All practice questions

Question 11961Question →

Match each specific accounting transaction or treatment on the left with the accounting concept or convention that governs it on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Expensing small items corresponds to Materiality; revenue recognition upon dispatch corresponds to Realization; inventory valuation at lower of cost or NRV corresponds to Prudence; and separating personal bills from business expenses corresponds to the Business Entity Concept.

Each transaction is accurately paired with its governing principle: expensing low-value items relies on Materiality; recognizing revenue when risk transfers relies on Realization; conservative valuation of assets relies on Prudence; and separating personal funds from business funds relies on the Business Entity Concept.

Step-by-Step Solution

1

Analyze the treatment of low-value assets (office wastebasket).

Since the amount is negligible and does not influence financial decisions, it is governed by the Materiality Concept.

Immaterial items are expensed immediately to save administrative effort.

2

Determine when legal title and risk of goods transfer to the buyer.

Revenue is realized upon delivery/dispatch, adhering to the Realization Concept.

Earnings must be legally enforceable before being recorded in profit or loss.

3

Evaluate the valuation rule for closing inventory.

Valuing stock at the lower of cost and net realizable value follows the Prudence (Conservatism) Convention.

This prevents assets and profits from being overstated.

4

Examine the separation between owner and enterprise funds.

Recording personal bills paid via business account as drawings aligns with the Business Entity Concept.

The business is recognized as a separate accounting entity from its proprietor.

Key Concept

Application of Fundamental Accounting Concepts and Conventions

Estimated Time:1m 30s

Question 11962Question →

Match each consignment transaction recorded in the consignor's books on the left with its correct double-entry posting on the right:

Click a left item, then click its matching right item

Show answer & explanation

Answer

Goods dispatched matches Debit Consignment Account and Credit Goods Sent on Consignment Account; Direct expenses paid by consignor matches Debit Consignment Account and Credit Cash/Bank Account; Del-credere commission payable matches Debit Consignment Account and Credit Consignee's Personal Account; Advance payment received matches Debit Bills Receivable Account and Credit Consignee's Personal Account.

In the consignor's ledger, the Consignment Account is debited with all costs (cost of goods sent, direct handling expenses, and consignee commissions). The Consignee's Personal Account is credited with advance payments received (such as bills receivable) and commissions earned by the agent.

Step-by-Step Solution

1

Identify the posting for goods dispatched by consignor

Debit Consignment Account and Credit Goods Sent on Consignment Account

The Consignment Account acts as a nominal account accumulating all consignment costs.

2

Identify the posting for direct carriage and freight expenses paid by consignor

Debit Consignment Account and Credit Cash/Bank Account

Direct expenses incurred by the consignor increase consignment cost and involve cash outlay.

3

Identify the posting for commission earned by consignee

Debit Consignment Account and Credit Consignee's Personal Account

Commission is a consignment expense payable to the agent, creating a credit balance in the consignee's personal account.

4

Identify the posting for an advance received by bill of exchange

Debit Bills Receivable Account and Credit Consignee's Personal Account

Receiving an advance creates an asset (Bills Receivable) while reducing the consignee's obligation.

Key Concept

Double Entry Rules for Consignment and Consignee Ledger Accounts in Consignor's Books

Question 11963Question →

At the end of the financial year, a sole proprietor conducted a physical stock count and determined the total cost of closing inventory to be $20,000$ . Upon inspection, items costing $4,000$ were found to be damaged. These damaged items can be sold for $2,500$ after undertaking repairs that will cost $500$ . In accordance with the prudence concept, what is the correct valuation of closing inventory to be presented in the final accounts?

₦16,000

₦18,000

₦18,500

₦20,000

Show answer & explanation

Answer: ₦18,000

Answer

The correct valuation of closing inventory is ₦18,000.

According to the principle of prudence, inventory should be valued at the lower of cost and net realizable value (NRV). The undamaged portion costing ₦16,000 is valued at cost. For the damaged portion, NRV is calculated as estimated selling price (₦2,500) minus repair costs (₦500), yielding ₦2,000. Since ₦2,000 is lower than its original cost of ₦4,000, the damaged stock is valued at ₦2,000. Total closing inventory is ₦16,000 + ₦2,000 = ₦18,000.

Step-by-Step Solution

1

Calculate the cost of undamaged inventory items.

₦20,000 - ₦4,000 = ₦16,000

Separating undamaged inventory allows us to value undamaged goods at cost.

2

Calculate the Net Realizable Value (NRV) of the damaged inventory items.

Estimated Selling Price (₦2,500) - Repair Costs (₦500) = ₦2,000

NRV is defined as the estimated selling price less any costs to complete or make the sale.

3

Apply the rule of valuing inventory at the lower of cost and Net Realizable Value for damaged items.

Lower of Cost (₦4,000) and NRV (₦2,000) = ₦2,000

Under the prudence concept, inventory must be valued at the lower of cost and net realizable value.

4

Sum the value of undamaged goods and damaged goods to find total closing inventory.

₦16,000 + ₦2,000 = ₦18,000

The total valuation combines undamaged goods at cost and damaged goods at NRV.

Key Concept

Lower of Cost and Net Realizable Value (Prudence Concept)

Question 11964Question →

A financial controller discovered that a junior clerk modified posted general ledger entries despite only being authorized to process purchase orders. Which internal IT control mechanism should have been enforced to restrict the clerk's system privileges strictly to assigned job functions?

Role-based access control

Offsite data backup procedures

Antivirus software scheduling

Network firewall filtering

Show answer & explanation

Answer: Role-based access control

Answer

Role-based access control

Role-based access control ensures that each system user is granted only the rights necessary to perform their designated job duties. Restricting the junior clerk's access to the purchase order module prevents unauthorized editing of the general ledger.

Step-by-Step Solution

1

Analyze the security breach scenario

Identified that an internal authenticated user performed unauthorized actions beyond their job scope.

Understanding the nature of the security gap distinguishes internal privilege management from external threat defense.

2

Evaluate candidate IT control measures

Determined that restricting user capabilities according to specific job roles directly prevents unauthorized module access.

Role-based access control enforces the principle of least privilege in accounting information systems.

Key Concept

Role-Based Access Control and Internal Security Controls

Question 11965Question →

During the financial year ended 31 December 2025, United Teachers Social Welfare Association received $\text{N}520,000$ in cash as subscription fees from its members. At the beginning of the year (1 January 2025), subscriptions accrued were $\text{N}35,000$ , while subscriptions prepaid were $\text{N}22,000$ . At the end of the year (31 December 2025), subscriptions accrued amounted to $\text{N}48,000$ and subscriptions prepaid amounted to $\text{N}18,000$ . Calculate the subscription income to be credited to the Income and Expenditure Account for the year ended 31 December 2025.

Show answer & explanation

Answer: 537000

Answer

537000

Under accrual accounting, subscription income credited to the Income and Expenditure Account represents income earned in the current financial year regardless of cash timing. Subscription Income = Cash Received (520,000) + Opening Advance (22,000) + Closing Arrears (48,000) - Opening Arrears (35,000) - Closing Advance (18,000) = NGN 537,000.

Step-by-Step Solution

1

Identify total subscription cash received during the year

NGN 520,000

This is the initial cash flow entry from the Receipts and Payments account.

2

Adjust for opening accruals and prepayments

NGN 520,000 - NGN 35,000 + NGN 22,000 = NGN 507,000

Subscriptions owing from previous period (opening arrears) are deducted, while subscriptions received in advance in previous period (opening advance) belong to current income and are added.

3

Adjust for closing accruals and prepayments

NGN 507,000 + NGN 48,000 - NGN 18,000 = NGN 537,000

Subscriptions owing for current period (closing arrears) are added, while subscriptions received in advance for next period (closing advance) are subtracted.

Key Concept

Accrual basis adjustment for non-profit subscriptions

Question 11966Question →

Coastal Officers' Club operates a bar to support its social activities. For the financial year ended 31 December 2025, the following details were extracted from the club's records:

Details	Amount (₦)
Bar inventory (1 January 2025)	18,500
Bar inventory (31 December 2025)	22,400
Receipts from bar sales	165,000
Payments to bar suppliers	94,000
Bar suppliers owing (1 January 2025)	11,200
Bar suppliers owing (31 December 2025)	14,800
Bar steward wages paid	16,000
Accrued bar steward wages (31 December 2025)	2,500

What is the net profit from the bar trading operations to be transferred to the Income and Expenditure Account for the year ended 31 December 2025?

Show answer & explanation

Answer: 52800

Answer

The net profit from the bar trading operations to be transferred to the Income and Expenditure Account is ₦52,800.

To find the bar net profit transferred to the Income and Expenditure Account, total purchases are calculated by adjusting cash paid to bar suppliers for creditors:

₦94,000 + ₦14,800 - ₦11,200 = ₦97,600

. Cost of Goods Sold is calculated as

₦18,500 + ₦97,600 - ₦22,400 = ₦93,700

. Bar Gross Profit is

₦165,000 - ₦93,700 = ₦71,300

. Adjusting bar steward wages for accruals gives

₦16,000 + ₦2,500 = ₦18,500

. Deducting direct bar expenses from gross profit yields a Bar Net Profit of

₦52,800

.

Step-by-Step Solution

1

Calculate credit purchases for the bar

Total Purchases = ₦97,600

Credit purchases are derived by adjusting cash payments to bar suppliers for opening and closing payables:

\text{Payments} (₦94,000) + \text{Closing Creditors} (₦14,800) - \text{Opening Creditors} (₦11,200) = ₦97,600

.

2

Determine the Cost of Bar Goods Sold

Cost of Goods Sold = ₦93,700

Cost of Goods Sold is calculated using the formula:

\text{Opening Bar Inventory} (₦18,500) + \text{Purchases} (₦97,600) - \text{Closing Bar Inventory} (₦22,400) = ₦93,700

.

3

Calculate the Bar Gross Profit

Bar Gross Profit = ₦71,300

Gross profit is determined by deducting Cost of Bar Goods Sold from Bar Sales:

₦165,000 - ₦93,700 = ₦71,300

.

4

Calculate total direct bar expenses

Total Bar Steward Wages = ₦18,500

Total wages attributable to the bar trading period include paid wages plus accrued wages:

₦16,000 + ₦2,500 = ₦18,500

.

5

Calculate Bar Net Profit

Bar Net Profit = ₦52,800

Bar Net Profit transferred to the Income and Expenditure Account is Bar Gross Profit minus total direct bar expenses:

₦71,300 - ₦18,500 = ₦52,800

.

Key Concept

Bar Trading Account Net Profit Determination in Non-Profit Organizations

Question 11967Question →

At 31st December 2025, the trial balance of Adebayo Trading Store showed Trade Receivables of $\text{₦}180,000$ and an existing Provision for Doubtful Debts credit balance of $\text{₦}11,000$ . At year end, an additional bad debt of $\text{₦}20,000$ is to be written off. A specific provision of $\text{₦}10,000$ is required for an insolvent debtor, and a general provision of $5\%$ is to be maintained on the remaining trade receivables. What is the net amount to be charged to the Profit and Loss Account as an increase in the provision for doubtful debts for the year?

Show answer & explanation

Answer: 6500

Answer

The net amount to be charged to the Profit and Loss Account for the increase in provision for doubtful debts is

\text{₦}6,500

.

To find the correct charge to the Profit and Loss Account, first write off the additional bad debt of

\text{₦}20,000

from

\text{₦}180,000

, giving

\text{₦}160,000

. Next, set aside the specific provision of

\text{₦}10,000

, leaving

\text{₦}150,000

eligible for the general provision. Computing

5\%

of

\text{₦}150,000

gives

\text{₦}7,500

. The total provision required is

\text{₦}10,000 + \text{₦}7,500 = \text{₦}17,500

. Subtracting the existing provision balance of

\text{₦}11,000

yields an increase of

\text{₦}6,500

to be debited to the Income Statement.

Step-by-Step Solution

1

Deduct additional bad debts written off at year end from gross trade receivables.

Adjusted Trade Receivables =

\text{₦}180,000 - \text{₦}20,000 = \text{₦}160,000

.

Bad debts written off reduce the total recoverable debts before provisions are calculated.

2

Deduct the specific provision target from adjusted trade receivables to isolate receivables for general provision.

Receivables subject to general provision =

\text{₦}160,000 - \text{₦}10,000 = \text{₦}150,000

.

Specific provisions cover identifiable bad debts, so the general percentage applies only to the remainder.

3

Calculate the total required provision for doubtful debts at year end.

General Provision =

5\% \times \text{₦}150,000 = \text{₦}7,500

. Total New Provision =

\text{₦}10,000 + \text{₦}7,500 = \text{₦}17,500

.

The total provision required combines both specific and general estimates of uncollectible debts.

4

Calculate the net change (increase) in provision to be charged to the Profit and Loss Account.

Charge to Profit and Loss Account =

\text{₦}17,500 - \text{₦}11,000 = \text{₦}6,500

.

Only the increment in provision above the existing balance represents an additional expense for the current period.

Key Concept

Calculation of Net Increase in Provision for Doubtful Debts with Specific and General Adjustments

Question 11968Question →

Match each type of non-profit organization receipt on the left with its appropriate accounting treatment on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Specific donations are credited directly to a special Building/Capital Fund in the Statement of Financial Position; general donations are credited in full to the Income and Expenditure Account; entrance fees subject to a 70% capitalization clause are split between the Statement of Financial Position (70%) and Income and Expenditure Account (30%); and unrestricted legacies are credited directly to the Accumulated Fund.

Specific donations create a capital fund liability for long-term projects; general donations fund current operations; entrance fees governed by policy are split according to constitutional percentages; and legacies are non-recurring bequests added directly to the Accumulated Fund.

Step-by-Step Solution

1

Analyze specific donations intended for asset acquisition

Classification as capital receipt tied to a specific project fund in the Statement of Financial Position

Specific donations cannot be used for general operational expenses.

2

Analyze general operational donations

Classification as revenue receipt in the Income and Expenditure Account

Unrestricted general donations support routine recurrent expenses.

3

Apply the club policy for entrance fees

Split allocation: 70% capitalized to Balance Sheet / Accumulated Fund and 30% credited to Income and Expenditure Account

Accounting treatment must adhere strictly to the entity's constitutional provisions.

4

Analyze unrestricted legacy bequests

Classification as a capital receipt added to the Accumulated Fund

Legacies are non-recurring capital gifts from deceased individuals.

Key Concept

Classification and Accounting Treatment of Non-Profit Receipts

Question 11969Question →

Oluwatobi Logistics Enterprise initially extracted a trial balance with total debit balances of $₦450,000$ and total credit balances of $₦450,000$ . A subsequent audit revealed the following accounting errors before final financial statements were drawn:

1. Discount allowed of $₦12,000$ recorded in the cash book was mistakenly posted to the credit side of the Discount Received account in the ledger instead of the debit side of the Discount Allowed account.
2. The credit purchase of a delivery motor vehicle costing $₦80,000$ was posted to the debit of the Purchases account instead of the Motor Vehicles account.
3. A trade debtor's debit balance of $₦15,000$ was completely omitted during the extraction of balances into the trial balance.

What is the corrected total of the debit column of the trial balance after rectifying these entries?

₦477,000

₦465,000

₦557,000

₦447,000

Show answer & explanation

Answer: ₦477,000

Answer

The corrected total of the debit column of the trial balance is ₦477,000.

The initial debit total of ₦450,000 is updated by taking into account the net effect of all three items. First, Discount Allowed is an expense and carries a debit balance, so omitting its ledger balance reduced the debit total by ₦12,000; adding it back increases the total. Second, reclassifying the ₦80,000 capital expenditure from Purchases (debit) to Motor Vehicles (debit) is a debit-for-debit swap, causing zero net change to the total debit column. Third, the omitted debtor balance of ₦15,000 is an asset with a debit balance, so including it increases the debit column total by ₦15,000. Therefore, the revised total debit column equals ₦450,000 + ₦12,000 + ₦15,000 = ₦477,000.

Step-by-Step Solution

1

Analyze the impact of the Discount Allowed posting error on the Trial Balance debit column.

Discount Allowed is an expense account with a debit balance. Since ₦12,000 was omitted from the debit side of Discount Allowed, correcting this increases the Trial Balance debit total by ₦12,000.

Discount allowed must be posted to the debit side of its designated ledger account.

2

Analyze the impact of the Motor Vehicle misclassification error on the Trial Balance debit column.

Transferring ₦80,000 from Purchases (a debit balance expense account) to Motor Vehicles (a debit balance asset account) results in a net change of ₦0 to the debit total.

Both Purchases and Motor Vehicles are accounts that carry debit balances in the trial balance.

3

Analyze the impact of the omitted debtor balance on the Trial Balance debit column.

Adding the omitted trade debtor balance increases the debit column total by ₦15,000.

Debtors represent assets and must be listed on the debit side of the trial balance.

4

Compute the revised total for the debit column of the trial balance.

Revised Debit Total = ₦450,000 + ₦12,000 + ₦0 + ₦15,000 = ₦477,000.

Summing the initial total and all adjustments gives the corrected debit column total.

Key Concept

Impact of ledger balancing and error correction on Trial Balance extraction totals

Estimated Time:3m 0s

Question 11970Question →

Which of the following public officers is constitutionally mandated to conduct the external audit of government ministries, departments, and agencies and submit financial reports to the National Assembly?

Auditor-General for the Federation

Accountant-General of the Federation

Minister of Finance

Chairman of the Public Accounts Committee

Show answer & explanation

Answer: Auditor-General for the Federation

Answer

Auditor-General for the Federation

The Auditor-General for the Federation is an independent officer constitutionally authorized to audit all public accounts of government ministries, departments, and agencies, and report audit findings directly to the legislature.

Step-by-Step Solution

1

Identify the financial control officer tasked with statutory external audit in the public sector.

The constitutional responsibility of independent examination of public accounts and reporting to the National Assembly rests with the Auditor-General for the Federation.

Separation of financial control duties requires an external auditor independent of the executive financial managers who prepare the treasury accounts.

Key Concept

Roles of Key Public Financial Officers in Financial Control and Audit

Question 11971Question →

Tunde consigned goods valued at $\text{₦}600,000$ to Okon and paid $\text{₦}30,000$ for carriage and insurance. Okon sold $80\%$ of the consignment for $\text{₦}560,000$ and incurred $\text{₦}20,000$ in selling expenses. Okon is entitled to an ordinary commission of $5\%$ and a del-credere commission of $2.5\%$ on total sales. During the period, credit sales of $\text{₦}15,000$ proved irrecoverable as a bad debt. What is the net amount due from Okon to Tunde upon final settlement of the account?

\text{₦}498,000

\text{₦}483,000

\text{₦}512,000

\text{₦}468,000

Show answer & explanation

Answer: $\text{₦}498,000$

Answer

The net amount due from Okon to Tunde upon final settlement is

\text{₦}498,000

.

In the consignor's ledger, the Consignee Personal Account (Okon's Account) is debited with the total sales proceeds of

\text{₦}560,000

. It is credited with the expenses incurred by the consignee (

\text{₦}20,000

) and total commission (

7.5\%

of

\text{₦}560,000 = \text{₦}42,000

). Because del-credere commission is paid, credit losses (bad debts of

\text{₦}15,000

) are absorbed by the consignee and do not enter the consignor's ledger. Therefore, the net balance payable to Tunde is

\text{₦}560,000 - \text{₦}20,000 - \text{₦}42,000 = \text{₦}498,000

.

Step-by-Step Solution

1

Calculate total commission earned by the consignee

Total Commission Rate =

5\% + 2.5\% = 7.5\%

. Total Commission Amount =

7.5\% \times \text{₦}560,000 = \text{��}42,000

.

Del-credere commission is added to ordinary commission to determine total compensation due to the consignee.

2

Determine the treatment of bad debts

Bad debts of

\text{₦}15,000

are borne entirely by Okon and are not credited to Okon's account in Tunde's books.

When a consignee receives del-credere commission, they guarantee payment and bear all credit losses.

3

Calculate net balance payable by Okon in Consignee Personal Account

Net Settlement =

\text{₦}560,000 - \text{₦}20,000 - \text{₦}42,000 = \text{₦}498,000

.

Okon's account is debited with sales proceeds collected and credited with approved expenses and commission.

Key Concept

Preparation of Consignee Personal Account in Consignor's Books and Accounting Treatment of Del-Credere Commission

Estimated Time:1m 30s

Question 11972Question →

Match each component of the Manufacturing Account on the left with its correct accounting valuation formula or descriptive definition on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Cost of Raw Materials Consumed matches Opening Stock of Raw Materials + Purchases + Carriage Inwards - Closing Stock of Raw Materials; Prime Cost matches Cost of Raw Materials Consumed + Direct Wages + Direct Factory Expenses; Factory Overheads matches Indirect Factory Wages + Factory Rent + Factory Machinery Depreciation + Indirect Materials; Cost of Production matches Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress.

Each manufacturing accounting term is correctly paired with its defining formula. Raw materials consumed aggregates direct raw material movements. Prime cost sums all direct inputs. Factory overheads accumulate indirect factory costs. Cost of production incorporates prime cost, factory overheads, and work-in-progress adjustments.

Step-by-Step Solution

1

Identify the formula for Direct Materials Consumed

Opening stock of raw materials plus purchases plus carriage inwards minus closing stock of raw materials.

Carriage inwards adds to the cost of raw material acquisition, while closing inventory is subtracted to determine net raw material used in production.

2

Determine Prime Cost composition

Sum of all direct costs (Direct Raw Materials + Direct Wages + Direct Expenses).

Prime Cost includes only direct costs traceable directly to units produced.

3

Identify Factory Overheads

Aggregation of indirect manufacturing costs such as indirect labor, factory building rent, factory power, and plant depreciation.

Overheads represent operational costs essential for factory operations but not directly assignable to specific finished goods.

4

Formulate the total Cost of Production

Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress.

Cost of production measures the total cost transferred to the trading account for completed goods during the period.

Key Concept

Preparation of Manufacturing Account and Cost of Production

Estimated Time:1m 30s

Question 11973Question →

During a financial year, a government ministry experiences a shortfall in its office stationery budget subhead but has unspent funds in its local transport subhead under the same approved head of expenditure. Which public financial control instrument authorizes the transfer of savings from the transport subhead to cover the shortfall in the stationery subhead?

Contingencies Warrant

Virement Warrant

Development Fund Warrant

Supplementary Expenditure Warrant

Show answer & explanation

Answer: Virement Warrant

Answer

Virement Warrant

The correct instrument is a Virement Warrant. Virement is an executive control tool issued by the Ministry of Finance that authorizes accounting officers to transfer savings from an over-allocated subhead to meet excess expenditure on another subhead under the same head of recurrent expenditure.

Step-by-Step Solution

1

Identify the nature of the financial transaction described in the stem.

The ministry is reallocating existing approved budgetary funds from one subhead (local transport) to another subhead (office stationery) under the same expenditure head.

Understanding whether the action involves new funding, emergency reserves, capital release, or internal reallocation determines the appropriate financial control instrument.

2

Distinguish between government warrant types.

Virement is the official administrative mechanism that permits fund movement between subheads within the same head without increasing total overall expenditure.

Other warrants (Contingencies, Development, Supplementary) involve releasing emergency funds, authorizing capital project expenditure, or appropriating new funds altogether.

Key Concept

Virement Control in Public Sector Accounting

Estimated Time:1m 0s

Question 11974Question →

A commercial bank operates an integrated computerized accounting system to process daily transaction batches and generate financial statements. Match each computerized internal control mechanism on the left with its appropriate functional control classification on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Range and Limit Check matches Input Application Control validating numerical boundaries; Segregation of Systems Development and Operations matches General IT Control preventing code alteration; Electronic Transaction Log matches Auditability Control recording chronological activity; Hash Total Verification matches Processing Application Control verifying batch integrity via non-financial sums.

Each control mechanism correctly aligns with its primary scope: Range and Limit Checks enforce input data validity; Segregation of IT roles acts as a general IT governance control; Electronic Transaction Logs maintain the audit trail; and Hash Totals ensure batch processing completeness.

Step-by-Step Solution

1

Analyze Range and Limit Check

Identified as an input validation control operating at data entry.

Input application controls screen individual transactions against logical constraints before processing.

2

Analyze Segregation of Systems Development and Operations

Identified as an organizational general IT control governing operational permissions.

General controls establish broad organizational safeguards across all IT systems and software modification procedures.

3

Analyze Electronic Transaction Log

Identified as an audit trail component preserving data history.

Because paper records are reduced in IT systems, auditability depends on background system logging.

4

Analyze Hash Total Verification

Identified as a batch processing control summing non-monetary numbers.

Hash totals confirm complete processing of all records in a batch without data loss.

Key Concept

Distinction and Application of General IT Controls, Application Controls, and Audit Trail Mechanisms in Accounting Systems

Question 11975Question →

Complete the statement below regarding ledger classification and double-entry posting rules by filling in the blanks with the appropriate accounting terms.

Fill in the blanks below

In double-entry bookkeeping, accounts that record tangible physical assets such as premises and machinery are classified as accounts, and an increase in these asset values is posted to the side.

Show answer & explanation

Answer

The first blank is 'real' (or 'Real') and the second blank is 'debit' (or 'Debit').

Real accounts contain property and tangible assets of a business firm (such as premises, motor vehicles, and machinery). Under the rules of double-entry bookkeeping, any increase in an asset is recorded on the debit side of its respective ledger account.

Step-by-Step Solution

1

Identify the ledger account classification for physical property and assets

Accounts representing physical property and tangible assets (e.g., machinery, equipment, buildings) are classified as real accounts.

Real accounts track possessions and physical properties owned by the business enterprise.

2

Apply the double-entry rule for asset increases

An increase in an asset value is recorded on the debit side of the account.

The basic rule of double entry states: Debit what comes in / increases in assets, and Credit what goes out / decreases in assets.

Key Concept

Classification of ledger accounts (Personal, Real, Nominal) and basic double-entry posting rules for assets.

Question 11976Question →

A head office forwards merchandise to its dependent branch at an invoice price loaded at a mark-up of $33\frac{1}{3}\%$ on cost. The branch ledger records show the following inventory transactions at invoice price for the trading period:

- Opening inventory: $\text{₦}15,000$
- Goods received from head office: $\text{₦}120,000$
- Goods returned to head office: $\text{₦}12,000$
- Closing inventory: $\text{₦}18,000$

Assuming all remaining goods were sold at the designated invoice price, what is the gross profit realized by the branch during the period?

\text{₦}26,250

\text{₦}35,000

\text{₦}30,000

\text{₦}4,500

Show answer & explanation

Answer: $\text{₦}26,250$

Answer

The gross profit realized by the branch during the period is

\text{₦}26,250

.

The correct answer is

\text{₦}26,250

. A mark-up of

33\frac{1}{3}\%

(or

\frac{1}{3}

) on cost is equivalent to a profit margin of

25\%

(or

\frac{1}{4}

) on invoice price. Net goods available for sale at invoice price equal opening inventory (

\text{₦}15,000

) plus goods received (

\text{₦}120,000

) minus returns (

\text{₦}12,000

), totaling

\text{₦}123,000

. Subtracting closing inventory (

\text{₦}18,000

) gives

\text{₦}105,000

as the invoice price of goods sold. Multiplying

\text{₦}105,000

by the

25\%

margin yields a realized gross profit of

\text{₦}26,250

.

Step-by-Step Solution

1

Convert mark-up on cost to profit margin on invoice price

Margin =

\frac{\text{Mark-up}}{1 + \text{Mark-up}} = \frac{1/3}{1 + 1/3} = \frac{1}{4} = 25\%

Because branch values are given at invoice price, profit loading must be computed using margin on invoice price.

2

Calculate net invoice price of goods available for sale

Opening Inventory + Goods Received - Goods Returned =

\text{₦}15,000 + \text{₦}120,000 - \text{₦}12,000 = \text{₦}123,000

Determines total goods held by the branch before deducting unsold closing stock.

3

Determine invoice price of goods sold

Goods Available - Closing Inventory =

\text{₦}123,000 - \text{₦}18,000 = \text{₦}105,000

Calculates the total sales value (at invoice price) of merchandise sold to customers.

4

Compute realized gross profit

Gross Profit =

25\% \times \text{₦}105,000 = \text{₦}26,250

Applying the margin to the invoice value of goods sold yields the profit element realized by the branch.

Key Concept

Conversion of Mark-up on Cost to Margin on Invoice Price for Dependent Branch Profit Realization

Estimated Time:2m 0s

Question 11977Question →

A sole trader who maintains incomplete accounting records presents the following financial summary for the year ended 31st December 2025:

- Opening Capital: $\text{₦}150,000$
- Additional Capital Introduced: $\text{₦}30,000$
- Drawings during the year: $\text{₦}20,000$
- Closing Capital: $\text{₦}210,000$

What is the net profit of the business for the year in Naira ( $\text{₦}$ )?

Show answer & explanation

Answer: 50000

Answer

The net profit for the year is ₦50,000.

Under the statement of affairs (capital comparison) method, profit is calculated by adding drawings back to the closing capital and deducting both the additional capital introduced and the opening capital:

\text{₦}210,000 + \text{₦}20,000 - \text{₦}30,000 - \text{₦}150,000 = \text{₦}50,000

.

Step-by-Step Solution

1

Identify the formula for determining net profit under incomplete records using the capital comparison method.

\text{Net Profit} = \text{Closing Capital} + \text{Drawings} - \text{Additional Capital} - \text{Opening Capital}

Drawings reduce capital and must be added back to find true earned profit, while additional capital increases equity without coming from trading performance and must be deducted.

2

Insert the given amounts into the formula.

\text{Net Profit} = \text{₦}210,000 + \text{₦}20,000 - \text{₦}30,000 - \text{₦}150,000

To isolate the profit generated purely from business operations during the year.

3

Perform the calculation.

\text{Net Profit} = \text{₦}50,000

\text{₦}230,000

total adjusted closing capital minus

\text{₦}180,000

total adjusted starting capital yields

\text{₦}50,000

net profit.

Key Concept

Statement of Affairs Method (Capital Comparison)

Estimated Time:1m 0s

Question 11978Question →

Match each type of receipt in a non-profit organization with its correct accounting treatment in the financial statements.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Unrestricted general legacies match with crediting directly to the Income and Expenditure Account; specific pavilion donations match with crediting to a Special Purpose Building/Capital Fund Account; fully capitalized entrance fees match with crediting to the Accumulated Fund; and lump-sum life membership subscriptions match with crediting to a deferred income account and amortizing over members' estimated lifetime.

The matches correctly distinguish between revenue income (unrestricted general legacies), special capital funds (specific pavilion donations), direct capital transfers to accumulated fund (constitutionally capitalized entrance fees), and deferred revenue income amortized over time (life membership fees).

Step-by-Step Solution

1

Analyze the nature and purpose of unrestricted general legacies.

Since no specific restriction is attached by the donor, it is treated as revenue income and credited to the Income and Expenditure Account.

General income without stipulations is available for routine operational activities.

2

Evaluate the accounting rule for specific-purpose donations.

Donations designated for capital asset creation (e.g., pavilion construction) must be capitalized in a Special Building/Capital Fund Account under liabilities/capital funds in the Statement of Financial Position.

Capital receipts intended for specific long-term assets cannot be credited to the general operational revenue account.

3

Determine the impact of constitutional directives on entrance fees.

If the club's constitution mandates 100% capitalization, entrance fees bypass the Income and Expenditure Account and are added directly to the Accumulated Fund.

Accounting treatment in non-profit entities strictly obeys constitutional provisions.

4

Identify the multi-period treatment of life membership subscriptions.

Life membership fees are recognized as deferred income (Life Membership Fund) and apportioned to the Income and Expenditure Account annually over the expected duration of membership.

This complies with the matching concept by spreading revenue across the periods in which service benefits are provided.

Key Concept

Classification of capital versus revenue receipts in non-profit organizations

Question 11979Question →

On 31st October 2025, the Cash Book of Tunde & Sons Enterprises showed a bank overdraft balance of ₦50,000. Upon comparing the Cash Book with the Bank Statement, the following items were discovered:
- Bank charges of ₦3,500 had not been recorded in the Cash Book.
- A customer made a direct deposit of ₦12,000 into the bank account, which was omitted from the Cash Book.
- A standing order for insurance of ₦6,500 was paid by the bank but not recorded in the Cash Book.
- Unpresented cheques amounted to ₦18,000, while uncredited lodgements totaled ₦22,000.

What is the corrected (adjusted) cash book balance as at 31st October 2025?

Overdraft balance of ₦48,000

Overdraft balance of ₦52,000

Overdraft balance of ₦59,000

Debit balance of ₦48,000

Show answer & explanation

Answer: Overdraft balance of ₦48,000

Answer

Overdraft balance of ₦48,000

The adjusted cash book is prepared by posting items omitted from the cash book (unrecorded bank charges, standing orders, and direct deposits) to update the balance before preparing the bank reconciliation statement. Starting with a credit overdraft balance of ₦50,000: adding the direct deposit of ₦12,000 and deducting bank charges of ₦3,500 and the standing order payment of ₦6,500 leaves a net credit (overdraft) balance of ₦48,000. Unpresented cheques and uncredited lodgements are timing differences that appear only in the bank reconciliation statement.

Step-by-Step Solution

1

Identify the initial cash book balance and its nature.

Initial cash book balance is a credit balance (overdraft) of ₦50,000.

An overdraft represents a credit balance in the cash book (a liability).

2

Filter for items that belong in the Adjusted Cash Book versus the Bank Reconciliation Statement.

Bank charges (₦3,500), direct deposit (₦12,000), and standing order (₦6,500) go into the Adjusted Cash Book. Unpresented cheques (₦18,000) and uncredited lodgements (₦22,000) are timing differences that go to the Bank Reconciliation Statement.

Only items omitted from or incorrectly recorded in the Cash Book are adjusted in the Cash Book prior to bank reconciliation.

3

Calculate the updated cash book balance.

Adjusted balance = -₦50,000 (overdraft) + ₦12,000 (direct deposit) - ₦3,500 (bank charges) - ₦6,500 (standing order) = -₦48,000.

Direct deposits increase the bank balance (debit cash book), while bank charges and standing order payments decrease it (credit cash book).

Key Concept

Adjusted Cash Book Preparation

Question 11980Question →

Chinedu, a textile merchant in Aba, maintains single-entry accounting records. For the financial year ended 31st December 2025, his total sales were $\text{₦}120,000$ . He fixes his selling prices by adding a mark-up of $25\%$ on cost. If his opening stock was $\text{₦}18,000$ and total purchases during the year amounted to $\text{₦}92,000$ , what is the estimated value of his closing stock?

\text{₦}14,000

\text{₦}20,000

\text{₦}22,000

\text{₦}30,000

Show answer & explanation

Answer: $\text{₦}14,000$

Answer

\text{₦}14,000

To estimate closing stock from sales revenue, the

25\%

mark-up on cost must first be converted to a margin on sales using

\text{Margin} = \frac{\text{Mark-up}}{1 + \text{Mark-up}} = \frac{1}{5}

(

20\%

). Gross profit is therefore

20\%

of

\text{₦}120,000 = \text{₦}24,000

, making Cost of Goods Sold

\text{₦}96,000

. Since total goods available for sale is

\text{₦}18,000 + \text{₦}92,000 = \text{₦}110,000

, subtracting COGS gives an estimated closing stock of

\text{₦}14,000

.

Step-by-Step Solution

1

Convert mark-up on cost to gross profit margin on sales

\text{Margin} = \frac{\text{Mark-up}}{1 + \text{Mark-up}} = \frac{0.25}{1 + 0.25} = \frac{1}{5} = 20\%

Sales figure is provided, so gross profit must be calculated as a percentage of sales (margin) rather than cost (mark-up).

2

Calculate Gross Profit and Cost of Goods Sold (COGS)

\text{Gross Profit} = 20\% \times \text{₦}120,000 = \text{₦}24,000

;

\text{COGS} = \text{₦}120,000 - \text{₦}24,000 = \text{₦}96,000

Subtracting gross profit from sales revenue yields the cost of goods sold.

3

Determine total goods available for sale

\text{Goods Available for Sale} = \text{Opening Stock} + \text{Purchases} = \text{₦}18,000 + \text{₦}92,000 = \text{₦}110,000

Adding opening inventory to net purchases during the period gives total stock available for trading.

4

Calculate estimated closing stock

\text{Closing Stock} = \text{Goods Available for Sale} - \text{COGS} = \text{₦}110,000 - \text{₦}96,000 = \text{₦}14,000

Subtracting the cost of goods sold from total goods available leaves the remaining closing inventory.

Key Concept

Conversion of Mark-up to Margin in Stock Estimation

Answer

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