50 questions. Try each one, then open the answer to check yourself and read the explanation.
A company has departments X, Y and Z. Department X occupies a space twice that of Y while Z occupies half the space of Y. If the company pays ₦70 000 on rent, what is the amount of rent that should be allocated to Y?
Answer: C (₦20 000)
Space ratio X : Y : Z = 2 : 1 : ½ = 4 : 2 : 1. Y's share = 2/7 × 70 000 = ₦20 000.
Entrance fees ₦1 200
Subscriptions (including ₦850 arrears) ₦4 310
Donations received ₦1 500
Proceeds from sales ₦2 300
Total payments ₦8 200
Depreciation ₦2 100
Closing cash balance ₦1 110
The club deposited 200% of the closing cash balance in the bank during the period.
Calculate the total figure for the receipts and payments account.
Answer: D (₦11 530.)
Payments side = payments 8 200 + bank deposit (200% × 1 110 = 2 220) + closing cash 1 110 = ₦11 530. Depreciation is not a cash item.
Entrance fees ₦1 200
Subscriptions (including ₦850 arrears) ₦4 310
Donations received ₦1 500
Proceeds from sales ₦2 300
Total payments ₦8 200
Depreciation ₦2 100
Closing cash balance ₦1 110
The club deposited 200% of the closing cash balance in the bank during the period.
Determine the opening cash balance of the club.
Answer: B (₦2 220)
Receipts = 1 200 + 4 310 + 1 500 + 2 300 = ₦9 310. Opening balance = 11 530 − 9 310 = ₦2 220.
Given:
Stock at start: Raw materials ₦57 000; Work-in-progress ₦42 000; Finished goods ₦71 000
Purchases of raw materials amount to ₦81 000, direct labour is ₦38 000 and factory overhead ₦29 000. Calculate the prime cost.
Answer: A (₦176 000)
Prime cost = raw materials used + direct labour = (57 000 + 81 000) + 38 000 = ₦176 000. Overheads and work-in-progress are not part of prime cost.
I. Profits and losses will be shared unequally.
II. Interest is not allowed on capital.
III. Salaries are not allowed.
IV. Interest is charged on drawings.
From the above, which of the following would apply where there is no agreement during partnership formation?
Answer: D (II and III.)
With no agreement the Partnership Act applies: profits are shared equally, no interest on capital, no salaries and no interest on drawings. So only II and III are correct.
Stock (1/1/02) at selling price ₦2 000
Goods sent to branch (selling price) ₦?
Sales by branch (selling price) ₦4 500
Stock (31/12/02) ₦?
Opening stock is ¼ of goods sent to branch.
The value of goods sent to branch is
Answer: C (₦8 000)
Opening stock = ¼ of goods sent, so goods sent = 4 × 2 000 = ₦8 000.
Stock (1/1/02) at selling price ₦2 000
Goods sent to branch (selling price) ₦?
Sales by branch (selling price) ₦4 500
Stock (31/12/02) ₦?
Opening stock is ¼ of goods sent to branch.
Determine the closing stock.
Answer: A (₦5 500)
Closing stock = opening stock + goods sent − sales = 2 000 + 8 000 − 4 500 = ₦5 500.
Expenses paid during the conversion of a partnership to a company are
Answer: B (debited to the realization account)
Expenses of realisation reduce the gain on conversion, so they are debited to the realisation account and credited to cash.
Given:
Receipts and Payments Account
Bal. b/f ₦1 000 | Salaries ₦5 000
Donations ₦5 000 | Secretariat expenses ₦5 000
Subscriptions ₦7 000 | Dance expenses ₦5 000
Sales of refreshments ₦11 000 | Refreshments ₦15 000
Entertainment ₦21 000 | Bal. c/d ₦15 000
Total ₦45 000 | Total ₦45 000
Calculate the surplus income.
Answer: D (₦14 000.)
Income = 5 000 + 7 000 + 11 000 + 21 000 = ₦44 000. Expenditure = 5 000 + 5 000 + 5 000 + 15 000 = ₦30 000. Surplus = ₦14 000 (balances b/f and c/d are not income or expense).
In the trading and profit and loss account of a manufacturing organization, purchases is
Answer: C (equivalent to the total cost of goods manufactured)
A manufacturer makes its own goods instead of buying them, so in the trading account the cost of goods manufactured is used where a trader would show purchases.
Goods worth ₦50 000 were sent at different times from head office to the branch during the year. By the end of the period, only ₦40 000 worth of goods had arrived at the branch. Which of the following is correct about the treatment of this transaction?
Answer: D (Branch should debit goods received from head office with ₦10 000.)
The ₦10 000 still on the way is recorded by the branch so that its books agree with head office: debit goods received (in transit) ₦10 000, credit head office account.
An accounting ratio that considers only quick assets to determine the short-term safety margin of a firm is the
Answer: D (acid test ratio.)
The acid test (quick) ratio compares quick assets (current assets less stock) with current liabilities.
A company's authorized share capital was one million ordinary shares at ₦1 each. It issued 80% of its shares at ₦1.10 per share. 70k was payable on application, 25k on allotment, 10k due on first call and the balance on second call.
What would be the total amount received on second call?
Answer: C (₦40 000)
Shares issued = 80% × 1 000 000 = 800 000. Second call = 110k − (70k + 25k + 10k) = 5k. 800 000 × ₦0.05 = ₦40 000.
A company's authorized share capital was one million ordinary shares at ₦1 each. It issued 80% of its shares at ₦1.10 per share. 70k was payable on application, 25k on allotment, 10k due on first call and the balance on second call.
The total amount of money received on application was
Answer: A (₦560 000)
800 000 shares × 70k = ₦560 000.
Given:
Shaku Company Ltd.
Stock ₦3 600 000
Cash at hand ₦800 000
Cash in bank ₦2 400 000
Debtors ₦580 000
Trade creditors ₦920 000
Bank overdraft ₦200 000
Tax liabilities ₦600 000
Salary owed to staff ₦180 000
Determine the working capital.
Answer: C (₦5 480 000)
Current assets = 3 600 000 + 800 000 + 2 400 000 + 580 000 = ₦7 380 000. Current liabilities = 920 000 + 200 000 + 600 000 + 180 000 = ₦1 900 000. Working capital = ₦5 480 000.
The receipts and payments account of a not-for-profit-making organization plays a similar role in a profit-making organization as
Answer: A (a cash account)
A receipts and payments account summarises cash received and paid in the year, just like a cash account.
Osei and Yabo were in partnership sharing profits and losses in the ratio of 3:2. On admitting Takwa, the profit and loss sharing ratio was changed to 1:1:1. Suppose Takwa paid ₦30 000 for goodwill, this amount would be
Answer: D (credited to the old partners' capital account.)
The new partner pays for a share of the goodwill built by the old partners, so the cash is credited to the old partners' capital accounts.
The amount of subscriptions accrued is reported in the balance sheet under
Answer: C (current asset)
Accrued subscriptions are amounts members still owe the club, so they are shown as a current asset.
Lighting ₦2 925
Rent ₦2 640
Salary ₦4 050
The expenses are for three different products: Zema, Zeta and Zera. They are apportioned on the basis of production. 4500 units of the products are produced, out of which 1260 and 2060 units are for Zema and Zeta respectively.
The lighting charge to be apportioned to Zema is
Answer: B (₦819)
2 925 × 1 260/4 500 = ₦819.
Lighting ₦2 925
Rent ₦2 640
Salary ₦4 050
The expenses are for three different products: Zema, Zeta and Zera. They are apportioned on the basis of production. 4500 units of the products are produced, out of which 1260 and 2060 units are for Zema and Zeta respectively.
Find the salary charged to Zera product.
Answer: C (₦1 062)
Zera units = 4 500 − 1 260 − 2 060 = 1 180. Salary = 4 050 × 1 180/4 500 = ₦1 062.
The gross profit disclosed in the branch stock adjustment account represents
Answer: D (branch profit.)
After the unrealised profit on closing stock is set aside, the balance of the branch stock adjustment account is the gross profit earned by the branch.
Partners' share of profit is credited to
Answer: A (a partner's current account)
Where capitals are fixed, each partner's share of profit is credited to his current account.
A pension granted to any past president or vice-president shall be charged to the
Answer: A (consolidated revenue fund)
Under the Constitution, pensions of former presidents and vice-presidents are paid directly from the Consolidated Revenue Fund.
The federal government approved ₦140 m to local governments W, X, Y and Z. The amount is to be shared on the basis of 40% equality, 35% population and 25% internal revenue generation. Calculate the share of local government W on equality.
Answer: B (₦14 m)
Equality portion = 40% × 140 m = ₦56 m, shared equally among 4 councils: 56 ÷ 4 = ₦14 m.
Stock valuation is useful because it informs the sales department on the
Answer: B (prices that will affect profitability)
Knowing the value of stock helps the firm set selling prices that give a profit.
Sales Ledger Control Account (Extract)
Bal. b/d ₦18 400 | Bad debt written off ₦1 500
Sales ₦? | Discount allowed ₦500
| Cheque received from debtors ₦25 000
| Cash received from debtors ₦10 000
| Bal. c/d ₦?
If the discount allowed is 2.5% of sales, calculate the closing balance in the sales ledger account.
Answer: A (₦1 400)
Sales = 500 ÷ 2.5% = ₦20 000. Debits = 18 400 + 20 000 = ₦38 400. Credits = 1 500 + 500 + 25 000 + 10 000 = ₦37 000. Closing balance = ₦1 400.
An asset was purchased for ₦343 m in 2003. The estimated life of the asset was 3 years with a residual value of ₦28 m.
Using the straight-line method, the depreciation of the asset in the first year was
Answer: C (₦105 m)
(343 − 28) ÷ 3 = ₦105 m a year.
An asset was purchased for ₦343 m in 2003. The estimated life of the asset was 3 years with a residual value of ₦28 m.
What was the asset value at the beginning of the third year?
Answer: B (₦133 m)
Two years of depreciation have been charged by the start of year 3: 343 − 2 × 105 = ₦133 m.
Given:
Opening capital ₦7 000
Additional capital ₦3 500
Net profit ₦2 500
Closing capital ₦10 250
The drawings for the period stand at
Answer: A (₦2 750)
Drawings = opening capital + additional capital + profit − closing capital = 7 000 + 3 500 + 2 500 − 10 250 = ₦2 750.
1/7/2005: Drawings –; Capital ₦25 000; Furniture and fittings ₦6 500
30/6/2006: Drawings ₦3 000; Capital ₦42 500; Furniture and fittings ₦10 200
Additional capital during the year amounts to 300% of the drawings.
Calculate the net profit or loss made during the year.
Answer: C (₦11 500 profit)
Additional capital = 300% × 3 000 = ₦9 000. Profit = 42 500 − 25 000 − 9 000 + 3 000 = ₦11 500 profit.
1/7/2005: Drawings –; Capital ₦25 000; Furniture and fittings ₦6 500
30/6/2006: Drawings ₦3 000; Capital ₦42 500; Furniture and fittings ₦10 200
Additional capital during the year amounts to 300% of the drawings.
What is the amount of the additional capital?
Answer: D (₦9 000.)
300% of drawings = 3 × 3 000 = ₦9 000.
I. Facilitating the preparation of final accounts
II. Making the existence of error easy to detect
III. Checking the accuracy of postings periodically
From the above, which of the following are among the uses of control accounts?
Answer: A (I, II and III)
Control accounts give totals of debtors and creditors quickly for the final accounts, check that postings to the sales and purchases ledgers are accurate, and help find where an error lies.
Debtors ₦20 000
Provision for bad debts 10%
Provision for discount on debtors 5%.
Determine the amount provided for discount allowed on debtors.
Answer: C (₦900)
Debtors expected to pay = 20 000 − 2 000 (bad debts provision) = ₦18 000. Discount provision = 5% × 18 000 = ₦900.
Debtors ₦20 000
Provision for bad debts 10%
Provision for discount on debtors 5%.
The provision for bad debt is
Answer: A (₦2 000)
10% × ₦20 000 = ₦2 000.
Given:
Prepaid b/f ₦10 000
Cash paid during the year ₦20 000
Prepaid c/f ₦5 000
The amount to be charged to the profit and loss account is
Answer: B (₦25 000)
Expense = prepaid b/f + cash paid − prepaid c/f = 10 000 + 20 000 − 5 000 = ₦25 000.
The purchases ledger control account showed a credit balance of ₦525 000 on April 30, 2006. This amount shows
Answer: C (what a business enterprise owed its creditors)
The credit balance of the purchases ledger control account is the total owed to all creditors, not to each one.
Net loss ₦2 300
Capital ₦10 500
Liabilities ₦7 200
Find the value of the total assets?
Answer: D (₦15 400.)
Owner's equity = 10 500 − 2 300 loss = ₦8 200. Assets = equity + liabilities = 8 200 + 7 200 = ₦15 400.
Net loss ₦2 300
Capital ₦10 500
Liabilities ₦7 200
What will be the equity of the business?
Answer: C (₦8 200)
The net loss reduces capital: 10 500 − 2 300 = ₦8 200.
Journal proper is used in recording
Answer: A (transactions that are not regular)
The journal proper records unusual entries such as opening entries, corrections and purchase of fixed assets on credit.
The process whereby a cheque received by one person is given to another for payment is known as
Answer: D (cheque endorsement.)
The payee signs the back of the cheque (endorses it) to transfer it to another person.
Balance as per cash book ₦13 560
Unpresented cheques ₦5 120
Uncredited lodgements ₦2 300
Dividend received not entered in the cash book ₦2 000
Bank charges ₦280
Standing order payments ₦600
Balance as per bank statement ₦?
Calculate the balance in the bank statement.
Answer: C (₦17 500)
Adjusted cash book = ₦14 680. Bank statement = 14 680 + 5 120 unpresented − 2 300 uncredited = ₦17 500.
Balance as per cash book ₦13 560
Unpresented cheques ₦5 120
Uncredited lodgements ₦2 300
Dividend received not entered in the cash book ₦2 000
Bank charges ₦280
Standing order payments ₦600
Balance as per bank statement ₦?
What is the adjusted cash book balance?
Answer: A (₦14 680)
13 560 + 2 000 dividend − 280 bank charges − 600 standing order = ₦14 680.
Given:
Sales Ledger
Bal. b/d ₦20 000 | Sales returns ₦10 000
Sales ₦40 000 | Discount allowed ₦1 000
| Bal. c/d ₦?
If cheques of ₦40 000 were received but a cheque of ₦8 000 was dishonoured, the amount owed was
Answer: D (₦17 000.)
Net cash received = 40 000 − 8 000 = ₦32 000. Owed = 20 000 + 40 000 − 10 000 − 1 000 − 32 000 = ₦17 000.
The fourth stage of the accounting information system is
Answer: C (summarizing)
The stages run: identifying (collecting) data, recording, classifying, summarising, then interpreting; summarising is fourth.
Given:
Returns inwards ₦1 500
Cash ₦1 550
Discount received ₦2 850
Capital ₦3 800
Debtors ₦900
Sundry expenses ₦?
The value of sundry expenses is 150% of returns inwards plus 50% of debtors.
How much is sundry expenses?
Answer: A (₦2 700)
150% × 1 500 + 50% × 900 = 2 250 + 450 = ₦2 700.
Given:
Returns inwards ₦1 500
Cash ₦1 550
Discount received ₦2 850
Capital ₦3 800
Debtors ₦900
Sundry expenses ₦?
The value of sundry expenses is 150% of returns inwards plus 50% of debtors.
The total of the trial balance is
Answer: B (₦6 650)
Debits: 1 500 + 1 550 + 900 + 2 700 = ₦6 650. Credits: 2 850 + 3 800 = ₦6 650.
If Mr. Ajasin paid his creditors ₦5 000 out of ₦20 000 owed, what would be the effect of this transaction on the accounting equation?
Answer: A (A decrease in the total liabilities and assets by ₦5 000.)
Cash (an asset) falls by ₦5 000 and creditors (a liability) fall by ₦5 000; capital is unchanged.
One of the benefits of book-keeping records is that they
Answer: A (give prospective investors accurate and direct information for decision-making)
Proper records give investors reliable information to decide whether to put money into the business.
Given:
Bank overdraft ₦2 000
Cash ₦2 000
Furniture ₦4 000
Calculate the total amount on the credit side of the trial balance.
Answer: C (₦6 000)
Debits (cash + furniture) = ₦6 000. Capital = 6 000 − 2 000 = ₦4 000. Credits = overdraft 2 000 + capital 4 000 = ₦6 000.
A sole trader purchased goods in cash worth ₦2 000 at 2% discount and made a cash sale ₦1 000 at the same rate of discount. Determine the amount of discount allowed.
Answer: A (₦20)
Discount allowed is given on the sale: 2% × 1 000 = ₦20. The ₦40 on the purchase is discount received.