All practice questions

Question 12061Question →

The bookkeeper of Farida Commercial Enterprise extracted the following ledger account balances at 31 December 2025:

Account Title	Balance (₦)
Capital	1,200,000
Freehold Land	800,000
Motor Vehicles	450,000
Fixtures and Fittings	200,000
Purchases	720,000
Sales	1,380,000
Returns Inward	35,000
Returns Outward	28,000
Carriage Inward	18,000
Carriage Outward	22,000
Discount Allowed	14,000
Discount Received	19,000
Trade Debtors	210,000
Trade Creditors	165,000
Provision for Doubtful Debts	15,000
Bank Overdraft	85,000
General Expenses	48,000
Rent and Rates	36,000
Drawings	55,000

When compiling the Trial Balance, the Cash at Bank account balance was completely omitted, causing a disagreement between total debits and total credits. A Suspense Account was opened for the difference. What is the value in Naira (₦) of the entry required in the Suspense Account to balance the Trial Balance?

Show answer & explanation

Answer: 284000

Answer

The entry required in the Suspense Account to balance the Trial Balance is ₦284,000.

To find the initial Suspense Account balance, separate the extracted ledger balances into debit and credit columns. Summing the debit balances yields ₦2,608,000, while summing the credit balances yields ₦2,892,000. The shortfall on the debit side is ₦2,892,000 - ₦2,608,000 = ₦284,000, which is the exact amount placed in the Suspense Account to temporarily balance the Trial Balance.

Step-by-Step Solution

1

Classify all listed accounts into debit and credit balances and sum the debit balances.

Total extracted debits = ₦2,608,000.

Assets (Land, Vehicles, Fixtures, Debtors), Expenses (Purchases, Carriage Inward/Outward, Discount Allowed, General Expenses, Rent & Rates), Drawings, and Returns Inward are debit balances.

2

Sum all extracted credit balances.

Total extracted credits = ₦2,892,000.

Capital, Liabilities (Creditors, Bank Overdraft), Revenues/Gains (Sales, Discount Received), Contra-assets (Provision for Doubtful Debts), and Returns Outward are credit balances.

3

Compute the difference between total credit balances and total debit balances.

Suspense account entry = ₦284,000.

Because the Cash at Bank account (a debit balance) was omitted, total credits exceeded total debits by ₦284,000, requiring a debit entry of ₦284,000 in the Suspense Account.

Key Concept

Trial balance extraction rules and determination of Suspense Account balances resulting from omitted account balances.

Question 12062Question →

Tunde and Chidi decided to dissolve their partnership firm. At the date of dissolution, total assets with a book value of $₦120,000$ were transferred to the Realization Account. These assets were realized for $₦135,000$ , and dissolution expenses amounting to $₦4,000$ were paid. What is the profit on realization in Naira ( $₦$ )?

Show answer & explanation

Answer: 11000

Answer

The profit on realization is

₦11,000

.

The Realization Account is debited with the book value of assets (

₦120,000

) and dissolution expenses (

₦4,000

), giving a total debit balance of

₦124,000

. It is credited with the asset sale proceeds of

₦135,000

. The excess credit of

₦11,000

represents the net profit on realization.

Step-by-Step Solution

1

Determine total debit items in the Realization Account

₦120,000 \text{ (book value of assets)} + ₦4,000 \text{ (expenses)} = ₦124,000

When dissolving a partnership, assets transferred and expenses paid are debited to the Realization Account.

2

Determine total credit items in the Realization Account

₦135,000 \text{ (cash realized)}

Amounts received from the realization of assets are credited to the Realization Account.

3

Calculate net realization profit

₦135,000 - ₦124,000 = ₦11,000

An excess of total credits over total debits in the Realization Account represents a profit on realization.

Key Concept

Calculation of Net Profit on Realization upon Partnership Dissolution

Question 12063Question →

Highridge Capital Plc presents the following capital structure and financial information for the year ended 31st December 2025:

Financial Item	Details / Amount
Issued $6\%$ Preference Shares of $₦1.00$ each	$₦500,000$
Issued Ordinary Shares of $₦0.50$ each	$800,000$ shares
Net profit for the year ended 31st December 2025	$₦185,000$
Retained profit brought forward ( $1\text{st}$ January 2025)	$₦35,000$

The board of directors approved the following appropriations:
- Transfer to General Reserve: $₦40,000$
- Interim ordinary dividend paid: $₦15,000$
- Preference share dividend: Fully provided for
- Proposed final ordinary dividend: $5\%$ on paid-up ordinary share capital

What is the retained profit balance carried forward to the next financial year?

₦95,000

₦115,000

₦80,000

₦145,000

Show answer & explanation

Answer: ₦115,000

Answer

The retained profit carried forward to the next financial year is ₦115,000.

The total profit available for appropriation is ₦220,000 (₦185,000 current net profit + ₦35,000 opening retained profit). The total appropriations consist of the preference dividend of ₦30,000 (

6\% \times ₦500,000

), general reserve transfer of ₦40,000, interim ordinary dividend of ₦15,000, and proposed final ordinary dividend of ₦20,000 (

5\% \text{ of } [800,000 \times ₦0.50 = ₦400,000]

). Subtracting the total appropriations of ₦105,000 from ₦220,000 leaves a retained profit carried forward of ₦115,000.

Step-by-Step Solution

1

Calculate the total profit available for appropriation

Total Available Profit = ₦185,000 (Net Profit for year) + ₦35,000 (Retained Profit b/f) = ₦220,000

Retained profits brought forward from previous periods must be added to the current period's net profit to determine distributable profits.

2

Calculate preference share dividend

Preference Dividend = 6% × ₦500,000 = ₦30,000

Fixed preference dividends are calculated as a percentage of paid-up preference share capital.

3

Calculate ordinary share capital and proposed final ordinary dividend

Paid-up Ordinary Share Capital = 800,000 shares × ₦0.50 = ₦400,000. Proposed Final Ordinary Dividend = 5% × ₦400,000 = ₦20,000

Dividends are computed on the total nominal paid-up monetary value of capital, not simply on the number of issued shares.

4

Sum all appropriations and calculate retained profit carried forward

Total Appropriations = ₦30,000 (Pref. Div) + ₦40,000 (General Reserve) + ₦15,000 (Interim Div) + ₦20,000 (Final Ord. Div) = ₦105,000. Retained Profit c/f = ₦220,000 - ₦105,000 = ₦115,000

Subtracting total appropriations from total available profit gives the retained balance carried forward.

Key Concept

Profit and Loss Appropriation Account and Dividend Calculation

Estimated Time:2m 0s

Question 12064Question →

The draft financial statements of a sole trader for the year ended 31st December 2025 showed a net profit of $₦350,000$ . During an end-of-year audit, the following errors and unrecorded items were discovered:

1. Goods costing $₦40,000$ (with a normal selling price of $₦55,000$ ) withdrawn by the owner for personal consumption were not recorded in the books.
2. Additional capital of $₦150,000$ introduced by the owner during the year was erroneously credited to the Sales Account.
3. Payment of $₦20,000$ from the owner's personal bank account for repairing business delivery equipment was incorrectly debited to the Drawings Account, with no entry made in the repairs account.

What is the corrected net profit for the year ended 31st December 2025?

₦220,000

₦255,000

₦140,000

₦440,000

Show answer & explanation

Answer: $₦220,000$

Answer

The corrected net profit for the year ended 31st December 2025 is

₦220,000

.

To arrive at the corrected net profit, start with the draft net profit of

₦350,000

. Goods withdrawn for personal use must be credited to the Purchases Account at cost price (

₦40,000

), reducing cost of goods sold and increasing profit. Capital introduced (

₦150,000

) erroneously credited to Sales must be removed from revenue, reducing profit by

₦150,000

. Finally, business repairs (

₦20,000

) paid from personal funds must be charged as an expense, reducing profit by

₦20,000

. Thus, corrected net profit =

350,000 + 40,000 - 150,000 - 20,000 = ₦220,000

.

Step-by-Step Solution

1

Adjust for goods withdrawn by the proprietor

Increase net profit by

₦40,000

Goods taken for personal use must be credited to the Purchases Account at cost price (

₦40,000

), which reduces the Cost of Goods Sold and increases Net Profit.

2

Correct the misclassification of capital introduced

Decrease net profit by

₦150,000

Capital introduced was incorrectly credited to Sales, overstating revenue. Removing it from Sales reduces Net Profit by

₦150,000

.

3

Record unposted business repair expense

Decrease net profit by

₦20,000

Business repairs paid from private funds represent additional capital, but since the expense was not debited to Repairs Account, profit was overstated by

₦20,000

.

4

Compute corrected net profit

₦350,000 + ₦40,000 - ₦150,000 - ₦20,000 = ₦220,000

Combining the draft net profit with all three profit-impacting adjustments yields

₦220,000

.

Key Concept

Adjustments for Goods Withdrawn, Capital Introduced, and Business Expenses Paid from Personal Funds

Estimated Time:2m 0s

Question 12065Question →

At 31st December 2025, the trial balance of Zainab Stores showed Trade Debtors of $\text{₦}200,000$ and an existing Provision for Doubtful Debts of $\text{₦}8,000$ . An additional bad debt of $\text{₦}20,000$ is to be written off, and the provision for doubtful debts is to be maintained at $5\%$ of the remaining trade debtors. What is the amount to be charged to the Profit and Loss Account for the provision for doubtful debts?

\text{₦}1,000

\text{₦}9,000

\text{₦}2,000

\text{₦}10,000

Show answer & explanation

Answer: $\text{₦}1,000$

Answer

\text{₦}1,000

The net trade debtors after writing off the additional bad debt of

\text{₦}20,000

are

\text{₦}180,000

. The required provision is

5\%

of

\text{₦}180,000 = \text{₦}9,000

. Comparing this with the existing provision of

\text{₦}8,000

gives an increase of

\text{₦}1,000

, which is the exact amount charged to the Profit and Loss Account.

Step-by-Step Solution

1

Calculate remaining trade debtors after writing off the additional bad debt

\text{₦}200,000 - \text{₦}20,000 = \text{₦}180,000

Provision for doubtful debts is calculated only on surviving receivables after all confirmed irrecoverable debts are written off.

2

Calculate the required new provision for doubtful debts

5\% \times \text{₦}180,000 = \text{₦}9,000

$

The provision represents the estimated percentage of remaining debtors that may default.

3

Determine the net adjustment for the Profit and Loss Account

\text{₦}9,000 \text{ (New Provision)} - \text{₦}8,000 \text{ (Existing Provision)} = \text{₦}1,000

Only the increase in provision is charged as an expense to the Profit and Loss Account for the period.

Key Concept

Adjustment of Provision for Doubtful Debts

Estimated Time:1m 30s

Question 12066Question →

Match each public sector financial control mechanism or auditing authority on the left with its statutory function on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Public Accounts Committee (PAC) matches with performing parliamentary scrutiny of audited reports and summoning accounting officers. Auditor-General for the Federation matches with conducting post-payment examination of public accounts and submitting annual audit reports directly to the legislature. Ministry of Finance / Treasury matches with exercising executive financial control through warrant releases, fund management, and expenditure guidelines. Internal Audit Department matches with executing continuous pre-payment verification, voucher checks, and internal control evaluations within an MDA.

Each control organ operates at a distinct stage of public financial management. The Public Accounts Committee represents legislative oversight by examining audited accounts. The Auditor-General provides independent external statutory audit services. The Ministry of Finance exercises executive control over spending authorization and warrant issuance. The Internal Audit Department enforces continuous internal pre-payment verification.

Step-by-Step Solution

1

Identify the primary arm of public financial control for each authority.

Categorize PAC under legislative oversight, Auditor-General under external statutory audit, Ministry of Finance under executive control, and Internal Audit under departmental pre-payment control.

Public sector accounting divides financial control into executive, legislative, statutory audit, and internal operational tiers.

2

Distinguish between the Auditor-General and the Public Accounts Committee (PAC).

The Auditor-General audits public accounts and submits reports to the legislature, whereas the PAC considers the Auditor-General's report and conducts parliamentary queries.

A common point of confusion is misattributing the reporting function of the Auditor-General to the legislative committee that acts upon the report.

3

Map executive warrant releases and internal checks to their respective offices.

Ministry of Finance manages overall budget execution and warrants, while Internal Audit handles continuous pre-payment voucher verification.

Executive financial control operates at the macro budget level, while internal audit provides continuous micro-level operational control within each ministry.

Key Concept

Tiers of Public Sector Financial Control and Audit Procedures

Question 12067Question →

City X is located at longitude $15^\circ\text{E}$ . When the local time at City X is $2:00\text{ PM}$ , what is the local time at City Y, located at longitude $45^\circ\text{E}$ ?

4:00\text{ PM}

12:00\text{ noon}

3:00\text{ PM}

1:00\text{ PM}

Show answer & explanation

Answer: $4:00\text{ PM}$

Answer

The local time at City Y is

4:00\text{ PM}

.

The difference in longitude between City X (

15^\circ\text{E}

) and City Y (

45^\circ\text{E}

) is

30^\circ

. Since

15^\circ

corresponds to 1 hour,

30^\circ

equals 2 hours. Because City Y lies to the east of City X, local time is ahead, so 2 hours must be added to

2:00\text{ PM}

, giving

4:00\text{ PM}

.

Step-by-Step Solution

1

Calculate the angular longitudinal difference between City X and City Y.

Difference

= 45^\circ\text{E} - 15^\circ\text{E} = 30^\circ

.

Since both cities are in the Eastern Hemisphere, subtract the smaller longitude from the larger longitude.

2

Convert the longitudinal difference into a time difference.

Time difference

= 30^\circ \div 15^\circ/\text{hour} = 2\text{ hours}

.

The Earth rotates

15^\circ

per hour (

360^\circ

in 24 hours).

3

Determine whether to add or subtract the time difference.

Local time

= 2:00\text{ PM} + 2\text{ hours} = 4:00\text{ PM}

.

City Y (

45^\circ\text{E}

) is east of City X (

15^\circ\text{E}

), so time is ahead (gain time going east).

Key Concept

Calculation of local time difference using longitudinal intervals

Estimated Time:45s

Question 12068Question →

Apex Nigeria Plc has an authorized share capital of 1,000,000 ordinary shares of ₦1 each. The company had previously issued 600,000 ordinary shares at a premium of ₦0.20 per share, all fully paid. Prior to year-end adjustments, the General Reserve account held a balance of ₦50,000. The directors subsequently wrote off preliminary expenses of ₦10,000 from the Share Premium account and then issued bonus shares to existing shareholders on the basis of one new share for every four shares held, utilizing the Share Premium account to its maximum statutory limit before drawing on revenue reserves. What is the remaining balance in the General Reserve account after the bonus issue?

₦10,000

₦20,000

₦0

₦40,000

Show answer & explanation

Answer: ₦10,000

Answer

The remaining balance in the General Reserve account is ₦10,000.

The correct option correctly accounts for the statutory reduction of the Share Premium balance by ₦10,000 for preliminary expenses prior to capitalizing the remaining ₦110,000 for the ₦150,000 bonus issue. This leaves ₦40,000 to be transferred from the General Reserve, leaving ₦10,000 in the General Reserve.

Step-by-Step Solution

1

Calculate the initial Share Premium balance

600,000 shares × ₦0.20 = ₦120,000

Share Premium is calculated as the premium per share multiplied by the number of issued shares.

2

Deduct preliminary expenses written off from Share Premium

₦120,000 - ₦10,000 = ₦110,000 available Share Premium

Writing off preliminary expenses is a statutory permitted use of the Share Premium account.

3

Determine the nominal value of the bonus shares issued

(600,000 shares ÷ 4) × ₦1 = 150,000 shares = ₦150,000

A 1-for-4 bonus issue on 600,000 shares yields 150,000 new ordinary shares at ₦1 nominal value.

4

Apply available Share Premium and compute General Reserve utilization

General Reserve required = ₦150,000 total bonus - ₦110,000 Share Premium = ₦40,000

Share Premium must be utilized to its maximum available balance before absorbing the remaining deficit from revenue reserves.

5

Compute the ending balance of the General Reserve

₦50,000 initial balance - ₦40,000 utilized = ₦10,000 remaining

Subtracting the amount drawn for the bonus issue from the opening General Reserve balance gives the final balance.

Key Concept

Statutory Utilization of Share Premium and Capitalization of Reserves for Bonus Issues

Estimated Time:3m 0s

Question 12069Question →

Mrs. Adebayo, a sole proprietor, withdrew inventory costing $\text{₦}35,000$ (with a marked retail selling price of $\text{₦}50,000$ ) from her boutique for her family's personal use. What is the correct double entry required to adjust for this transaction in the final accounts?

Debit Drawings account with

\text{₦}35,000

and credit Purchases account with

\text{₦}35,000

Debit Drawings account with

\text{₦}50,000

and credit Sales account with

\text{₦}50,000

Debit Purchases account with

\text{₦}35,000

and credit Capital account with

\text{₦}35,000

Debit Drawings account with

\text{₦}35,000

and credit Sales account with

\text{₦}35,000

Show answer & explanation

Answer: Debit Drawings account with $\text{₦}35,000$ and credit Purchases account with $\text{₦}35,000$

Answer

Debit Drawings account with

\text{₦}35,000

and credit Purchases account with

\text{₦}35,000

Goods taken by a business owner for personal use represent a reduction in inventory available for resale. Under fundamental double entry accounting, such transactions must be recorded at cost price by debiting Drawings account (to reflect the decrease in equity) and crediting Purchases account (to reduce total cost of goods purchased).

Step-by-Step Solution

1

Determine the relevant valuation basis for owner withdrawals.

The transaction must be valued at the cost price of

\text{₦}35,000

, not the retail selling price of

\text{₦}50,000

.

A business owner cannot make a commercial profit on goods withdrawn for personal consumption.

2

Identify the account to receive the debit entry.

Debit Drawings Account with

\text{₦}35,000

.

Drawings represent withdrawals of business assets by the owner for private use, reducing equity.

3

Identify the account to receive the credit entry.

Credit Purchases Account with

\text{₦}35,000

.

Crediting Purchases reduces total goods bought for resale so that the Trading Account reflects only inventory available for sale to customers.

Key Concept

Accounting treatment of goods withdrawn by the owner for personal use

Estimated Time:1m 0s

Question 12070Question →

Which of the following regional economic groupings is established specifically to promote economic integration among member countries in the West African sub-region?

Economic Community of West African States (ECOWAS)

Southern African Development Community (SADC)

East African Community (EAC)

Common Market for Eastern and Southern Africa (COMESA)

Show answer & explanation

Answer: Economic Community of West African States (ECOWAS)

Answer

Economic Community of West African States (ECOWAS)

The Economic Community of West African States (ECOWAS) is the official regional organization dedicated to economic integration, trade, and political cooperation strictly among member nations located in West Africa.

Step-by-Step Solution

1

Identify the target geographical sub-region mentioned in the question

The target area is West Africa.

The question specifically asks for the trade bloc belonging to West Africa.

2

Match regional African economic blocs with their geographic domains

ECOWAS serves West Africa, SADC serves Southern Africa, EAC serves East Africa, and COMESA serves Eastern and Southern Africa.

Classifying political and regional groupings based on their location on the African continent.

Key Concept

Political Divisions and Regional Economic Groupings of Africa

Question 12071Question →

A firm bought office furniture on credit for $\text{₦}250,000$ from Alaba Furniture Mart. The transaction was erroneously debited to the Purchases Account. Which of the following entries in the General Journal will correctly rectify this error?

Debit Office Furniture Account

\text{₦}250,000

and Credit Purchases Account

\text{₦}250,000

Debit Purchases Account

\text{₦}250,000

and Credit Office Furniture Account

\text{₦}250,000

Debit Office Furniture Account

\text{₦}250,000

and Credit Alaba Furniture Mart Account

\text{₦}250,000

Debit Alaba Furniture Mart Account

\text{₦}250,000

and Credit Purchases Account

\text{₦}250,000

Show answer & explanation

Answer: Debit Office Furniture Account $\text{₦}250,000$ and Credit Purchases Account $\text{₦}250,000$

Answer

Debit Office Furniture Account

\text{₦}250,000

and Credit Purchases Account

\text{₦}250,000

When a non-current asset purchase is erroneously debited to the Purchases Account, the error is rectified through the General Journal by debiting the specific asset account (Office Furniture) and crediting the Purchases Account to cancel the incorrect debit.

Step-by-Step Solution

1

Analyze the original incorrect entry made.

Purchases Account was debited with

\text{₦}250,000

, while Alaba Furniture Mart was correctly credited.

Purchase of a non-current asset was misclassified as revenue expenditure in the Purchases Account.

2

Determine the necessary correcting adjustments.

The Office Furniture Account requires a debit of

\text{₦}250,000

, and the Purchases Account requires a credit of

\text{₦}250,000

.

Debiting Office Furniture Account records the asset, while crediting Purchases Account removes the incorrect debit balance.

3

Formulate the rectifying journal entry.

Debit Office Furniture Account

\text{₦}250,000

; Credit Purchases Account

\text{₦}250,000

.

This restores the double entry balance without altering the supplier's account, which was correctly credited initially.

Key Concept

Correction of Errors via General Journal (Journal Proper)

Estimated Time:1m 15s

Question 12072Question →

In the books of Chidiebere Enterprise, Trade Debtors stand at $\text{₦}200,000$ at the end of the financial year. Additional information reveals that bad debts of $\text{₦}20,000$ are to be written off, a provision for doubtful debts is to be created at $5\%$ , and a $2\%$ provision for discount on debtors is to be provided for. Calculate the required figures to complete the financial statement extract.

Fill in the blanks below

The net debtors balance after deducting bad debts and provision for doubtful debts is

\text{₦}

, and the provision for discount on debtors to be debited to the Profit and Loss Account is

\text{₦}

.

Show answer & explanation

Answer

The net debtors balance after provision for doubtful debts is 171,000, and the provision for discount on debtors is 3,420.

First, bad debts of ₦20,000 are subtracted from gross debtors of ₦200,000 to get ₦180,000. Next, 5% provision for doubtful debts (₦9,000) is deducted from ₦180,000 to give ₦171,000. Finally, 2% provision for discount on debtors is calculated on ₦171,000 to yield ₦3,420.

Step-by-Step Solution

1

Deduct bad debts written off from the gross trade debtors balance.

Adjusted debtors balance =

\text{₦}200,000 - \text{₦}20,000 = \text{₦}180,000

.

Bad debts are irrecoverable and must be removed from debtors before calculating any provision.

2

Calculate the provision for doubtful debts at

5\%

on adjusted debtors.

Provision for doubtful debts =

5\% \times \text{₦}180,000 = \text{₦}9,000

.

The doubtful debts provision percentage applies to debtors expected to remain after write-offs.

3

Deduct the provision for doubtful debts to determine debtors expected to pay prompt cash.

Net debtors eligible for discount =

\text{₦}180,000 - \text{₦}9,000 = \text{₦}171,000

.

Discounts are only allowed to debtors expected to settle their accounts, excluding potential defaults.

4

Calculate the provision for discount on debtors at

2\%

on net debtors.

Provision for discount on debtors =

2\% \times \text{₦}171,000 = \text{₦}3,420

.

The discount provision is computed on the net valuation of debtors after deducting both bad debts and doubtful debts provision.

Key Concept

Sequential Calculation Order for Debtors Adjustments (Bad Debts → Provision for Doubtful Debts → Provision for Discount on Debtors)

Question 12073Question →

The following financial balances were extracted from the ledger of Prime Crest Plc as at 31st December 2025:

- Issued Share Capital: ₦600,000
- Share Premium: ₦120,000
- Retained Earnings: ₦180,000
- 8% Debentures (2032): ₦250,000

What is the total amount of Equity and Reserves to be presented in the Statement of Financial Position?

₦900,000

₦1,150,000

₦780,000

₦540,000

Show answer & explanation

Answer: ₦900,000

Answer

The total amount of Equity and Reserves is ₦900,000.

Total Equity and Reserves equals the sum of Issued Share Capital (₦600,000), Share Premium (₦120,000), and Retained Earnings (₦180,000), giving ₦900,000. Debentures are long-term liabilities and are excluded.

Step-by-Step Solution

1

Identify equity components

Issued Share Capital = ₦600,000, Share Premium = ₦120,000, Retained Earnings = ₦180,000.

Equity and Reserves comprises issued share capital, capital reserves (such as share premium), and revenue reserves (such as retained earnings).

2

Distinguish non-current liabilities

8% Debentures = ₦250,000 (Non-Current Liability).

Debentures represent long-term borrowed funds and must be classified under non-current liabilities, not equity.

3

Calculate Total Equity and Reserves

₦600,000 + ₦120,000 + ₦180,000 = ₦900,000

Summing all equity items yields total equity attributable to shareholders.

Key Concept

Classification of Equity and Reserves in Company Financial Statements

Question 12074Question →

Starlight Sports Club operates a bar for its members. For the financial year ended 31 December 2025, the following information was extracted from its accounting records:

Item	Amount (₦)
Bar takings	250,000
Opening bar inventory	30,000
Bar purchases	160,000
Closing bar inventory	35,000
Bar staff wages paid	22,000
Bar electricity paid	7,000

Additional Information:
At 31 December 2025, bar electricity paid in advance amounted to ₦2,000.

Calculate the net profit from bar trading to be transferred to the Income and Expenditure Account.

Show answer & explanation

Answer: 68000

Answer

The net profit from bar trading transferred to the Income and Expenditure Account is ₦68,000.

The net profit from bar trading is calculated by deducting the cost of goods sold (₦155,000) from total bar takings (₦250,000) to arrive at a gross profit of ₦95,000. Operating expenses specific to the bar, consisting of staff wages (₦22,000) and electricity adjusted for prepayment (₦7,000 - ₦2,000 = ₦5,000), total ₦27,000. Deducting total bar expenses from gross profit gives a net profit of ₦68,000 to be credited to the Income and Expenditure Account.

Step-by-Step Solution

1

Calculate the Cost of Goods Sold for the bar

₦155,000

Cost of Goods Sold is calculated as Opening Inventory + Bar Purchases - Closing Inventory = ₦30,000 + ₦160,000 - ₦35,000 = ₦155,000.

2

Determine the Bar Gross Profit

₦95,000

Bar Gross Profit equals Bar Takings minus Cost of Goods Sold = ₦250,000 - ₦155,000 = ₦95,000.

3

Calculate the total bar operating expenses incorporating adjustments

₦27,000

Adjusted Bar Electricity = ₦7,000 paid - ₦2,000 prepaid = ₦5,000. Total Bar Expenses = Bar Wages (��22,000) + Adjusted Electricity (₦5,000) = ₦27,000.

4

Calculate net bar profit to transfer to the Income and Expenditure Account

₦68,000

Net Bar Profit = Gross Profit - Total Expenses = ₦95,000 - ₦27,000 = ₦68,000.

Key Concept

Bar Trading Account Net Profit Determination in Non-Profit Organizations

Question 12075Question →

Match each receipt transaction of Metro Athletic Union on the left with its correct financial accounting treatment on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The correct accounting treatments pair receipts based on their capital or revenue nature: specific legacies match restricted endowment funds in the Statement of Financial Position; general unrestricted donations match revenue income in the Income and Expenditure Account; partially capitalized entrance fees match proportional allocation between Accumulated Fund and Income and Expenditure Account; and specific capital project donations match dedicated building fund accounts in the Statement of Financial Position.

Receipts in non-profit organizations are classified according to donor intent and executive policy. Specific-purpose legacies and building donations are capital receipts credited to special fund accounts in the Statement of Financial Position. Unrestricted general donations are revenue receipts recognized in the Income and Expenditure Account. Entrance fees split by constitutional policy are divided accordingly between the Accumulated Fund and Income and Expenditure Account.

Step-by-Step Solution

1

Analyze each non-profit receipt to determine whether it is a capital receipt, revenue receipt, or a hybrid transaction.

Specific legacies and specific project donations are capital receipts; general donations are revenue receipts; split entrance fees contain both capital and revenue components.

Non-profit accounting accounting rules require capital receipts (restricted or long-term) to be balance sheet items, while revenue receipts (unrestricted operational income) belong in the Income and Expenditure Account.

2

Map each receipt type to its corresponding account and financial statement presentation.

The legacy matches the restricted Scholarship Endowment Fund; general donation matches Income and Expenditure Account revenue; entrance fees match the split treatment between Accumulated Fund and Income and Expenditure; gymnasium donation matches the Gymnasium Building Fund.

Matching each item ensures compliance with accounting principles governing non-profit financial reporting.

Key Concept

Accounting Treatment of Non-Profit Receipts (Entrance Fees, Donations, and Legacies)

Question 12076Question →

The accounting policy of Metro Tradesmen Welfare Association requires $75\%$ of entrance fees to be capitalized, while the remaining portion is recognized as revenue income. During the year ended 31 December 2025, the association recorded the following receipts:
- Entrance fees: ₦ $800,000$
- General donations: ₦ $450,000$
- Legacy for constructing a new gymnasium: ₦ $2,500,000$

What is the total amount to be credited to the Income and Expenditure Account for the year?

₦650,000

₦1,250,000

₦3,150,000

₦3,750,000

Show answer & explanation

Answer: ₦650,000

Answer

The total amount credited to the Income and Expenditure Account is ₦650,000.

In accordance with non-profit accounting rules, entrance fees are split according to organizational policy (25% revenue = ₦200,000). General donations of ₦450,000 are unrestricted revenue income. The legacy of ₦2,500,000 is earmarked for a specific capital project (building a gymnasium) and must be capitalized on the Balance Sheet. Therefore, total revenue credited to the Income and Expenditure Account is ₦200,000 + ₦450,000 = ₦650,000.

Step-by-Step Solution

1

Calculate the revenue portion of entrance fees

₦800,000 × (100% - 75%) = ₦800,000 × 25% = ₦200,000

Since 75% of entrance fees must be capitalized, only the remaining 25% is recognized as revenue income.

2

Identify the treatment for general donations and specific legacy

General donations = ₦450,000 (Revenue income); Gymnasium legacy = ₦2,500,000 (Capital receipt)

General donations are recurring/unrestricted income credited to Income & Expenditure Account, whereas legacies for a specific purpose (gymnasium) are capital receipts credited directly to a specific fund/Balance Sheet.

3

Sum up the items to be credited to Income and Expenditure Account

₦200,000 + ₦450,000 = ₦650,000

Total revenue income credited to Income & Expenditure Account consists of the revenue portion of entrance fees plus general donations.

Key Concept

Accounting treatment of entrance fees, general donations, and specific legacies in non-profit financial statements.

Question 12077Question →

As at 30th June 2026, the trial balance of Danladi Stores showed Trade Debtors of $₦260,000$ and an existing Provision for Doubtful Debts of $₦7,500$ . At the end of the financial period, an additional bad debt of $₦10,000$ is to be written off, and the provision for doubtful debts is to be maintained at $5\%$ of net trade debtors. What is the net trade debtors figure to be presented in the Statement of Financial Position?

Show answer & explanation

Answer: 237500

Answer

The net trade debtors figure to be presented in the Statement of Financial Position is ₦237,500.

To determine the net trade debtors for presentation in the Statement of Financial Position, first write off the additional bad debt of ₦10,000 from the gross trade debtors of ₦260,000, leaving ₦250,000. Next, compute the 5% provision on ₦250,000, which equals ₦12,500. Subtracting the ₦12,500 provision from ₦250,000 gives ₦237,500.

Step-by-Step Solution

1

Deduct additional bad debts from gross debtors

₦250,000

Additional bad debts must be written off from trade debtors before computing the required percentage provision.

2

Calculate the closing provision for doubtful debts at 5%

₦12,500

The 5% provision applies strictly to the remaining valid debtors (

5\% \times ₦250,000

).

3

Deduct the new provision from adjusted trade debtors

₦237,500

Net trade debtors in the Statement of Financial Position equals adjusted debtors minus the closing provision (

₦250,000 - ₦12,500

).

Key Concept

Adjustments for Bad Debts and Provision for Doubtful Debts in Final Accounts

Question 12078Question →

The accountant of Prime Ventures extracted the following balances from the ledger accounts at the end of the trading period:

Account Title	Balance ( $₦$ )
Capital	$300,000$
Equipment	$350,000$
Sales	$400,000$
Purchases	$280,000$
Rent Expense	$35,000$
Returns Inward	$15,000$
Bank Overdraft	$30,000$
Trade Debtors	$125,000$
Trade Creditors	$70,000$
Provision for Doubtful Debts	$5,000$

During the extraction process to the Trial Balance, two errors occurred:
1. Returns Inward ( $₦15,000$ ) was erroneously entered into the credit column.
2. Provision for Doubtful Debts ( $₦5,000$ ) was erroneously entered into the debit column.

What is the total of the credit column of the Trial Balance as extracted by the accountant?

₦815,000

₦795,000

₦805,000

��825,000

Show answer & explanation

Answer: $₦815,000$

Answer

The total of the credit column of the extracted Trial Balance is

₦815,000

.

The normal credit balances of Prime Ventures consist of Capital (

₦300,000

), Sales (

₦400,000

), Bank Overdraft (

₦30,000

), Trade Creditors (

₦70,000

), and Provision for Doubtful Debts (

₦5,000

), totaling

₦805,000

. When Returns Inward (

₦15,000

) is mistakenly entered on the credit side, the credit total increases to

₦820,000

. Simultaneously, because Provision for Doubtful Debts (

₦5,000

) was entered on the debit side instead, it is absent from the credit column, reducing the extracted credit total to

₦815,000

.

Step-by-Step Solution

1

Identify normal credit balances and calculate the initial normal credit total.

Credit items: Capital (

₦300,000

), Sales (

₦400,000

), Bank Overdraft (

₦30,000

), Trade Creditors (

₦70,000

), and Provision for Doubtful Debts (

₦5,000

). Normal Credit Total =

300,000 + 400,000 + 30,000 + 70,000 + 5,000 = ₦805,000

.

Establishing the correct baseline total of credit entries is necessary before applying extraction errors.

2

Adjust the credit total for the misplacement of Returns Inward.

Returns Inward (

₦15,000

) is added to the credit column:

805,000 + 15,000 = ₦820,000

.

Entering a debit balance item into the credit column increases the total of the credit column by its full value.

3

Adjust the credit total for the misplacement of Provision for Doubtful Debts.

Provision for Doubtful Debts (

₦5,000

) was removed from the credit side and placed on the debit side. Extracted Credit Total =

820,000 - 5,000 = ₦815,000

.

Because Provision for Doubtful Debts was placed on the debit side instead, it was omitted from the credit side, reducing the credit column total by

₦5,000

.

Key Concept

Impact of Ledger Extraction and Side Placement Errors on Trial Balance Column Totals

Estimated Time:2m 0s

Question 12079Question →

At the end of the accounting period, a trader's physical stock count reveals inventory with a total cost price of $\text{N}75,000$ . The expected selling price of this inventory is $\text{N}72,000$ , and the estimated costs to sell are $\text{N}4,000$ . Calculate the value of closing stock (in Naira) to be credited to the Trading Account in accordance with the prudence concept.

Show answer & explanation

Answer: 68000

Answer

The closing stock value to be credited to the Trading Account is 68,000 Naira.

Closing stock is valued at the lower of cost and net realizable value (NRV). The cost is 75,000 Naira, and the NRV is calculated as 72,000 Naira minus 4,000 Naira, which equals 68,000 Naira. The lower value of 68,000 Naira is used in the final accounts.

Step-by-Step Solution

1

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

\text{NRV} = \text{N}72,000 - \text{N}4,000 = \text{N}68,000

Net Realizable Value is calculated as the estimated selling price minus costs necessary to complete the sale.

2

Determine the valuation of closing stock using the lower of cost and NRV rule.

\min(\text{N}75,000, \text{N}68,000) = \text{N}68,000

Under accounting conventions and the prudence concept, closing stock must be recorded at the lower of cost and net realizable value.

Key Concept

Valuation of Closing Stock at the lower of cost and net realizable value (Prudence Concept)

Question 12080Question →

Which major physical region of Nigeria is characterized by extensive coastal lowlands, mangrove swamps, and a vast network of river distributaries emptying into the Atlantic Ocean?

The Niger Delta

The Jos Plateau

The High Plains of Hausaland

The Western Uplands

Show answer & explanation

Answer: The Niger Delta

Answer

The Niger Delta is the physical region characterized by coastal lowlands, mangrove swamps, and river distributaries.

The Niger Delta is a vast low-lying physical region formed by alluvial deposition from the River Niger. It features extensive mangrove swamps, creeks, and numerous distributary channels discharging into the Atlantic Ocean.

Step-by-Step Solution

1

Analyze the physical terrain characteristics listed in the stem.

The features described are low altitude coastal plains, mangrove vegetation, and river distributaries entering the ocean.

These physical and hydrological traits specifically define river deltas and coastal marine environments.

2

Match the description to Nigeria's physical regions.

The Niger Delta is the primary coastal deltaic lowlands region located along southern Nigeria.

The other options represent inland elevated plains and plateau structures.

Key Concept

Physical Regions and Coastal Lowlands of Nigeria

Estimated Time:45s

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