48 questions. Try each one, then open the answer to check yourself and read the explanation.
The current growth in the volume of trading and financial dealings in Nigeria is helped by
Answer: A (increased financial activities)
More financial activity (banking, credit, capital markets) supports a larger volume of trade and financial dealings.
Cost accounting entails the provision of information
Answer: B (for decision making)
Cost accounting gives management cost information for planning, control and decision making.
The main objective of accounting report is to provide information about
Answer: D (a company's economic resources.)
Financial statements tell owners, lenders and others what economic resources the entity controls, what it owes and how these have changed, so they can make decisions.
If liabilities amounted to ₦12,045, other assets ₦36,800 and equity ₦26,896, the cash at hand would be
Answer: C (₦2,141)
Total assets = liabilities + equity = 12,045 + 26,896 = 38,941. Cash = 38,941 − 36,800 = ₦2,141.
Use the information below to answer questions 5 and 6.
Given: (₦)
Fixed assets 85,600
Sales 197,000
Stock 34,300
Salaries and wages 37,000
Purchases 127,700
Share capital 120,000
Creditors 16,050
Motor expenses 10,500
Debtors 25,000
What is the cash balance?
Answer: D (₦12,950.)
Credits = 197,000 + 120,000 + 16,050 = 333,050. Debits without cash = 85,600 + 34,300 + 37,000 + 127,700 + 10,500 + 25,000 = 320,100. Cash = ₦12,950.
Use the information below to answer questions 5 and 6.
Given: (₦)
Fixed assets 85,600
Sales 197,000
Stock 34,300
Salaries and wages 37,000
Purchases 127,700
Share capital 120,000
Creditors 16,050
Motor expenses 10,500
Debtors 25,000
Determine the total of the trial balance
Answer: B (₦333,050)
Credit side = sales 197,000 + share capital 120,000 + creditors 16,050 = ₦333,050, and the debits (with cash) equal this.
The accuracy of journalizing is checked by
Answer: A (ensuring that debit totals equal credit totals)
In double entry each journal entry has a debit and an equal credit. Checking that the debit and credit totals agree shows the journal entries are accurate.
Hauwa Ltd bought 10 bags of rice for ₦500 each. The company was given 5% and 12% trade and cash discounts respectively. What will be recorded as discount received in the company's book?
Answer: B (₦570)
List price 5,000 less 5% trade discount = 4,750. Cash discount = 12% × 4,750 = ₦570. Trade discount is not recorded.
A cash book had opening balance of ₦15,200, closing balance ₦18,400 and total cash received during the period ₦36,000. What was the amount of cash paid out during the same period?
Answer: D (₦32,800.)
Paid out = 15,200 + 36,000 − 18,400 = ₦32,800.
In a petty cash book, the closing balance was ₦235, imprest ₦1,250, while the stationery expenses were ₦655. How much was paid for other general expenses?
Answer: A (₦360)
Spent = 1,250 − 235 = 1,015. Other expenses = 1,015 − 655 = ₦360.
When a bill is negotiated to a bank, it is said to be
Answer: C (discounted)
Selling a bill to a bank before it matures, for less than its face value, is called discounting.
Given that the balance as per cash book after necessary adjustments was ₦4,315, unpresented cheques were ₦1,688 and the bank statement balance was ₦4,791, what was the balance of the uncredited cheques?
Answer: B (₦1,212)
Bank balance = cash book + unpresented − uncredited: 4,791 = 4,315 + 1,688 − x, so x = ₦1,212.
If a property developing company sells a completed building to an interested third party, this sale can be treated in the books of the company as
Answer: B (revenue receipt)
Building and selling houses is the developer's normal trade, so the sale proceeds are revenue receipts.
Use the information below to answer questions 14 and 15.
Palaju Enterprises had fixed assets of ₦3,100,000 at the end of the year. Fixed assets costing ₦900,000 with provision for depreciation of ₦150,000 were disposed of during the period. Fixed assets of ₦100,000 were added during the year. Provision for depreciation was ₦350,000 at the beginning of the year and ₦300,000 at the end of the year.
What was the value of fixed assets at the beginning of the year?
Answer: C (₦3,900,000)
Opening = closing 3,100,000 + disposals 900,000 − additions 100,000 = ₦3,900,000.
Use the information below to answer questions 14 and 15.
Palaju Enterprises had fixed assets of ₦3,100,000 at the end of the year. Fixed assets costing ₦900,000 with provision for depreciation of ₦150,000 were disposed of during the period. Fixed assets of ₦100,000 were added during the year. Provision for depreciation was ₦350,000 at the beginning of the year and ₦300,000 at the end of the year.
The depreciation expense charged for the year is
Answer: D (₦100,000.)
Opening provision 350,000 − 150,000 removed on disposal = 200,000. To reach 300,000 the year's charge = ₦100,000.
A reduction in the catalogue price of an article given by a wholesaler to a retailer is called a
Answer: B (trade discount)
Trade discount is a reduction from the catalogue (list) price given to traders.
Use the information below to answer questions 17 and 18.
Stock Control Account [Extract] as at January, 2000
(Date: Receipts Qty, Unit Price ₦, Amt. ₦ | Issues Qty, Unit ₦, Amt. ₦ | Balance Amt. ₦)
Jan. 1: 100, 5.00, 500.00 | — | 500.00
Jan. 5: 50, 6.00, 300.00 | — | 800.00
Jan. 7: — | 40, 6.00, 240.00 | 560.00
Jan 10: 50, 4.00, 200.00 | — | 760.00
Jan 15: — | 50, 4.00, 200.00 | 560.00
Jan 20: — | 10, x, y | z
What is the stock valuation method used?
Answer: A (Last In First Out)
On Jan 7 the issue is priced at ₦6 (the latest purchase) and on Jan 15 at ₦4 (the latest), so the method is LIFO.
Use the information below to answer questions 17 and 18.
Stock Control Account [Extract] as at January, 2000
(Date: Receipts Qty, Unit Price ₦, Amt. ₦ | Issues Qty, Unit ₦, Amt. ₦ | Balance Amt. ₦)
Jan. 1: 100, 5.00, 500.00 | — | 500.00
Jan. 5: 50, 6.00, 300.00 | — | 800.00
Jan. 7: — | 40, 6.00, 240.00 | 560.00
Jan 10: 50, 4.00, 200.00 | — | 760.00
Jan 15: — | 50, 4.00, 200.00 | 560.00
Jan 20: — | 10, x, y | z
The value of x is
Answer: D (₦6.00.)
After Jan 15 the stock is 100 at ₦5 and 10 at ₦6 (the latest layer). Under LIFO the 10 units issued on Jan 20 are priced at ₦6.00.
Use the information below to answer questions 19 and 20.
(₦)
Purchases ledger opening balances 4,000
Sales ledger opening balances 6,000
Credit purchases during the year 25,000
Discounts allowed 1,000
Returns inwards 2,000
Credit sales during the year 10,000
Returns outwards 6,000
Calculate the sales ledger balance.
Answer: D (₦13,000.)
Sales ledger = opening 6,000 + credit sales 10,000 − discounts allowed 1,000 − returns inwards 2,000 = ₦13,000.
Use the information below to answer questions 19 and 20.
(₦)
Purchases ledger opening balances 4,000
Sales ledger opening balances 6,000
Credit purchases during the year 25,000
Discounts allowed 1,000
Returns inwards 2,000
Credit sales during the year 10,000
Returns outwards 6,000
What is the purchases ledger balance?
Answer: B (₦23,000)
Purchases ledger = 4,000 + 25,000 − returns outwards 6,000 = ₦23,000.
For an incomplete record to provide necessary information, it must be converted to
Answer: B (double entry records)
Incomplete records are converted to double entry so that full final accounts can be prepared.
Use the information below to answer questions 22 and 23.
Given: (31/12/98 ₦; 31/12/99 ₦)
Assets: Plant & Mach. 1,500; 1,200
Fixtures 700; 520
Stock 500; 600
Debtors 900; 400
Cash 200; 300
Liabilities: Creditors 500; 600
Loan 600; 400
Determine the total fixed asset from the opening balance sheet
Answer: A (₦2,200)
At 31/12/98: plant and machinery 1,500 + fixtures 700 = ₦2,200.
Use the information below to answer questions 22 and 23.
Given: (31/12/98 ₦; 31/12/99 ₦)
Assets: Plant & Mach. 1,500; 1,200
Fixtures 700; 520
Stock 500; 600
Debtors 900; 400
Cash 200; 300
Liabilities: Creditors 500; 600
Loan 600; 400
What is the capital from the opening balance sheet?
Answer: B (₦2,700)
Assets = 1,500 + 700 + 500 + 900 + 200 = 3,800. Liabilities = 500 + 600 = 1,100. Capital = ₦2,700.
Given:
(₦)
Direct material 2,500
Direct labour 5,000
Direct expenses 1,000
Overhead expenses 1,500
From the data above, compute the prime cost
Answer: A (₦8,500)
Prime cost = direct material + direct labour + direct expenses = 2,500 + 5,000 + 1,000 = ₦8,500.
Use the information below to answer questions 25 and 26.
(₦)
Bar opening stock 10,000
Amount owed to bar suppliers at the beginning of the year 10,000
Bar sales 50,000
Bar credit purchases 40,000
Payment to suppliers 30,000
Bar expenses 1,000
Bar closing stock 15,000
How much is owed to suppliers?
Answer: D (₦20,000.)
Owed = 10,000 + credit purchases 40,000 − payments 30,000 = ₦20,000.
Lubricating oil and spare parts of machinery are examples of
Answer: B (indirect materials)
They are materials used up in production without forming part of the finished product, so they are indirect materials.
Use the information below to answer questions 28 and 29.
(₦)
Subscriptions received during the year 30,000
Subscriptions owed last year 4,000
Subscriptions received for next year 6,000
The ₦6,000 subscription received is
Answer: B (current liability)
Subscriptions paid in advance are owed to members as future benefits, so they are a current liability.
Use the information below to answer questions 28 and 29.
(₦)
Subscriptions received during the year 30,000
Subscriptions owed last year 4,000
Subscriptions received for next year 6,000
What is the subscription to be charged to income and expenditure account?
Answer: D (₦20,000)
30,000 − 4,000 (for last year) − 6,000 (for next year) = ₦20,000 for this year.
Given:
(₦)
Club trading profit 12,000
Members' subscription 15,000
Profit on sale of fixed assets 2,500
Loss on sale of investments 1,000
Wages 16,500
Other expenses 10,000
Determine the club's excess of income over expenditure
Answer: C (₦2,000)
Income = 12,000 + 15,000 + 2,500 = 29,500. Expenditure = 1,000 + 16,500 + 10,000 = 27,500. Excess = ₦2,000.
The excess of income over expenditure is usually transferred to the
Answer: A (accumulated fund)
A club's surplus is added to its accumulated fund, as a firm's profit is added to capital.
Partners' salaries and drawings are usually posted to the
Answer: B (current account)
Salaries are credited and drawings debited to the partners' current accounts; capital accounts stay fixed.
Marhumu and Yusuf are in partnership sharing profits and losses in the ratio of 2:1. On 31/3/2000, the partnership decided to admit Idris who is to take ¼ of future profits without changing the ratio of Marhumu and Yusuf. What is the new profit-sharing ratio of Marhumu and Yusuf?
Answer: A (50% : 25%)
¾ remains for the old partners in 2:1: Marhumu ⅔ × ¾ = 50%, Yusuf ⅓ × ¾ = 25%.
If a partner pays a premium of ₦500 for ⅕ share of profit, then the total value of goodwill is
Answer: C (₦2,500)
The premium is the new partner's share of goodwill: ⅕ of goodwill = 500, so goodwill = ₦2,500.
On the dissolution of a partnership business, the net book value of the assets is transferred to
Answer: A (debit of realization account)
Assets are transferred to the debit of the realisation account; what they fetch is credited to it.
Bala Ltd acquired the business of Bello Ltd and caused the separate existence of the latter company to terminate. This situation is best described as
Answer: A (absorption)
When one company takes over another and the taken-over company ceases to exist, it is an absorption.
Where a company acquires controlling shares of another and the consideration is paid in cash, the entries in the books of the purchases are debit
Answer: A (investment and credit cash)
The shares bought are an investment: debit investment account and credit cash.
Given:
(₦)
Capital 200,000
Liabilities 10,000
Total 210,000
Total assets 210,000
If the business is purchased at a price including a goodwill of ₦20,000, what must have been the purchase price?
Answer: C (₦220,000)
Net assets = 210,000 − 10,000 = 200,000. Purchase price = 200,000 + goodwill 20,000 = ₦220,000.
The main difference between the ordinary and preference shareholders is that
Answer: D (the former have voting rights while the latter do not.)
Ordinary shareholders vote at meetings; preference shareholders usually do not.
Use the information below to answer questions 41 and 42.
Given: (₦)
Authorized Capital: 100,000 ordinary shares of ₦1 each
Issued and fully paid: 50,000 ordinary shares of ₦1 each 50,000
10,000 8% preference shares of ₦1 each 10,000
Reserves 25,000
Creditors 15,000
Debtors 13,000
Cash in hand 5,000
Determine the net current assets
Answer: D (₦3,000.)
Current assets = debtors 13,000 + cash 5,000 = 18,000. Less creditors 15,000 = ₦3,000.
Use the information below to answer questions 41 and 42.
Given: (₦)
Authorized Capital: 100,000 ordinary shares of ₦1 each
Issued and fully paid: 50,000 ordinary shares of ₦1 each 50,000
10,000 8% preference shares of ₦1 each 10,000
Reserves 25,000
Creditors 15,000
Debtors 13,000
Cash in hand 5,000
Calculate the shareholders' fund
Answer: C (₦85,000)
Shareholders' fund = ordinary 50,000 + preference 10,000 + reserves 25,000 = ₦85,000.
The law that currently regulates the registration of companies in Nigeria is the
Answer: C (Companies and Allied Matters Decree, 1990)
Companies are registered under the Companies and Allied Matters Decree (Act) of 1990.
X and Y are two departments that are to share 50% of all joint costs equally and the balance in the ratio 2 :1. If a sum of ₦150,000 is incurred jointly, what will be the portion attributable to X?
Answer: C (₦87,500)
Half (75,000) shared equally: X gets 37,500. The other 75,000 in 2:1: X gets 50,000. Total ₦87,500.
Department F transferred some goods to department G at a selling price. The goods were not sold at the end of the accounting period. Which account is affected at the time of preparing a combined balance sheet?
Answer: C (stock)
The unsold goods include unrealised profit, so the stock figure must be reduced in the combined balance sheet.
The correct entry to reflect the receipt of cash sent by a branch to a head office is
Answer: A (debit cash and credit branch current account)
Head office receives cash (debit cash) and the branch owes less (credit branch current account).
To account for expenses paid by head office on behalf of the branch, the branch should
Answer: B (debit profit and loss account and credit head office account)
The branch bears the expense (debit profit and loss) and owes head office for it (credit head office account).
The officer responsible for ascertaining whether all public expenditure and appropriation are in line with approved guidelines is the
Answer: B (Auditor General)
The Auditor General audits public accounts to check that spending follows approved appropriations and rules.
Use the information below to answer questions 49 and 50.
Given:
PTF Trial Balance [Extract] as at 31 December, 1999 (Dr ₦'000; Cr ₦'000)
Cash 2,000
Investments 3,000
Accounts receivable 6,000
Fund balance — ; 11,000
Totals 11,000 ; 11,000
Assuming all the investments realized ₦4m, what will be the ending fund balance?
Answer: C (₦12m)
Investments of ₦3m sold for ₦4m give a gain of ₦1m, so the fund rises from ₦11m to ₦12m.
Use the information below to answer questions 49 and 50.
Given:
PTF Trial Balance [Extract] as at 31 December, 1999 (Dr ₦'000; Cr ₦'000)
Cash 2,000
Investments 3,000
Accounts receivable 6,000
Fund balance — ; 11,000
Totals 11,000 ; 11,000
If only ⅓ of the investments is sold for ₦2m and ₦5m realized from the accounts receivable, what will be the balance of the fund?
Answer: B (₦11m)
⅓ of investments (₦1m) sold for ₦2m: gain ₦1m. Receivables of ₦6m realise ₦5m: loss ₦1m. Net change 0, so the fund stays ₦11m.