All practice questions

13931 questions

All types13,931 Multiple choice7,139 True / False771 Numeric1,526 Matching2,583 Ordering631 Fill in the blank1,223 Short answer58

Question 11981Question →

Under a standard consignment arrangement, dispatching goods from the consignor to the consignee transfers physical possession of the merchandise to the consignee, while legal ownership and title to the unsold goods remain with the consignor.

True

False

Show answer & explanation

Answer: True

Answer

The statement is True. In a consignment transaction, the consignor (principal) retains legal title to all unsold goods, transferring only physical possession to the consignee (agent).

The correct evaluation is True because a consignment is fundamentally a principal-agent agreement. The consignor retains ownership of the merchandise, while the consignee merely acts as an intermediary receiving physical custody to effect sales.

Step-by-Step Solution

Analyze the nature of the principal-agent relationship in consignment transactions.

The consignor is the principal and owner of the goods, whereas the consignee acts as an agent receiving goods for sale on commission.

Establishing the legal relationship identifies who retains legal title.

Distinguish between physical possession and legal ownership during dispatch.

Physical possession passes to the consignee upon delivery, but legal title remains with the consignor until a sale occurs.

Consignment is a bailment of goods, not an outright purchase or sale.

Evaluate the statement against accounting principles of consignment.

The statement accurately reflects that legal title stays with the consignor while possession transfers to the consignee.

Unsold goods are included in the consignor's closing inventory for accounting purposes.

Key Concept

Principal-Agent Relationship and Ownership Retention in Consignment

Question 11982Question →

Sahara Energy Works Plc extracted the following trial balance figures and notes for the financial year ended 31 December 2025:

- Gross profit: ₦2,450,000
- Administrative and distribution expenses paid: ₦680,000
- 10% Debentures (issued 1 January 2025): ₦1,000,000
- Debenture interest paid: ₦40,000
- Trade debtors: ₦600,000
- Existing provision for doubtful debts: ₦25,000

Additional Information at 31 December 2025:
1. Administrative expenses paid include ₦30,000 for prepaid insurance.
2. Audit fees of ₦50,000 remain accrued and unpaid.
3. The provision for doubtful debts is to be adjusted to $5\%$ of trade debtors.
4. Corporate income tax rate is estimated at $30\%$ on profit before tax.

What is the Net Profit after Tax for Sahara Energy Works Plc for the year ended 31 December 2025?

Show answer & explanation

Answer: 1151500

Answer

The Net Profit after Tax for Sahara Energy Works Plc is ��1,151,500.

To calculate the Net Profit after Tax, first compute adjusted operating expenses: base expenses of ₦680,000 minus prepaid insurance of ₦30,000 plus accrued audit fees of ₦50,000 plus the increase in doubtful debts provision of ₦5,000 (₦30,000 required minus ₦25,000 existing), yielding ₦705,000. Subtracting this from Gross Profit (₦2,450,000) gives Operating Profit of ₦1,745,000. Next, deduct the total annual debenture interest expense of ₦100,000 (10% of ₦1,000,000) to arrive at Profit before Tax of ₦1,645,000. Finally, deduct corporate tax of 30% (₦493,500) from ₦1,645,000 to obtain Net Profit after Tax equal to ₦1,151,500.

Step-by-Step Solution

Calculate the total operating expenses incorporating adjustments for prepayments, accruals, and doubtful debt provisions.

Total operating expenses = ₦680,000 - ₦30,000 + ₦50,000 + (5% of ₦600,000 - ₦25,000) = ₦705,000.

Prepaid expenses are deducted from cash paid, accrued expenses are added, and the increase in provision for doubtful debts (₦30,000 - ₦25,000 = ₦5,000) is charged as an operating expense.

Deduct operating expenses from gross profit to find operating profit (profit before interest and tax).

Operating profit = ₦2,450,000 - ₦705,000 = ₦1,745,000.

Gross profit less total operating expenses yields the operating profit for the reporting period.

Determine full finance cost (debenture interest) and profit before taxation.

Debenture interest expense = 10% of ₦1,000,000 = ₦100,000. Profit before tax = ₦1,745,000 - ₦100,000 = ₦1,645,000.

The Statement of Profit or Loss must charge the full nominal debenture interest expense incurred for the year (

10\% \times ₦1,000,000 = ₦100,000

), regardless of the amount actually paid (₦40,000).

Calculate taxation and determine Net Profit after Tax.

Taxation = 30% of ₦1,645,000 = ₦493,500. Net profit after tax = ₦1,645,000 - ₦493,500 = ₦1,151,500.

Tax rate applies to profit before tax. Deducting taxation from profit before tax yields the final net profit after tax.

Key Concept

Preparation of Company Statement of Profit or Loss with Multi-Step Adjustments (Accruals, Prepayments, Debenture Interest, and Taxation)

Question 11983Question →

Consider the financial data extracted from the books of Kalu Enterprises at the end of the accounting period. Fill in the blanks with the correct numerical values.

Fill in the blanks below

Kalu Enterprises has Trade Debtors of

\text{₦}150,000

. The firm decides to write off bad debts of

\text{₦}10,000

and create a

5\%

Provision for Doubtful Debts. Thereafter, a

2\%

Provision for Discount on Debtors is to be created.

The net debtors amount on which the provision for discount is calculated is

\text{₦}

, and the amount of Provision for Discount on Debtors is

\text{₦}

Show answer & explanation

Answer

The net debtors amount subject to discount provision is ₦133,000, and the Provision for Discount on Debtors is ₦2,660.

To calculate the provision for discount on debtors correctly, bad debts written off (₦10,000) are subtracted from gross debtors (₦150,000) to get ₦140,000. Next, the 5% provision for doubtful debts (₦7,000) is deducted to determine the net good debtors of ₦133,000. Finally, 2% of ₦133,000 gives ₦2,660 as the provision for discount on debtors.

Step-by-Step Solution

Deduct bad debts written off from gross trade debtors

\text{₦}150,000 - \text{₦}10,000 = \text{₦}140,000

Bad debts are irrecoverable and must be removed before calculating any provisions.

Calculate and deduct the provision for doubtful debts

Provision for doubtful debts =

5\% \times \text{₦}140,000 = \text{₦}7,000

. Debtors remaining =

\text{₦}140,000 - \text{₦}7,000 = \text{₦}133,000

Discount is only allowed to customers who are expected to pay, so doubtful debts must be excluded first.

Calculate the provision for discount on debtors

Provision for discount on debtors =

2\% \times \text{₦}133,000 = \text{₦}2,660

Apply the discount provision percentage to the net good debtors balance.

Key Concept

Calculation order for Provision for Discount on Debtors

Question 11984Question →

Match each inventory valuation rule or accounting treatment in the final accounts of a sole trader with its corresponding description, concept, or financial statement placement.

Click a left item, then click its matching right item

Show answer & explanation

Answer

1. Valuation at lower of cost and NRV matches Application of the prudence concept; 2. Deduction from cost of goods available for sale matches Adjustment required to calculate Cost of Goods Sold; 3. Inclusion under Current Assets matches Presentation of unsold stock as a short-term resource; 4. Calculation of NRV matches Estimated selling price minus completion and selling expenses.

Each inventory rule directly aligns with financial accounting principles: lower of cost or NRV embodies prudence; deducting closing stock isolates cost of goods sold; Balance Sheet inclusion reflects working capital assets; and NRV represents expected net proceeds after completion and selling costs.

Step-by-Step Solution

Identify the accounting convention governing inventory valuation

IAS 2 / GAAP mandates inventory be valued at the lower of cost and net realizable value based on prudence.

Prevents overstating profits and current assets.

Determine the impact of closing inventory on the Trading Account

Closing stock is deducted from Opening Stock + Purchases (less returns).

Separates the cost of unsold stock from goods sold to determine gross profit accurately.

Determine the Balance Sheet presentation

Closing stock is listed as a Current Asset.

It is a short-term asset available to generate future income in the next operating cycle.

Define the formula for Net Realizable Value

NRV = Estimated Selling Price - (Estimated Completion Costs + Selling Expenses).

Reflects the actual net amount expected to be recovered from the sale of inventory.

Key Concept

Valuation and Treatment of Inventory in Final Accounts

Question 11985Question →

Under the legal framework governing Nigerian public sector accounting, the Auditor-General for the Federation is restricted from directly conducting the annual audit of government-owned statutory corporations, and instead provides a list of qualified external auditors for their appointment.

True

False

Show answer & explanation

Answer: True

Answer

True. The Auditor-General for the Federation is legally restricted from performing direct annual audits of statutory corporations, supplying instead an approved list of qualified external auditors and monitoring guidelines.

The statement is true because the constitutional framework limits the Auditor-General to providing a vetted list of external auditors and oversight guidelines for statutory corporations rather than conducting direct audits.

Step-by-Step Solution

Analyze the statutory responsibilities of the Auditor-General for the Federation regarding government ministries versus statutory corporations.

The Auditor-General conducts direct audits for ministries and departments, but not for statutory parastatals.

Constitutional rules specify distinct oversight mechanisms for commercial and statutory public bodies.

Evaluate the mechanism used to audit public corporations under Nigerian financial regulations.

Statutory corporations select external auditors from an approved list issued by the Auditor-General.

This maintains external professional auditing for parastatals while ensuring the Auditor-General retains supervisory standards.

Key Concept

Audit Mandate and Limitations of the Auditor-General

Question 11986Question →

An accounting officer using a computerized financial accounting software posted fictitious payment transactions by overwriting past records without leaving a record of the change. Which internal control mechanism should management implement to ensure that every system transaction leaves a permanent, chronological record of user actions?

Implementation of an automated audit trail log

Sole reliance on password protection for initial system entry

Reverting payment processing to a traditional manual journal system

Converting all real-time entries into periodic batch processing routines

Show answer & explanation

Answer: Implementation of an automated audit trail log

Answer

The implementation of an automated audit trail log

An automated audit trail provides a continuous, secure record of all transactions processed in a computerized accounting system. It records details such as user ID, date, time, and specific modifications made, ensuring accountability and auditability.

Step-by-Step Solution

Analyze the control failure described in the scenario

Identified that transaction details were modified without tracking or recording historic activity.

Understanding the exact breakdown in data integrity points to the missing control requirement.

Evaluate internal control mechanisms in computerized accounting

An audit trail automatically logs every user command, edit, and deletion with timestamps.

An audit trail preserves transaction history and deters unauthorized modifications.

Key Concept

Audit Trail in Computerized Accounting

Estimated Time:1m 0s

Question 11987Question →

The Cash Book of Biobaku Traders showed an unadjusted overdraft balance of $\text{NGN } 18,100$ on 31st May 2026. On comparing the Cash Book with the Bank Statement, the following discrepancies were identified:

- Bank charges of $\text{NGN } 1,500$ and a standing order payment of $\text{NGN } 3,200$ were recorded only in the Bank Statement.
- A cheque for $\text{NGN } 4,000$ deposited into the bank was returned unpaid (dishonoured).
- Unpresented cheques totaled $\text{NGN } 8,600$ .
- Uncredited lodgements totaled $\text{NGN } 11,400$ .

What is the balance as per the Bank Statement on 31st May 2026?

Overdraft of

\text{NGN } 29,600

Overdraft of

\text{NGN } 24,000

Overdraft of

\text{NGN } 25,600

Overdraft of

\text{NGN } 12,200

Show answer & explanation

Answer: Overdraft of $\text{NGN } 29,600$

Answer

Overdraft of

\text{NGN } 29,600

The correct answer is derived by first adjusting the cash book for items not previously entered (bank charges, standing order, dishonoured cheque), increasing the overdraft from

\text{NGN } 18,100

\text{NGN } 26,800

. Reconciling to the bank statement balance, unpresented cheques of

\text{NGN } 8,600

are added and uncredited lodgements of

\text{NGN } 11,400

are subtracted, giving a final bank statement overdraft of

\text{NGN } 29,600

Step-by-Step Solution

Calculate the Adjusted Cash Book Balance

Adjusted Cash Book Overdraft =

\text{NGN } 26,800

Bank charges, standing orders, and dishonoured cheques must be debited/deducted from cash book balance (which increases an overdraft). Initial Overdraft (

-\text{NGN } 18,100

)

-

Bank charges (

\text{NGN } 1,500

)

-

Standing order (

\text{NGN } 3,200

)

-

Dishonoured cheque (

\text{NGN } 4,000

) =

-\text{NGN } 26,800

Prepare the Bank Reconciliation Statement starting from Adjusted Cash Book Overdraft

Bank Statement Balance = Overdraft of

\text{NGN } 29,600

To reconcile from Cash Book Overdraft (

-\text{NGN } 26,800

) to Bank Statement Balance: Add Unpresented Cheques (

+\text{NGN } 8,600

) and Deduct Uncredited Lodgements (

-\text{NGN } 11,400

). Total =

-\text{NGN } 26,800 + \text{NGN } 8,600 - \text{NGN } 11,400 = -\text{NGN } 29,600

Key Concept

Two-step Bank Reconciliation with Overdraft Balances

Question 11988Question →

Metallic mineral deposits, such as bauxite in West Africa, differ fundamentally from biological resources, such as timber. Why are metallic minerals classified as non-renewable natural resources?

Their natural replenishment occurs over geological timescales far exceeding human consumption rates

They are formed from organic materials that decompose rapidly under tropical atmospheric conditions

They lose their physical and chemical properties after initial industrial extraction and cannot be recycled

Their geographical occurrence is strictly restricted to humid tropical rainforest belts

Show answer & explanation

Answer: Their natural replenishment occurs over geological timescales far exceeding human consumption rates

Answer

Metallic minerals are classified as non-renewable because their rate of natural formation requires geological timescales of millions of years, which means they cannot be regenerated within human timeframes.

Non-renewable natural resources, including metallic minerals like bauxite and iron ore, exist in finite quantities because their rate of natural formation spans millions of years (geological timescales). As a result, exploitation depletes the fixed reserve faster than nature can recreate it.

Step-by-Step Solution

Define the criterion for natural resource classification (renewable vs. non-renewable)

Classification depends on the rate of natural regeneration relative to human consumption rates.

Renewable resources regenerate naturally on human timescales, whereas non-renewable resources form over geological epochs.

Analyze the formation process of metallic mineral deposits like bauxite

Bauxite forms through deep weathering of rocks over millions of years.

Because formation takes millions of years, the total available stock is fixed on human timescales.

Evaluate the correct statement explaining non-renewability

The statement highlighting natural replenishment over geological timescales accurately explains the non-renewable status.

Once extracted and consumed, natural geological processes cannot replace metallic minerals quickly enough to sustain ongoing use.

Key Concept

Criteria for Resource Classification: Geological Timescales of Formation

Question 11989Question →

An electronics retailing firm upgraded to an automated inventory and billing accounting system. During an annual audit, the internal auditor discovered that several posted sales records were deleted directly from the system database without leaving any transaction history or log of user actions. Which internal control deficiency directly allowed this unrecorded deletion of financial data to occur?

Absence of an immutable audit trail and user access privilege restrictions on the database

Complete reliance on computerized software under the assumption that automation inherently eliminates fraud

Utilization of batch data processing rather than real-time online transaction processing

Failure of the system's edit check to perform range validation during data entry

Show answer & explanation

Answer: Absence of an immutable audit trail and user access privilege restrictions on the database

Answer

Absence of an immutable audit trail and user access privilege restrictions on the database

An audit trail in a computerized accounting system records all transaction processing history, updates, and deletions along with timestamps and user identification. Combined with access controls restricting direct database manipulation, these controls ensure data integrity and accountability.

Step-by-Step Solution

Analyze the control breakdown described in the accounting scenario

Posted sales transactions were erased from the database with no record of who executed the action or when it happened.

Identifying the specific failure helps determine which internal control component was missing.

Evaluate internal control mechanisms in computerized accounting environments

An audit trail maintains an automatic chronological record of system events, while access controls restrict raw database access to authorized database administrators.

Without an audit trail and proper access restrictions, direct database alterations leave no trace and bypass traditional accounting logs.

Key Concept

Audit Trail and Access Control in Computerized Accounting

Question 11990Question →

As at 31 December 2025, Adeola Trading Enterprise had Trade Debtors of $₦450,000$ and an existing Provision for Doubtful Debts of $₦15,000$ . At year-end, an additional bad debt of $₦20,000$ is to be written off, and the provision for doubtful debts is to be adjusted to $5\%$ of the remaining trade debtors. What is the net amount of trade debtors to be presented under Current Assets in the Statement of Financial Position as at 31 December 2025?

Show answer & explanation

Answer: 408500

Answer

The net amount of trade debtors to be presented under Current Assets in the Statement of Financial Position is ₦408,500.

To determine the net trade debtors for the Statement of Financial Position, first subtract the additional bad debts of ₦20,000 from gross debtors of ₦450,000, leaving ₦430,000. Next, calculate the closing provision of 5% on ₦430,000, which equals ₦21,500. Subtracting the ₦21,500 provision from ₦430,000 gives ₦408,500 as the net trade debtors figure.

Step-by-Step Solution

Deduct additional bad debts from gross trade debtors

Adjusted Debtors = ₦450,000 - ₦20,000 = ₦430,000

Bad debts identified at year-end must be written off from trade debtors before computing the provision for doubtful debts.

Calculate the required closing provision for doubtful debts

Closing Provision = 5% of ₦430,000 = ₦21,500

The percentage provision for doubtful debts applies strictly to net trade debtors after writing off bad debts.

Calculate net trade debtors for Statement of Financial Position presentation

Net Trade Debtors = ₦430,000 - ₦21,500 = ₦408,500

Trade debtors are shown in the balance sheet net of the closing provision for doubtful debts.

Key Concept

Calculation of Net Trade Debtors for Balance Sheet presentation after adjustments for bad debts and provision for doubtful debts.

Question 11991Question →

In the books of Apex Trading Enterprise, the Branch Current Account in the Head Office ledger shows a debit balance of $\text{₦}145,000$ , while the Head Office Current Account in the Branch ledger shows a credit balance of $\text{₦}110,000$ at year-end. Upon reconciliation, it was discovered that a cash remittance of $\text{₦}20,000$ sent by the branch had not yet been received by the head office, and goods worth $\text{₦}15,000$ dispatched by the head office were still in transit to the branch. What is the reconciled balance of the inter-company current account?

₦125,000

₦150,000

₦140,000

₦165,000

Show answer & explanation

Answer: ₦125,000

Answer

The reconciled balance of the inter-company current account is ₦125,000.

To reconcile independent branch and head office accounts, in-transit items must be recorded in the books of the party that has not yet entered them. Cash in transit (₦20,000) was sent by the branch, so it is already recorded in the branch books; Head Office must credit the Branch Current Account, reducing the debit balance from ₦145,000 to ₦125,000. Similarly, goods in transit (₦15,000) sent by Head Office are already recorded in Head Office books; the branch must credit the Head Office Current Account, increasing the credit balance from ₦110,000 to ₦125,000.

Step-by-Step Solution

Identify the unadjusted balances in both ledgers

Head Office ledger (Branch Current A/c) = ₦145,000 (Debit); Branch ledger (Head Office Current A/c) = ₦110,000 (Credit).

The two accounts represent reciprocal records of the same relationship and should be equal after adjusting for in-transit items.

Adjust the Head Office ledger for cash in transit

Reconciled Balance = ₦145,000 - ₦20,000 = ₦125,000 (Debit).

The branch has already debited Head Office and credited cash, but Head Office has not yet credited the Branch Current Account for the cash received.

Adjust the Branch ledger for goods in transit to verify consistency

Reconciled Balance = ₦110,000 + ₦15,000 = ₦125,000 (Credit).

The Head Office has already credited the Branch Current Account and debited Goods Sent to Branch, but the branch has not yet credited the Head Office Current Account for the goods received.

Key Concept

Independent Branch Head Office Reconciliation

Estimated Time:2m 0s

Question 11992Question →

A topographical map displays a statement scale of $2\text{ cm}$ to $1\text{ km}$ . Which of the following represents this scale as a Representative Fraction (R.F.)?

50,000 : 1

1 : 50,000

1 : 2,500,000

1 : 500

Show answer & explanation

Answer: $1 : 50,000$

Answer

The Representative Fraction (R.F.) of the map is

1 : 50,000

The correct Representative Fraction is

1 : 50,000

. Converting

1\text{ km}

into centimeters yields

100,000\text{ cm}

. Expressing the scale as a ratio gives

2\text{ cm} : 100,000\text{ cm}

, which simplifies to

1 : 50,000

when both terms are divided by

2

Step-by-Step Solution

Convert the ground distance from kilometers to centimeters so both sides of the scale ratio share identical units.

1\text{ km} = 100,000\text{ cm}

Representative Fraction requires unitless comparison, so both map distance and ground distance must be in the same measurement units.

Express the relationship as a ratio of map distance to ground distance.

\text{Scale} = 2\text{ cm} : 100,000\text{ cm}

A Representative Fraction is written in the form

1 : n

, where

1

represents map distance and

n

represents ground distance.

Divide both terms of the ratio by the map distance value (

2

) to reduce the numerator/antecedent to

1

\frac{2}{2} : \frac{100,000}{2} = 1 : 50,000

Simplifying the antecedent to unity gives the final standard Representative Fraction format.

Key Concept

Conversion of Statement Scale to Representative Fraction (R.F.)

Estimated Time:45s

Question 11993Question →

A trading enterprise operates two regional sales outlets in different locations. Outlet X receives all inventory directly from the head office, remits all daily cash receipts to the head office bank account, and relies entirely on the head office to maintain its accounting records. Outlet Y, on the other hand, maintains a complete double-entry ledger system, purchases inventory locally, and extracts its own trial balance at the end of the financial period. Which of the following accounting classifications correctly describes Outlet X and Outlet Y?

Outlet X is an independent branch, while Outlet Y is a dependent branch.

Outlet X is a dependent branch, while Outlet Y is an independent branch.

Both Outlet X and Outlet Y are classified as dependent branches.

Both Outlet X and Outlet Y are classified as independent branches.

Show answer & explanation

Answer: Outlet X is a dependent branch, while Outlet Y is an independent branch.

Answer

Outlet X is a dependent branch, while Outlet Y is an independent branch.

A dependent branch (such as Outlet X) does not keep a complete set of accounting books; its books are kept by the head office, and it operates under strict head office oversight regarding supplies and cash. Conversely, an independent branch (such as Outlet Y) operates autonomously in terms of bookkeeping, maintaining a full double-entry ledger system, purchasing goods from local suppliers, and extracting a trial balance at period end.

Step-by-Step Solution

Analyze the operational and record-keeping features of Outlet X.

Outlet X relies on the head office for inventory supply, remits all cash to head office, and does not maintain its own accounting ledgers. Therefore, it is a dependent branch.

Dependent branches do not maintain complete books of account; all major accounting functions are handled by the head office.

Analyze the operational and record-keeping features of Outlet Y.

Outlet Y maintains a complete set of accounting books, purchases goods locally, and extracts its own trial balance. Therefore, it is an independent branch.

Independent branches function as separate accounting entities, keeping double-entry records and balancing their own accounts.

Select the classification option that matches both outlets.

Outlet X is dependent and Outlet Y is independent.

This correctly aligns both outlets with their respective accounting features.

Key Concept

Distinction Between Dependent and Independent Branches

Question 11994Question →

According to the ICAN Code of Ethics for Professional Accountants, the fundamental principle of confidentiality requires an accountant to refrain from disclosing client or employer financial information under all circumstances, even when subpoenaed by a court of law or required by anti-money laundering legislation.

True

False

Show answer & explanation

Answer: False

Answer

The statement is False.

The fundamental principle of confidentiality is not absolute. Under professional accounting codes of ethics (such as ICAN and IFAC), accountants are required to disclose confidential information when there is a legal right or duty to disclose, such as under court subpoenas, statutory tax investigations, or anti-money laundering provisions.

Step-by-Step Solution

Identify the ethical principle and rule in question.

The concept is the principle of Confidentiality under ICAN/IFAC codes of ethics.

Evaluating whether confidentiality is absolute or subject to statutory overrides.

Evaluate the exceptions to professional confidentiality.

Confidentiality does not apply when disclosure is required by law (e.g., judicial court order, statutory reporting of financial fraud/money laundering) or permitted by law for professional defense.

Legal duty supersedes professional secrecy in regulatory and judicial contexts.

Key Concept

Exceptions to the Fundamental Principle of Confidentiality in Professional Ethics

Question 11995Question →

A head office transfers goods to its dependent branch at an invoice price loaded at a mark-up of $25\%$ on cost. During the financial period, goods sent to the branch amounted to $\text{₦}200,000$ at invoice price, while goods returned by the branch to the head office at invoice price totaled $\text{₦}16,000$ . What is the total profit load (unrealized profit element) contained in the net goods sent to the branch?

Show answer & explanation

Answer: 36800

Answer

The total profit load contained in the net goods sent to the branch is ₦36,800.

To find the unrealized profit loading on net goods sent, subtract returns (₦16,000) from total goods sent (₦200,000) to get net goods sent of ₦184,000 at invoice price. A 25% mark-up on cost corresponds to a 20% margin on invoice price (1/5th). Calculating 20% of ₦184,000 yields ₦36,800.

Step-by-Step Solution

Calculate net goods sent to the branch at invoice price

₦184,000

Returns to head office must be deducted from gross transfers to determine net goods received by the branch.

Convert mark-up on cost to margin on invoice price

20% (or 1/5)

Since invoice price is cost plus mark-up, a mark-up of 25% on cost translates to 20% on invoice price.

Calculate the profit element (loading)

₦36,800

Multiply the margin fraction (1/5) by the net invoice price (₦184,000).

Key Concept

Accounting for Dependent Branches at Selling / Invoice Price

Question 11996Question →

Silver Crest Social Club operates a bar for its members. The following details relate to the bar operations for the financial year ended 31 December 2025:

Details	Amount (₦)
Cash received from bar sales	450,000
Bar inventory as at 1 January 2025	40,000
Bar inventory as at 31 December 2025	55,000
Cash paid to bar suppliers	260,000
Bar creditors as at 1 January 2025	30,000
Bar creditors as at 31 December 2025	45,000
Bar steward's wages paid	50,000
Accrued bar steward's wages as at 31 December 2025	10,000

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

₦130,000

₦180,000

��100,000

₦145,000

Show answer & explanation

Answer: ₦130,000

Answer

The net profit from bar operations to be transferred to the Income and Expenditure Account is ₦130,000.

The net bar profit transferred to the Income and Expenditure Account is ₦130,000. It is computed by finding total credit purchases (₦275,000), evaluating Cost of Goods Sold (₦260,000) to get Gross Profit (₦190,000), and deducting total steward wages including accrued amount (₦60,000).

Step-by-Step Solution

Calculate total bar purchases for the year

Total Purchases =

\text{₦}260,000 + \text{₦}45,000 - \text{₦}30,000 = \text{₦}275,000

Cash payments must be adjusted by adding closing creditors and deducting opening creditors to derive credit purchases.

Calculate Cost of Bar Goods Sold (COGS)

COGS =

\text{₦}40,000 + \text{₦}275,000 - \text{₦}55,000 = \text{₦}260,000

Opening inventory is added to total purchases and closing inventory is deducted.

Calculate Bar Gross Profit

Gross Profit =

\text{₦}450,000 - \text{₦}260,000 = \text{₦}190,000

Cost of goods sold is subtracted from total cash takings/sales.

Deduct total bar expenses to find Net Bar Profit

Total Wages =

\text{₦}50,000 + \text{₦}10,000 = \text{₦}60,000

; Net Profit =

\text{₦}190,000 - \text{₦}60,000 = \text{₦}130,000

Accrued wages must be added to paid wages to determine total expense, which is then subtracted from bar gross profit.

Key Concept

Preparation of Bar Trading and Profitability Statement in Non-Profit Organizations

Estimated Time:2m 0s

Question 11997Question →

Bello consigned goods to Segun and paid him a del-credere commission in addition to his ordinary commission. If a credit customer defaults on payment to Segun, how should the resulting bad debt be recorded in Bello's ledger?

It is not recorded in any account in Bello's ledger.

Debited to the Consignment Account

Debited to Segun's Personal Account

Debited to the Trading Account as part of cost of goods sold

Show answer & explanation

Answer: It is not recorded in any account in Bello's ledger.

Answer

No entry is recorded in Bello's ledger because the consignee bears all bad debt losses when del-credere commission is paid.

When a consignor pays a del-credere commission, the consignee guarantees payment for all credit sales and personally absorbs any bad debts. Consequently, credit losses are not recognized in the consignor's books, meaning no entry is made in the consignor's ledger.

Step-by-Step Solution

Identify the relationship between consignor, consignee, and del-credere commission.

The consignee (Segun) receives del-credere commission specifically to guarantee collection from credit buyers.

Del-credere commission transfers the financial risk of credit customer defaults from the consignor to the consignee.

Determine the accounting treatment in the consignor's (Bello's) ledger.

Since the loss is absorbed entirely by Segun out of his commission, Bello suffers no bad debt loss.

No entry for bad debts is required in either the Consignment Account or Segun's Personal Account in Bello's books.

Key Concept

Accounting treatment of bad debts when del-credere commission is paid

Estimated Time:45s

Question 11998Question →

Which of the following activities represents the primary scope of bookkeeping rather than accounting?

Systematically recording daily financial transactions in books of original entry

Analyzing and interpreting financial statements to guide management decisions

Auditing financial statements to verify accuracy and regulatory compliance

Separating the proprietor's personal transactions from business transactions

Show answer & explanation

Answer: Systematically recording daily financial transactions in books of original entry

Answer

Systematically recording daily financial transactions in books of original entry

Bookkeeping is the routine and systematic recording of financial transactions in books of prime entry and ledgers. It forms the preliminary stage upon which accounting performs analysis, interpretation, and reporting.

Step-by-Step Solution

Define the primary function of bookkeeping

Bookkeeping involves routine clerical procedures such as recording transactions chronologically in journals and posting them to ledgers.

It serves as the initial, mechanical foundation of financial record maintenance.

Compare bookkeeping with accounting functions

Accounting takes recorded data from bookkeeping to summarize, analyze, interpret, and report results to stakeholders.

This establishes that systematic recording of transactions belongs to bookkeeping.

Key Concept

Scope difference between bookkeeping and accounting

Question 11999Question →

The financial records of Crestwood Logistics Ltd at the end of its financial year showed Total Non-Current Assets of ₦1,200,000 and Net Current Assets of ₦350,000. If 8% Debentures stood at ₦400,000 and total reserves were ₦250,000, what is the value of the Issued Share Capital in the Statement of Financial Position?

₦900,000

₦1,300,000

₦600,000

₦1,700,000

Show answer & explanation

Answer: ₦900,000

Answer

The Issued Share Capital of Crestwood Logistics Ltd is ₦900,000.

In a corporate Statement of Financial Position, Total Net Assets equals Non-Current Assets plus Net Current Assets (₦1,200,000 + ₦350,000 = ₦1,550,000). Total Net Assets are financed by Shareholders' Funds (Issued Share Capital + Reserves) and Non-Current Liabilities (Debentures). Subtracting Reserves (₦250,000) and Debentures (₦400,000) from ₦1,550,000 gives an Issued Share Capital of ₦900,000.

Step-by-Step Solution

Calculate Total Net Assets (Capital Employed)

Total Net Assets = Non-Current Assets + Net Current Assets = ₦1,200,000 + ₦350,000 = ₦1,550,000

Total Net Assets represents the overall net resources employed by the company.

Set up the Capital Employed equation

Capital Employed = Issued Share Capital + Reserves + Non-Current Liabilities (Debentures)

The Statement of Financial Position balancing equation requires total capital financing to equal total net assets.

Solve for Issued Share Capital

Issued Share Capital = ₦1,550,000 - ₦250,000 - ₦400,000 = ₦900,000

Deducting reserves and long-term liabilities from capital employed yields the equity share capital.

Key Concept

Accounting Equation and Structure of Company Statement of Financial Position

Question 12000Question →

The following financial positions were extracted from the books of Lakeside Recreation Association as at 1st January 2025:

Item	Amount (₦)
Clubhouse premises	1,200,000
Equipment and furniture	650,000
Cash at bank	180,000
Bar inventory	45,000
Subscriptions due but unpaid	35,000
Subscriptions received in advance	20,000
Outstanding electricity bill	15,000
Bar creditors	25,000

What is the Accumulated Fund of the association as at 1st January 2025 in Naira (₦)?

Show answer & explanation

Answer: 2050000

Answer

The Accumulated Fund of Lakeside Recreation Association as at 1st January 2025 is ₦2,050,000.

The Accumulated Fund is calculated by subtracting total liabilities from total assets at the start of the financial period. Adding the assets gives: Clubhouse premises (₦1,200,000) + Equipment and furniture (₦650,000) + Cash at bank (₦180,000) + Bar inventory (₦45,000) + Subscriptions due but unpaid (₦35,000) = ₦2,110,000. Summing the liabilities gives: Subscriptions received in advance (₦20,000) + Outstanding electricity bill (₦15,000) + Bar creditors (₦25,000) = ₦60,000. Subtracting liabilities from assets yields ₦2,110,000 - ₦60,000 = ₦2,050,000.

Step-by-Step Solution

Calculate Total Assets as at 1st January 2025

��2,110,000

Total assets comprise non-current assets (premises, equipment/furniture), current assets (cash at bank, bar inventory), and accrued income (subscriptions due but unpaid).

Calculate Total Liabilities as at 1st January 2025

₦60,000

Total liabilities comprise prepaid income (subscriptions received in advance), accrued expenses (outstanding electricity bill), and payables (bar creditors).

Deduct Total Liabilities from Total Assets to determine the Accumulated Fund

₦2,050,000

The Accumulated Fund represents the opening capital surplus of a non-profit entity, calculated using the accounting equation: Accumulated Fund = Total Assets - Total Liabilities.

Key Concept

Calculation of Accumulated Fund for Non-Profit Organizations

PreviousPage 600 / 697Next

All practice questions

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