47 questions. Try each one, then open the answer to check yourself and read the explanation.
The basis upon which assets of an organization is valued is the
Answer: A (historical concept)
Assets are recorded at what they cost when bought, the historical cost concept.
An accountant must not only be interested in record keeping but also in
Answer: A (the application of professional competency)
Beyond keeping records, an accountant must apply professional skill and judgement in his work.
The correct posting in the double entry system of account when there is an increase in assets, expenses, capital or liabilities is to debit
Answer: C (assets and credit capital)
Increases in assets (and expenses) are debited; increases in capital (and liabilities) are credited.
The capital of a sole trader can be increased by
Answer: B (crediting the capital account)
Capital is on the credit side, so any addition to it (more money brought in, or profit) is credited to the capital account.
Akirika bought a motor van for his business by cash. The entries are to debit
Answer: C (motor van and credit cash)
The motor van (an asset) comes in, so it is debited; cash goes out, so cash is credited.
Ibrahim, a microbusiness operator, sold 10 bags of sugar to Jide at total cost of ₦12,000.
In the book of Ibrahim, the entry to record the transaction would be to debit
Answer: B (Jide ₦12,000 and credit sales account ₦12,000)
Jide owes Ibrahim for the sugar, so Ibrahim debits Jide (a debtor) and credits sales.
Ibrahim, a microbusiness operator, sold 10 bags of sugar to Jide at total cost of ₦12,000.
The record in Jide's book would be to debit
Answer: A (purchases ₦12,000 and credit Ibrahim ₦12,000)
Jide has bought goods on credit: debit purchases and credit Ibrahim, his creditor.
Given:
Cash Book
Debit: Capital ₦2,600; Sales ₦28,200
Credit: Purchases ₦15,000; Rent ₦1,250; Motor vehicle ₦7,600
Determine the bank balance.
Answer: B (₦6,950 debit)
Debits 2 600 + 28 200 = 30 800; credits 15 000 + 1 250 + 7 600 = 23 850. The debit side is bigger by ₦6 950, a debit balance.
In a three-column cash book, dishonoured cheques will be shown on the
Answer: B (bank column (credit))
The cheque was first debited in the bank column when banked; when it bounces, the money is taken back out by crediting the bank column.
Date | Particulars | Folio | Details | Total
1/6/02 | 2 bags of maize | SL | 1,800 | 1,800
12/6/02 | 3 bags of salt less 5% discount | | 7,000 | 7,000
Total 8,800
The 5% discount shown above indicates
Answer: A (trade discount)
A discount deducted on the invoice at the time of sale, in a day book, is a trade discount, not a cash discount for prompt payment.
Cash can be drawn from the bank using
Answer: D (ATM card.)
An ATM (debit) card lets the account holder withdraw cash from his account at a cash machine.
In a modern day banking system, cash transfer cannot be made where the transferor
Answer: A (has no sufficient cash with the bank)
A transfer only goes through if the account has enough money to cover it.
Given:
Cash book balance ₦5,000
Dishonoured cheque ₦1,000
Direct credit ₦800
Direct debit ₦500
The adjusted cash book balance is
Answer: B (₦4,300)
Adjusted cash book = 5 000 − dishonoured cheque 1 000 + direct credit 800 − direct debit 500 = ₦4 300.
Given:
Stock 1/1 ₦20,000
Add purchases ₦250,000
Cost of goods available for sale ₦270,000
Less stock 31/12 ₦40,000
Cost of goods sold ₦230,000
Rent expenses ₦35,000
Net sales ₦370,000
Find the gross profit.
Answer: D (₦140,000)
Gross profit = net sales 370 000 − cost of goods sold 230 000 = ₦140 000.
Given:
Stock 1/1 ₦20,000
Add purchases ₦250,000
Cost of goods available for sale ₦270,000
Less stock 31/12 ₦40,000
Cost of goods sold ₦230,000
Rent expenses ₦35,000
Net sales ₦370,000
Calculate the net profit.
Answer: C (₦105,000)
Net profit = gross profit 140 000 − rent 35 000 = ₦105 000.
At the end of a financial period, the trading profit and loss account of a sole trader shows a profit of ₦180,000. It is however discovered that revenue of ₦15,000 is recorded as expenses while expenses of ₦4,000 is recorded as revenue.
Determine the adjusted net profit.
Answer: B (₦202,000)
Revenue wrongly shown as expense cut profit by 2 × 15 000 = 30 000; expense shown as revenue raised it by 2 × 4 000 = 8 000. Adjusted profit = 180 000 + 30 000 − 8 000 = ₦202 000.
At the end of a financial period, the trading profit and loss account of a sole trader shows a profit of ₦180,000. It is however discovered that revenue of ₦15,000 is recorded as expenses while expenses of ₦4,000 is recorded as revenue.
The revenue to be added as an adjustment is
Answer: B (₦30,000)
Removing the ₦15 000 from expenses and putting it into revenue adds 2 × 15 000 = ₦30 000 to profit.
Which of the following is an item of special assets?
Answer: C (Trademark)
A trademark is an intangible asset, listed separately from ordinary fixed and current assets.
1/5/07 Purchased 100 bags of milk at ₦10.00k each
3/5/07 Purchased 60 bags of milk at ₦11.50k each
8/5/07 Issued 85 bags of milk
15/5/07 Purchased 180 bags of milk at ₦12.80k each
22/5/07 Issued 145 bags of milk.
Using FIFO method, what would be the value of stock as at 9/5/07?
Answer: B (₦840.00)
FIFO issues the oldest first, so the 85 bags come from the ₦10 batch. Left: 15 × 10 = 150 plus 60 × 11.50 = 690, total ₦840.
1/5/07 Purchased 100 bags of milk at ₦10.00k each
3/5/07 Purchased 60 bags of milk at ₦11.50k each
8/5/07 Issued 85 bags of milk
15/5/07 Purchased 180 bags of milk at ₦12.80k each
22/5/07 Issued 145 bags of milk.
Using simple average method, calculate the value of stock after 22/5/07.
Answer: C (₦1,257.67)
Bags left = 340 − 230 = 110. Simple average price = (10.00 + 11.50 + 12.80) ÷ 3 = ₦11.433, so stock = 110 × 11.433 = ₦1 257.67.
The LIFO method has an advantage over FIFO in that stocks are valued at
Answer: B (current prices)
Under LIFO the latest prices are charged to production or sales, so cost of sales reflects current prices.
In sales ledger control account, returns inwards is usually
Answer: B (credited and sales returns debited)
Returns inwards reduce what debtors owe, so they are credited in the sales ledger control (sales returns account debited).
Purchases ledger control account can also be referred to as
Answer: C (creditors ledger)
The purchases ledger holds creditors' accounts, so its control account is the creditors (ledger) control.
Which of the following is a debit item in the sales ledger control account?
Answer: B (Dishonoured cheques)
A dishonoured cheque means the debtor owes the money again, so it is debited; the others reduce debtors and are credits.
Cash Book (Extract)
Debit: Balance b/f ₦2,200; Receipt from Customers ₦16,400
Credit: Sundry expenses ₦16,800; Drawings ₦4,700; Suppliers ₦7,300
Debtors opening and closing balances amount to ₦6,500 and ₦7,600 respectively.
What is the sales value?
Answer: B (₦17,500)
Credit sales = receipts 16 400 + closing debtors 7 600 − opening debtors 6 500 = ₦17 500.
Given:
Fixtures ₦30,000
Debtors ₦7,000
Stock ₦8,000
Creditors ₦3,000
Goodwill ₦10,000
Determine the capital.
Answer: D (₦52,000.)
Assets = 30 000 + 7 000 + 8 000 + 10 000 = 55 000. Capital = 55 000 − creditors 3 000 = ₦52 000.
In manufacturing accounts, finance expenses are charged to the
Answer: C (profit and loss account)
Finance costs such as interest are not production costs; they go to the profit and loss account.
Total production cost ₦360,000
Factory overhead cost ₦56,000
Selling price per unit ₦120
Production volume 4 000 units
What is the total manufacturing profit?
Answer: B (₦120,000)
Market value of goods made = 4 000 × 120 = ₦480 000. Manufacturing profit = 480 000 − 360 000 = ₦120 000.
Total production cost ₦360,000
Factory overhead cost ₦56,000
Selling price per unit ₦120
Production volume 4 000 units
Determine the value of prime cost.
Answer: B (₦304,000)
Prime cost = total production cost − factory overheads = 360 000 − 56 000 = ₦304 000.
The excess of revenue over expenditure is charged to
Answer: C (accumulated fund)
A club's surplus is added to its accumulated fund.
Receipt and Payment Accounts (Extract)
Receipts: 1/9 Balance b/f ₦210,000; 5/9 Subscriptions ₦80,000; 30/9 Donations ₦60,000
Payments: 10/9 Salary ₦20,000; 15/9 Wages ₦15,000; 20/9 Donations ₦40,000; 20/9 Transportation ₦10,000; 30/9 Entertainment ₦50,000
Determine the balance.
Answer: C (215,000 debit)
Receipts = 350 000; payments = 135 000. Balance = ₦215 000 on the debit side (cash in hand).
Trading, Profit and Loss Account (Extract), Department X:
Net sales ₦3,000
Less cost of goods sold:
Stock 1/1 ₦200
Purchases ₦1,000
Cost of good available for sale ₦1,200
Less stock 31/12 ₦400
Cost of goods sold ₦800
From the above information, the gross profit for department X is
Answer: C (₦2,200)
Gross profit = 3 000 − 800 = ₦2 200.
In the head office ledger, the value of goods sent to the branch are
Answer: B (debited to the branch current account)
In its own books head office keeps a branch current account and debits it with goods sent, because the branch now owes for them.
Which of the following methods of invoicing goods to branches facilitate easy checks on the activities of branches?
Answer: C (selling price)
If goods go to the branch at selling price, head office knows what the stock should sell for and can check it against sales and stock left.
The partners capital are: Modibbo ₦60,000 and Jakata ₦90,000. The partners share profit and losses in the ratio of their capital contributions.
The net profit for the year is ₦12,000
What is Jakata's profit sharing ratio?
Answer: A (3:5)
Total capital = 150 000. Jakata's share = 90 000/150 000 = 3/5, written 3:5.
In what way can a goodwill be written off in a partnership business?
Answer: A (Using the partners' profit and loss sharing ratio)
Goodwill is written off against the partners' capitals in their profit-sharing ratio.
Ngozi and Musa with a capital of ₦30,000 each decide to admit Mary into the partnership business with a capital of ₦20,000 and goodwill ₦15,000. If the profits and losses are to be shared equally, the journal entries to record goodwill are
Answer: A (debit goodwill ₦15,000, cash ₦20,000 and credit Mary's capital ₦35,000)
Mary brings ₦20 000 cash and ₦15 000 goodwill: debit goodwill and cash, credit Mary's capital with the total ₦35 000.
In converting a partnership into a limited liability company, the necessary accounts to be opened in the books of the company are
Answer: B (business purchase account, vendor account and ordinary share capital account)
The company opens a business purchase account for the assets taken over, a vendor account for the amount owed, and share capital for the shares given in payment.
Given:
I. The Memorandum of Association of the Company
II. The Article of Association of the Company
III. The incorporation documents
From the above, which of the following is delivered to the Registrar of companies for incorporation?
Answer: B (I, II and III)
To register a company the promoters file the memorandum, the articles and the other incorporation documents.
When shares are oversubscribed and money returned to unsuccessful applicants, the entry to record such money is to debit
Answer: B (application and allotment account and credit cash)
The refund reverses part of the application money: debit application and allotment, credit cash (bank).
Investment at cost of a company is to be disclosed under
Answer: C (balance sheet)
Investments are assets, so they are shown in the balance sheet.
Purchases ₦44,880
Sales ₦85,850
Trade creditors ₦12,250
Trade debtors ₦24,000
Accrued expenses ₦350
Prepaid expenses ₦700
Stock 1/1/2006 ₦25,120
Stock 31/12/2006 ₦27,840
Calculate the acid test ratio.
Answer: B (1.96:1)
Quick assets (no stock) = debtors 24 000 + prepaid 700 = 24 700. Current liabilities = 12 250 + 350 = 12 600. 24 700 ÷ 12 600 = 1.96:1.
Purchases ₦44,880
Sales ₦85,850
Trade creditors ₦12,250
Trade debtors ₦24,000
Accrued expenses ₦350
Prepaid expenses ₦700
Stock 1/1/2006 ₦25,120
Stock 31/12/2006 ₦27,840
Determine the number of times stock was turned over during the period to the nearest figure.
Answer: B (2)
Cost of sales = 25 120 + 44 880 − 27 840 = 42 160. Average stock = (25 120 + 27 840)/2 = 26 480. 42 160 ÷ 26 480 ≈ 1.6, about 2 times.
Which of the following is a source of revenue to the federation account?
Answer: C (Tariffs)
Import and export tariffs are collected federally; market fees, bicycle licences and property rates are local government revenue.
The book into which all types of a ministry's expenditure are recorded is the
Answer: C (vote book)
A ministry records spending against each approved vote (budget head) in the vote book.
The Petroleum Technology Development Fund is under the
Answer: C (trust fund)
Money held by government for one stated purpose, such as the PTDF, is kept in a trust (special) fund.
The power to appoint the Auditor General of the Federation is vested in the
Answer: B (President)
The President appoints the Auditor-General on the advice of the Civil Service Commission, subject to Senate confirmation.