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Preparation of Company Statement of Financial Position

5 questions

All types5Multiple choice3Numeric1Matching1
Question 1Question →

The following balances were extracted from the books of Zenith Nigeria Plc as at 31st December 2025:

Account ItemAmount (₦)
Issued Share Capital (Ordinary shares of ₦1 each)500,000
Share Premium50,000
General Reserve30,000
10% Debentures100,000
Non-Current Assets (Net Book Value)620,000
Current Assets180,000
Current Liabilities70,000

What is the balance of the Retained Earnings (Profit and Loss Account) as at 31st December 2025?

Show answer & explanation

Answer: 50000

Answer

The balance of Retained Earnings as at 31st December 2025 is ₦50,000.
Under the company accounting framework, Net Assets equals total Shareholders' Equity. Total Assets of ₦800,000 less Current Liabilities of ₦70,000 and Non-Current Liabilities of ₦100,000 leaves Net Assets of ₦630,000. Subtracting the known equity items (Share Capital ₦500,000 + Share Premium ₦50,000 + General Reserve ₦30,000 = ₦580,000) yields the Retained Earnings balance of ₦50,000.

Step-by-Step Solution

1
Calculate Total Assets
₦800,000
Total Assets is the sum of Non-Current Assets (₦620,000) and Current Assets (₦180,000).
2
Calculate Net Assets (Capital Employed by Equity)
₦630,000
Net Assets is determined by deducting Current Liabilities (₦70,000) and Non-Current Liabilities (₦100,000) from Total Assets (₦800,000).
3
Sum known Shareholders' Equity components
₦580,000
Add Share Capital (₦500,000), Share Premium (₦50,000), and General Reserve (₦30,000).
4
Deduct known equity components from Net Assets to solve for Retained Earnings
₦50,000
Retained Earnings = Net Assets (₦630,000) - Known Equity (₦580,000) = ₦50,000.

Key Concept

Accounting Equation for Company Statement of Financial Position
Question 2Question →

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?

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

1
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.
2
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.
3
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 3Question →

Match each financial item of a public limited company to its appropriate section in the Statement of Financial Position.

Click a left item, then click its matching right item

Items

Share Premium Account
10% Debentures (repayable in 5 years)
Trade Receivables
Proposed Dividend Payable

Matches

Show answer & explanation

Answer

Share Premium Account matches Reserves and Surplus, 10% Debentures matches Non-Current Liabilities, Trade Receivables matches Current Assets, and Proposed Dividend Payable matches Current Liabilities.
In a company's Statement of Financial Position, Share Premium is presented under Reserves and Surplus (Equity), Debentures payable in 5 years fall under Non-Current Liabilities, Trade Receivables fall under Current Assets, and Proposed Dividend Payable is listed under Current Liabilities.

Step-by-Step Solution

1
Identify equity components and capital reserves.
Share Premium Account is matched to Reserves and Surplus.
Share premium is an equity reserve representing premiums received on share issues.
2
Distinguish between long-term obligations and short-term liabilities.
10% Debentures match Non-Current Liabilities, while Proposed Dividend Payable matches Current Liabilities.
Debentures maturing in 5 years are long-term liabilities, whereas proposed dividends must be settled within the upcoming accounting period.
3
Classify short-term operational assets.
Trade Receivables match Current Assets.
Amounts owed by trade debtors are realized as cash within a short operational cycle.

Key Concept

Classification of Company Balance Sheet Items
Question 4Question →

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?

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 5Question →

Apex Maritime Services Plc extracted the following balances from its financial records at 31st December 2025:

Ledger AccountAmount (₦)
Ordinary Share Capital800,000800,000
Share Premium120,000120,000
Retained Earnings250,000250,000
Proposed Dividends50,00050,000
8% Debentures (2032)300,000300,000

What is the correct total value of Shareholders' Funds (Equity and Reserves) to be reported in the Statement of Financial Position?

Show answer & explanation

Answer: ₦1,170,000

Answer

The correct total value of Shareholders' Funds to be presented in the Statement of Financial Position is ₦1,170,000.
Shareholders' Funds (Equity and Reserves) in a company Statement of Financial Position consists of paid-up share capital plus capital and revenue reserves. Here, Ordinary Share Capital (₦800,000₦800,000), Share Premium (₦120,000₦120,000), and Retained Earnings (₦250,000₦250,000) sum up to ₦1,170,000₦1,170,000. Proposed dividends are current liabilities, and debentures are non-current liabilities.

Step-by-Step Solution

1
Identify the components of Shareholders' Funds (Equity and Reserves).
Components are Ordinary Share Capital (₦800,000₦800,000), Share Premium (₦120,000₦120,000), and Retained Earnings (₦250,000₦250,000).
Shareholders' funds represent the owners' equity interest in the company, comprising paid-up share capital along with capital and revenue reserves.
2
Sum the equity and reserve items.
₦800,000+₦120,000+₦250,000=₦1,170,000₦800,000 + ₦120,000 + ₦250,000 = ₦1,170,000.
Share Premium is a non-distributable capital reserve and Retained Earnings is a revenue reserve, both of which belong under Shareholders' Funds.
3
Exclude items belonging to liabilities.
Proposed Dividends (₦50,000₦50,000) are current liabilities and 8% Debentures (₦300,000₦300,000) are non-current liabilities.
Debentures represent borrowed loan capital, while proposed dividends represent short-term payables.

Key Concept

Classification of Equity and Reserves in Company Statement of Financial Position
Preparation of Company Statement of Financial Position Practice Questions — JAMB UTME | Examkin