45 questions. Try each one, then open the answer to check yourself and read the explanation.
The major function of accounting bodies in Nigeria is to
Answer: C (promote the ethics of the profession)
Bodies such as ICAN regulate accountants and enforce professional standards and ethics.
Ledger account is mainly classified into
Answer: A (nominal, real and personal accounts)
Ledger accounts are personal (people), real (assets) or nominal (income and expenses).
If salary account is debited instead of stationery account, the error committed is that of
Answer: A (commission)
The amount went to the wrong account of the same class (both are expense accounts), which is an error of commission.
If stationery bought for ₦200 has been entered as ₦2000. To correct this error
Answer: B (credit stationery with ₦1800)
Stationery was overstated by 2 000 − 200 = ₦1 800, so credit stationery with ₦1 800.
The account which refers to the tangible assets of a company that is of permanent nature is the
Answer: B (real account)
Real accounts record property and assets such as land, buildings and machinery.
The major feature of an invoice is that, it
Answer: C (specifies the particulars of goods bought)
An invoice lists the goods sold on credit: quantity, description, price and total.
The source documents include
Answer: D (credit notes.)
Source documents such as invoices, receipts and credit notes are the evidence from which the books are written up.
Three Column Cash Book (Extract)
Debit side (Date, Particulars, Cash ₦, Bank ₦):
1. Bal b/d 3000, 4000
2. Cash Sales 1000
3. Fatima 2000
4. Baffa 200, 300
Credit side (Particulars, Date, Cash ₦, Bank ₦):
Electricity 5, 200, 300
Purchases 6, 3000
Ahmad 7, bank 500
Khadija 8, 200
If Fatima was granted a discount of 2%, what will be the discount allowed?
Answer: B (₦40)
2% × ₦2 000 = ₦40.
Three Column Cash Book (Extract)
Debit side (Date, Particulars, Cash ₦, Bank ₦):
1. Bal b/d 3000, 4000
2. Cash Sales 1000
3. Fatima 2000
4. Baffa 200, 300
Credit side (Particulars, Date, Cash ₦, Bank ₦):
Electricity 5, 200, 300
Purchases 6, 3000
Ahmad 7, bank 500
Khadija 8, 200
Calculate the cash balance after the discount.
Answer: A (₦2 760)
Cash in: 3 000 + 1 000 + (2 000 − 40) + 200 = ₦6 160. Cash out: 200 + 3 000 + 200 = ₦3 400. Balance = ₦2 760.
The bank charges levied on a current account holder is the charges on
Answer: B (turnover)
Banks levy commission on turnover (COT) on current accounts.
The cause of discrepancies between the bank statement and the cash book that overstates the cash book is the
Answer: C (uncredited cheques)
Cheques paid in are already in the cash book but the bank has not yet credited them, so the cash book shows more.
Sales ₦10,900
Stock 1/1 ₦1,000
Stock 31/12 ₦2,000
Purchases ₦4,000
Returns outwards ₦800
Returns inwards ₦600
Carriage outwards ₦300
Carriage inwards ₦200
Find the gross profit.
Answer: B (₦7 900)
Net sales = 10 900 − 600 = ₦10 300. Cost of sales = 1 000 + 4 000 − 800 + 200 − 2 000 = ₦2 400. Gross profit = ₦7 900 (carriage outwards goes to profit and loss).
Sales ₦10,900
Stock 1/1 ₦1,000
Stock 31/12 ₦2,000
Purchases ₦4,000
Returns outwards ₦800
Returns inwards ₦600
Carriage outwards ₦300
Carriage inwards ₦200
The cost of goods available for sale is
Answer: D (₦4 400.)
Opening stock 1 000 + purchases 4 000 − returns outwards 800 + carriage inwards 200 = ₦4 400.
Sundry debtor ₦20,000
Provision for bad debts ₦500
Provision for bad debt at 4% of sundry debtors.
Determine the provision for bad debts to profit and loss account.
Answer: D (₦300)
New provision = 4% × 20 000 = ₦800. Only the increase over the old ₦500, i.e. ₦300, is charged to profit and loss.
Sundry debtor ₦20,000
Provision for bad debts ₦500
Provision for bad debt at 4% of sundry debtors.
Calculate the provision to be taken to the balance sheet.
Answer: B (₦800)
The balance sheet shows the full new provision: 4% × 20 000 = ₦800.
Benefits enjoyed for which payments have not been made are
Answer: A (accruals)
An accrual is an expense already used up but not yet paid.
If an organization maintains a periodic stock system, the stock quantities are
Answer: A (updated at the end of the accounting year)
Under the periodic system stock is counted and updated only at the end of the period.
If a company values its stocks in the period of rising prices using LIFO method, there is a tendency for it to
Answer: A (have a higher cost of goods sold)
LIFO issues the most recent (dearest) goods first, so when prices are rising cost of goods sold is higher.
Sales Ledger Control Account
Debit: Balance b/d ₦87 000; Credit sales ?; Bills receivable dishonoured ₦58 000; Dishonoured cheques ₦50 000
Credit: Discount allowed ₦40 000; Bills receivable ₦50 000; Cash receivable ₦280 000; Returns inwards ₦30 000; Balance c/d ?
Credit sales is given at 160% of cash received.
What is the balance c/d?
Answer: D (₦243 000)
Credit sales = 160% × 280 000 = ₦448 000. Debit total = 87 000 + 448 000 + 58 000 + 50 000 = ₦643 000. Credits = 40 000 + 50 000 + 280 000 + 30 000 = ₦400 000. Balance c/d = ₦243 000.
Sales Ledger Control Account
Debit: Balance b/d ₦87 000; Credit sales ?; Bills receivable dishonoured ₦58 000; Dishonoured cheques ₦50 000
Credit: Discount allowed ₦40 000; Bills receivable ₦50 000; Cash receivable ₦280 000; Returns inwards ₦30 000; Balance c/d ?
Credit sales is given at 160% of cash received.
Calculate the value of credit sales.
Answer: C (₦448 000)
Credit sales = 160% × 280 000 = ₦448 000.
Given:
31/12/07: Stocks ₦4 200; Rates in advance ₦1 000; Accrued wages ₦1 150
31/12/08: Stocks ₦3 900; Rates in advance ₦1 500; Accrued wages ₦1 350
Cost of goods sold was valued at ₦6 000. Cash paid for rates and wages during the year was ₦1 300 and ₦2 200 respectively.
What is the value of purchases for the year 2008?
Answer: D (₦5 700)
Purchases = cost of goods sold + closing stock − opening stock = 6 000 + 3 900 − 4 200 = ₦5 700.
31/12/08: Furniture and fittings ₦21 000; Office equipment ₦9 800; Debtors ₦6 800; Creditors ₦4 900; Cash at bank ₦7 000
31/12/09: Furniture and fittings ₦28 000; Office equipment ₦13 200; Debtors ₦5 200; Creditors ₦5 100; Cash at bank ₦4 600; Accrued electricity bills ₦1 200
Monthly drawings averaged ₦330.
Find the opening capital.
Answer: A (₦39 700)
Opening capital = 21 000 + 9 800 + 6 800 + 7 000 − 4 900 = ₦39 700.
31/12/08: Furniture and fittings ₦21 000; Office equipment ₦9 800; Debtors ₦6 800; Creditors ₦4 900; Cash at bank ₦7 000
31/12/09: Furniture and fittings ₦28 000; Office equipment ₦13 200; Debtors ₦5 200; Creditors ₦5 100; Cash at bank ₦4 600; Accrued electricity bills ₦1 200
Monthly drawings averaged ₦330.
Determine the net profit.
Answer: D (₦8 960)
Closing capital = 28 000 + 13 200 + 5 200 + 4 600 − 5 100 − 1 200 = ₦44 700. Net profit = 44 700 − 39 700 + drawings (330 × 12 = 3 960) = ₦8 960.
The gross loss on manufacturing is always transferred to the
Answer: B (debit side of profit and loss account)
A loss reduces profit, so it is debited to the profit and loss account.
The depreciation on a motor vehicle that is being used for manufacturing and administration is charged to the
Answer: A (debit side of manufacturing and profit and loss account)
The factory share is a manufacturing overhead and the office share is an administrative expense, so both accounts are debited.
The prime cost is the total of the
Answer: B (direct material + direct labour + direct expenses)
Prime cost is all the direct costs: direct materials, direct labour and direct expenses.
In the not-for-profit-making organization, the excess of income over expenditure is
Answer: B (added to the accumulated fund)
A club's surplus increases its accumulated fund (its 'capital').
The equivalent of a club's receipts and payment account is the
Answer: C (cash account)
A receipts and payments account is a summary of cash received and paid, like a cash account.
The summary of receipt and payments account represents
Answer: A (cash at hand)
Its closing balance shows the cash (and bank) the club holds.
Abingo Limited has three departments K, L and M.
(i) Rent for the year ₦3 000
(ii) Selling and distribution expenses ₦1 800
Department / Turnover / Floor space in square meters
K: ₦40 000; 120
L: ₦60 000; 80
M: ₦89 000; 100
How much rent is apportioned to department K?
Answer: A (₦1 200)
Rent is shared by floor space: 120/300 × 3 000 = ₦1 200.
If goods were returned to branch by the customers, the correct posting for this transaction is to debit
Answer: C (branch stock account and credit branch debtors' account)
The goods come back into branch stock (debit) and the customers owe less (credit branch debtors).
The branch expenses paid by the head office is recorded in the books by debiting branch
Answer: B (expenses account and crediting bank account)
The branch expenses account is debited and the bank (which paid) is credited.
Goods returned to branch by branch customers is recorded in the head office books by debiting
Answer: C (branch stock account and crediting branch debtors' account)
The goods return to branch stock (debit) and branch debtors owe less (credit).
Which of the following is mostly used in treating partners' current earnings?
Answer: B (Current account)
Partners' shares of profit, salaries, interest and drawings are passed through their current accounts.
The salary of a partner is usually debited to the
Answer: B (appropriation account)
A partner's salary is a share of profit, so it is debited in the appropriation account.
The rules which govern the internal management of a firm and its financial affairs in a partnership business is a
Answer: C (deed)
The partnership deed sets out the partners' rights, duties and profit-sharing.
The interest on partners' loan is
Answer: C (debited in profit and loss account)
Interest on a partner's loan is an expense of the firm, so it is debited in the profit and loss account.
The capital contributed by the partners is treated in the
Answer: B (capital account)
Each partner's capital contribution is credited to his capital account.
Given:
6 000 000 10% preference shares of ₦0.50 each
6 000 000 ordinary shares of ₦1 each
Capital reserves ₦2 700 000
Long-term liabilities ₦4 000 000
Find the value of authorized share capital.
Answer: C (9 000 000)
6 000 000 × 0.50 + 6 000 000 × 1 = ₦9 000 000; reserves and liabilities are not share capital.
The Directors' salaries paid are items of
Answer: B (profit and loss account)
Directors' salaries are an expense charged in the profit and loss account.
Sundry debtors in the balance sheet of Onoja Bakery and Sons totalled ₦800 000. A provision of 2% was made for discount and 5% provision for bad and doubtful debts.
Find the amount for sundry debtors after provision.
Answer: B (₦744 800)
Bad debts: 5% × 800 000 = ₦40 000, leaving ₦760 000. Discount: 2% × 760 000 = ₦15 200. Net debtors = ₦744 800.
An ordinary share of ₦80 was issued at ₦96. The share was issued at
Answer: A (premium)
Issued above its nominal value, so it was issued at a premium.
The financial plan of the government for a year is contained in the
Answer: A (budget)
The budget sets out government's planned revenue and spending for the year.
An increase in government expenditure within a year is taken care of by means of
Answer: D (supplementary estimate.)
Extra spending not in the approved budget needs a supplementary estimate (budget).
As evidence of payments to a government ministry, the revenue collectors will issue
Answer: A (treasury receipt)
Government revenue collectors issue a treasury receipt for money received.