from bar gross profit

Net Bar Profit = ₦59,000

Net profit transferred to Income and Expenditure account is Gross Profit minus Total Bar Expenses:

84,000 - 25,000 = 59,000

.

Key Concept

Calculation of Net Profit from Bar Operations in Non-Profit Organizations

Question 11939Question →

Complete the financial statement adjustment statement by calculating the correct value for the blank.

Fill in the blanks below

A firm transfers manufactured goods to its trading department at a transfer price featuring a

20\%

mark-up on production cost. If the closing inventory of finished goods held in the trading department is valued at a transfer price of

\text{₦}60,000

, the amount to be provided as provision for unrealized profit is

\text{₦}

.

Show answer & explanation

Answer

The provision for unrealized profit on closing inventory is ₦10,000.

The closing inventory of ₦60,000 is valued at transfer price, which incorporates a 20% profit mark-up on manufacturing cost. Converting the 20% (or

\frac{1}{5}

) mark-up on cost to margin on transfer price yields

\frac{1}{6}

. Taking

\frac{1}{6}

of ₦60,000 gives ₦10,000 as the required provision for unrealized profit.

Step-by-Step Solution

1

Convert the mark-up on cost to margin on transfer price.

A mark-up of 20% (or

\frac{1}{5}

) on cost translates to a margin of

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

on transfer price.

Since closing inventory is stated at transfer price (cost plus profit mark-up), the profit element must be calculated using margin relative to the transfer price.

2

Calculate the unrealized profit embedded in the closing inventory.

\frac{1}{6} \times \text{₦}60,000 = \text{₦}10,000

.

Multiplying the margin fraction by the total transfer price of closing inventory isolates the profit portion that remains unsold.

Key Concept

Provision for Unrealized Profit on Closing Inventory

Question 11940Question →

A business owner prepares financial statements presenting financial transactions in a clear, organized, and standardized format so that external stakeholders with basic business knowledge can easily digest the report. Which qualitative characteristic of accounting information does this practice directly exhibit?

Understandability

Verifiability

Business Entity Concept

Timeliness

Show answer & explanation

Answer: Understandability

Answer

Understandability

Understandability is an enhancing qualitative characteristic of accounting information which requires financial statements to be classified, characterized, and presented clearly and concisely so that users with a reasonable knowledge of business and economic activities can comprehend them.

Step-by-Step Solution

1

Identify the primary objective described in the scenario.

The scenario emphasizes presenting information in a clear, organized format for easy comprehension by stakeholders.

The core theme of the question is user comprehension and clarity of financial statements.

2

Match the identified objective with standard qualitative characteristics of accounting information.

Understandability is the enhancing qualitative characteristic that enables users with reasonable knowledge to comprehend financial reports.

Clear structure and concise presentation directly fulfill the criterion of understandability.

Key Concept

Understandability as an enhancing qualitative characteristic of accounting information

Estimated Time:45s

Answer

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