54 questions. Try each one, then open the answer to check yourself and read the explanation.
Which of the following will a supplier send to a customer whose invoice was undercast?
Answer: B (Debit Note)
An undercast invoice charged too little, so the supplier sends a debit note to charge the extra.
In which of the following books will trade discount be recorded?
Answer: C (Purchases Day Book)
Trade discount is not posted to the ledger or cash book; it is shown on the invoice and the purchases day book records the purchase at list price less trade discount.
The following balances were extracted from the books of XYZ Co. Ltd.
Goodwill: ₦20,000
Other Fixed Assets: ₦400,000
Stock: ₦10,000
Debtors: ₦30,000
Provision for bad debts: ₦5,000
Bank balance: ₦10,000
Sundry Creditors: ₦25,000
Accrued expenses: ₦5,000
Bills payable: ₦2,000
Provision for depreciation: ₦90,000
The working capital is
Answer: E (₦13,000)
Current assets 10,000 + (30,000 − 5,000) + 10,000 = 45,000; current liabilities 25,000 + 5,000 + 2,000 = 32,000; 45,000 − 32,000 = ₦13,000.
The following balances were extracted from the books of XYZ Co. Ltd.
Goodwill: ₦20,000
Other Fixed Assets: ₦400,000
Stock: ₦10,000
Debtors: ₦30,000
Provision for bad debts: ₦5,000
Bank balance: ₦10,000
Sundry Creditors: ₦25,000
Accrued expenses: ₦5,000
Bills payable: ₦2,000
Provision for depreciation: ₦90,000
The total Net Assets is
Answer: E (₦343,000)
Fixed assets 400,000 − 90,000 = 310,000 + goodwill 20,000 + working capital 13,000 = ₦343,000.
The following balances were extracted from the books of XYZ Co. Ltd.
Goodwill: ₦20,000
Other Fixed Assets: ₦400,000
Stock: ₦10,000
Debtors: ₦30,000
Provision for bad debts: ₦5,000
Bank balance: ₦10,000
Sundry Creditors: ₦25,000
Accrued expenses: ₦5,000
Bills payable: ₦2,000
Provision for depreciation: ₦90,000
Current ratio is
Answer: C (1.4:1)
45,000 ÷ 32,000 = 1.4:1.
In a manufacturing company, wages paid to operatives increase the value of
Answer: B (prime cost)
Wages of workers making the goods are direct labour, part of prime cost.
The accounting equation is
Answer: C (assets less liabilities amount to capital)
Assets − Liabilities = Capital.
The purchase of a typewriter for the office was debited to Purchases Account. This is an error of
Answer: D (principle)
A fixed asset was posted to a revenue account (wrong class of account): an error of principle.
Which of the following is not a book of prime entry?
Answer: E (Purchases Ledger.)
A ledger is a book of final entry; the others are books of prime entry.
Abdul paid off his indebtedness to John by cash. The accounting entries in Abdul's books are: debit
Answer: C (John's account, credit Cash account)
Paying a creditor in cash: debit the creditor (John), credit cash.
Adex Company Limited issued ordinary shares ₦1 each to the public at ₦1.20. The shares were issued at
Answer: E (a premium.)
Issuing above nominal value (₦1.20 for a ₦1 share) is issuing at a premium.
A trader paid insurance premium of ₦1,350 for 15 months ended 31st March 1991. He prepares account to 31st December.
How much is charged to the profit and Loss Account for 1990?
Answer: B (₦1,080)
₦1,350 ÷ 15 = ₦90 a month; 1990 has 12 months: ₦1,080.
A trader paid insurance premium of ₦1,350 for 15 months ended 31st March 1991. He prepares account to 31st December.
How much is carried in the Balance Sheet at 31st December 1990?
Answer: D (₦270)
January–March 1991 is paid in advance: 3 × ₦90 = ₦270.
A trader paid insurance premium of ₦1,350 for 15 months ended 31st March 1991. He prepares account to 31st December.
The amount carried in the Balance Sheet is classified as
Answer: A (current asset)
Insurance paid in advance (a prepayment) is a current asset.
Subscription in advance is treated in the Balance Sheet of a club as
Answer: A (current liability)
Subscriptions received for next year are owed back to members in services, so they are a current liability.
Directors' remuneration are recorded in the book as
Answer: A (revenue expenditure)
Directors' fees are an expense of running the company, charged to profit and loss.
In a non-profit oriented organisation, the excess of income over expenditure is
Answer: B (added to the accumulated fund)
A club's surplus is added to its accumulated fund.
Which of the following will not affect the agreement of the cash book balance and bank statement balance?
Answer: D (Cash payment)
A payment in cash does not pass through the bank, so it causes no difference between the cash book bank column and the statement.
Ajijola Enterprises bought 40 pairs of shoes at ₦45 each from Kabi Shoe Factory on credit. This transaction will first be recorded by Ajijola in the
Answer: D (Purchases day book)
Goods for resale bought on credit go first into the purchases day book.
Nagode (Nig.) Ltd. has three departments A, B and C. You are given the following information:
(i) Rent for the year: ₦3,000
(ii) Selling and distribution expenses: ₦1,800
(iii) Department | Turnover | Floor space in square metres
A | ₦40,000 | 120
B | ₦60,000 | 80
C | ₦80,000 | 100
How much rent is apportioned to department A?
Answer: C (₦1,200)
Rent by floor space: 120/300 × 3,000 = ₦1,200.
Nagode (Nig.) Ltd. has three departments A, B and C. You are given the following information:
(i) Rent for the year: ₦3,000
(ii) Selling and distribution expenses: ₦1,800
(iii) Department | Turnover | Floor space in square metres
A | ₦40,000 | 120
B | ₦60,000 | 80
C | ₦80,000 | 100
How much rent is apportioned to department C?
Answer: D (₦1,000)
100/300 × 3,000 = ₦1,000.
Nagode (Nig.) Ltd. has three departments A, B and C. You are given the following information:
(i) Rent for the year: ₦3,000
(ii) Selling and distribution expenses: ₦1,800
(iii) Department | Turnover | Floor space in square metres
A | ₦40,000 | 120
B | ₦60,000 | 80
C | ₦80,000 | 100
How much of selling and distribution expenses is apportioned to department B?
Answer: C (₦600)
Selling costs by turnover: 60,000/180,000 × 1,800 = ₦600.
Nagode (Nig.) Ltd. has three departments A, B and C. You are given the following information:
(i) Rent for the year: ₦3,000
(ii) Selling and distribution expenses: ₦1,800
(iii) Department | Turnover | Floor space in square metres
A | ₦40,000 | 120
B | ₦60,000 | 80
C | ₦80,000 | 100
How much of selling and distribution expenses is apportioned to department A?
Answer: E (₦400.)
40,000/180,000 × 1,800 = ₦400.
Impersonal real accounts include (I) expenditure on telephone (II) motor vehicles (III) expenses on telegram (IV) land and buildings
Answer: C (II and IV only)
Real accounts are for things owned (assets) such as motor vehicles and land; telephone and telegram are nominal (expense) accounts.
Emeka Chukwudi (Nig.) Limited is a manufacturing company. Its books showed the following for the year ended 31st December, 1990.
Opening Stock - Raw materials: ₦42,000
Purchases - Raw materials: ₦265,000
Returns Outwards: ₦13,000
Depreciation – Plant and Machinery: ₦10,000
Wages: ₦52,000
Closing Stock – Raw materials: ₦72,000
Direct expenses: ₦11,000
Production Manager's salaries: ₦18,000
Factory rent: ₦15,000
The Prime cost is
Answer: B (₦285,000)
Materials used 42,000 + 265,000 − 13,000 − 72,000 = 222,000; + wages 52,000 + direct expenses 11,000 = ₦285,000.
Emeka Chukwudi (Nig.) Limited is a manufacturing company. Its books showed the following for the year ended 31st December, 1990.
Opening Stock - Raw materials: ₦42,000
Purchases - Raw materials: ₦265,000
Returns Outwards: ₦13,000
Depreciation – Plant and Machinery: ₦10,000
Wages: ₦52,000
Closing Stock – Raw materials: ₦72,000
Direct expenses: ₦11,000
Production Manager's salaries: ₦18,000
Factory rent: ₦15,000
The factory overhead is
Answer: D (₦43,000)
Depreciation 10,000 + production manager 18,000 + factory rent 15,000 = ₦43,000.
Emeka Chukwudi (Nig.) Limited is a manufacturing company. Its books showed the following for the year ended 31st December, 1990.
Opening Stock - Raw materials: ₦42,000
Purchases - Raw materials: ₦265,000
Returns Outwards: ₦13,000
Depreciation – Plant and Machinery: ₦10,000
Wages: ₦52,000
Closing Stock – Raw materials: ₦72,000
Direct expenses: ₦11,000
Production Manager's salaries: ₦18,000
Factory rent: ₦15,000
The cost of production is
Answer: D (₦328,000)
Prime cost 285,000 + overheads 43,000 = ₦328,000.
A private limited company is that which I. restricts the right to transfer its shares II. has a minimum of seven members III. limits membership to fifty IV. offers its shares for sale to the public.
Answer: E (I and III only.)
A private company restricts share transfers and has at most 50 members; it needs only two members and cannot offer shares to the public.
One of the advantages of Control Account is that
Answer: A (all errors are localised thus reducing delays in balancing accounts)
Control accounts show which ledger contains an error, so mistakes are found faster.
The assets of a business can be classified broadly into
Answer: B (fixed and current assets)
Assets are grouped as fixed (long-term) and current (short-term).
A Trial Balance is prepared to
Answer: D (test arithmetical accuracy of entries made in the ledger)
A trial balance checks that ledger debits equal credits.
The Chief Accounting Officer of the Federal Republic of Nigeria is the
Answer: D (Accountant General of the Federation)
The Accountant-General of the Federation is the government's chief accounting officer.
Materials are taken out of government unallocated store by means of
Answer: B (stores issue voucher)
Items leave a government store only against a stores issue voucher.
As evidence of payment to a government ministry, the revenue collectors issue
Answer: C (treasury receipt)
Money paid to government is acknowledged with a treasury receipt.
When provision is made for doubtful debt, the accounting entries are debit,
Answer: D (Profit and Loss Account, credit Provision for Doubtful Debt Account)
The provision is charged to profit and loss and credited to the provision account; the debtors' accounts are not touched.
Oruwa Limited has authorised share capital of 300,000 ₦1 ordinary shares of which 250,000 shares were issued at ₦1.30. All the issued shares are fully paid. Dividend declared is 5%. How much is the dividend shown in the Appropriation Account?
Answer: E (₦12,500.)
Dividend is on nominal value issued: 5% × 250,000 = ₦12,500.
Chukwu's capital at 1/1/89 and 31/12/89 were ₦30,000 and ₦50,000 respectively. During the year he introduced additional capital of ₦10,500 and withdrew ₦5,300 for private use. What is his profit for 1989?
Answer: E (₦14,800.)
Profit = 50,000 − 30,000 − 10,500 + 5,300 = ₦14,800.
Rufai, a vulcaniser bought 4 machines for ₦20,200 and incurred the following expenses for the year ended 31st December, 1990
Glue: ₦2,100
Thread: ₦600
Kerosine: ₦900
Rubber: ₦558
Matches: ₦110
He received ₦5,772 from customers. Two machines were later sold for ₦6,990 and ₦5,670 respectively.
What is his capital expenditure?
Answer: E (₦20,200.)
The machines (₦20,200) are capital expenditure.
Rufai, a vulcaniser bought 4 machines for ₦20,200 and incurred the following expenses for the year ended 31st December, 1990
Glue: ₦2,100
Thread: ₦600
Kerosine: ₦900
Rubber: ₦558
Matches: ₦110
He received ₦5,772 from customers. Two machines were later sold for ₦6,990 and ₦5,670 respectively.
What is his revenue expenditure?
Answer: C (₦4,268)
2,100 + 600 + 900 + 558 + 110 = ₦4,268.
Rufai, a vulcaniser bought 4 machines for ₦20,200 and incurred the following expenses for the year ended 31st December, 1990
Glue: ₦2,100
Thread: ₦600
Kerosine: ₦900
Rubber: ₦558
Matches: ₦110
He received ₦5,772 from customers. Two machines were later sold for ₦6,990 and ₦5,670 respectively.
What is his capital receipt?
Answer: B (₦12,660)
Sale of machines: 6,990 + 5,670 = ₦12,660.
Rufai, a vulcaniser bought 4 machines for ₦20,200 and incurred the following expenses for the year ended 31st December, 1990
Glue: ₦2,100
Thread: ₦600
Kerosine: ₦900
Rubber: ₦558
Matches: ₦110
He received ₦5,772 from customers. Two machines were later sold for ₦6,990 and ₦5,670 respectively.
What is his revenue receipt?
Answer: D (₦5,772)
Money from customers for his services, ₦5,772.
The excess of the par value of a company's shares over the amount for which they are issued to the public is called
Answer: A (discount)
If shares are issued for less than their par value, the shortfall is a discount.
Which of the following is not a balance sheet item?
Answer: E (Dividend received.)
Dividend received is income for the profit and loss account.
Ade and Okon are in partnership with the following partnership agreement:
Fixed Capital: Ade ₦15,000; Okon ₦25,000
Salary per annum: Ade ₦6,000; Okon ₦8,000
Interest on capital per annum: Ade 8%; Okon 8%
Profit or loss sharing ratio: Ade 40%; Okon 60%
The net profit for the year ended 31st December 1990 is ₦28,000 while drawings are ₦3,000 and ₦4,000 for Ade and Okon respectively.
What is the interest on capital?
Answer: C (₦3,200)
8% × (15,000 + 25,000) = ₦3,200.
Ade and Okon are in partnership with the following partnership agreement:
Fixed Capital: Ade ₦15,000; Okon ₦25,000
Salary per annum: Ade ₦6,000; Okon ₦8,000
Interest on capital per annum: Ade 8%; Okon 8%
Profit or loss sharing ratio: Ade 40%; Okon 60%
The net profit for the year ended 31st December 1990 is ₦28,000 while drawings are ₦3,000 and ₦4,000 for Ade and Okon respectively.
What is the profit available for distribution?
Answer: C (₦10,800)
28,000 − salaries 14,000 − interest 3,200 = ₦10,800.
Ade and Okon are in partnership with the following partnership agreement:
Fixed Capital: Ade ₦15,000; Okon ₦25,000
Salary per annum: Ade ₦6,000; Okon ₦8,000
Interest on capital per annum: Ade 8%; Okon 8%
Profit or loss sharing ratio: Ade 40%; Okon 60%
The net profit for the year ended 31st December 1990 is ₦28,000 while drawings are ₦3,000 and ₦4,000 for Ade and Okon respectively.
What is Ade's share of the profit?
Answer: E (₦4,320.)
40% × 10,800 = ₦4,320.
Ade and Okon are in partnership with the following partnership agreement:
Fixed Capital: Ade ₦15,000; Okon ₦25,000
Salary per annum: Ade ₦6,000; Okon ₦8,000
Interest on capital per annum: Ade 8%; Okon 8%
Profit or loss sharing ratio: Ade 40%; Okon 60%
The net profit for the year ended 31st December 1990 is ₦28,000 while drawings are ₦3,000 and ₦4,000 for Ade and Okon respectively.
What is Okon's share of the profit?
Answer: D (₦6,480)
60% × 10,800 = ₦6,480.
Which of the following is not on Debtor's Ledger Control account?
Answer: B (Cash Sales)
Cash sales create no debtor, so they never enter the debtors' control account.
Section A (compulsory)
Adebola Abass operates a restuarant on cash basis. All cash received are banked after deducting the following expenses:
Staff wages: ₦2,000
Cash purchases: ₦500
Sundry expenses: ₦100
Drawings (weekly): ₦30
The following is the Bank Account:
Receipts: Balance b/d (1/1/90) ₦2,000; Restaurant takings ₦26,000; Investment income ₦2,000; total ₦30,000
Payments: Rent ₦500; Rates ₦400; Electricity ₦220; Telephone ₦50; Advertising ₦200; New Equipment ₦400; Insurance ₦50; Repairs ₦300; Cash paid to Creditors ₦20,000; Deposit on private house ₦750; Income Tax for Abass ₦200; Balance c/d ₦6,930; total ₦30,000
Additional Information (a) The balances extracted from the books are as follows (1/1/90 | 31/1/90): Accrued electricity ₦30 | ₦40; Trade Creditors ₦1,500 | ₦2,000; Rate prepaid ₦100 | ₦150; Stock ₦400 | ₦300 (b) Equipment at cost on 1/1/90 was ₦600; depreciation is to be provided at 10% per annum. (c) Adebola Abass occupies an apartment in the restaurant which attracts a rent of ₦120. You are required to prepare (i) Trading, Profit and Loss Account for the year ended 31st December 1990 and (ii) A Balance Sheet as at that date.
Workings: takings = banked 26,000 + wages 2,000 + cash purchases 500 + sundry 100 + drawings (30 × 52) 1,560 = 30,160
Purchases = paid to creditors 20,000 + closing 2,000 − opening 1,500 = 20,500 credit + 500 cash = 21,000
Opening capital: equipment 600 + stock 400 + rates prepaid 100 + bank 2,000 − creditors 1,500 − accrued electricity 30 = ₦1,570
Drawings: cash 1,560 + income tax 200 + deposit on house 750 + private rent 120 = ₦2,630
(i) Trading, Profit and Loss Account for the year ended 31 December 1990: takings 30,160; cost of sales 400 + 21,000 − 300 = 21,100; gross profit ₦9,060; add investment income 2,000
Expenses: electricity (220 + 40 − 30) 230; rent (500 − 120) 380; rates (400 + 100 − 150) 350; telephone 50; advertising 200; insurance 50; repairs 300; depreciation 10% × 1,000 = 100; staff wages 2,000; sundry 100; total 3,760
Net profit ₦7,300
(ii) Balance Sheet as at 31 December 1990: equipment 1,000 − 100 = 900; stock 300; rates prepaid 150; bank 6,930; total ₦8,280
Capital 1,570 + 7,300 − 2,630 = 6,240; creditors 2,000; accrued electricity 40; total ₦8,280
Rebuild the takings from what was banked plus everything paid out of cash before banking.
Section B (Answer any three questions from this section)
The total balance of PQR Company Limited failed to agree and the difference was posted to a suspense account. An investigation into the books revealed the following: (a) A balance of ₦156 on Sales Day Book was carried forward as ₦516 (b) A sum of ₦140 paid for wages was recorded only in the cash book (c) A payment of ₦840 made by Malam Mohammed was credited to Malam Ahmed's account. (d) An amount of ₦800 posted to furniture account included ₦60 for furniture repairs (e) Purchases Day Book was overcasted by ₦440. (f) A payment of ₦31.50 for postage was posted to the credit side of the account (g) A balance of ₦118 due from a debtor was brought down as ₦181. You are required to prepare (i) Journal entries to correct the errors and (ii) A suspense account.
(i) Journal
(a) Dr Sales 360 / Cr Suspense 360 (sales overcast: 516 − 156)
(b) Dr Wages 140 / Cr Suspense 140 (wages not posted)
(c) Dr Malam Ahmed 840 / Cr Malam Mohammed 840 (error of commission; no suspense)
(d) Dr Furniture repairs 60 / Cr Furniture 60 (error of principle; no suspense)
(e) Dr Suspense 440 / Cr Purchases 440 (purchases overcast)
(f) Dr Postage 63 / Cr Suspense 63 (₦31.50 on the wrong side: twice the amount to correct)
(g) Dr Suspense 63 / Cr Debtor 63 (balance overstated: 181 − 118)
(ii) Suspense Account: Dr balance b/d (difference) 60; purchases 440; debtor 63; total 563 / Cr sales 360; wages 140; postage 63; total 563
So the original trial balance difference was ₦60 (debit side short)
Only errors that made one side of the trial balance different go through suspense; (c) and (d) do not.
The following balances were extracted from the books of Tomiwa & Co. Ltd as at 31st December 1990
Opening balances: Debtors ₦4,000; Creditors ₦3,300
Purchases: On credit ₦16,500; Cash ₦7,400
Sales: On Credit ₦25,500; For Cash ₦10,200
Payment to creditors ₦15,000
Receipt from debtors ₦23,600
Cash discount allowed ₦540
Cash discount received ₦400
Trade discount allowed ₦12,000
Returns Inwards ₦760
Returns Outwards ₦215
Control Settlement ₦500
Bad Debts written off ₦85
Provision for bad debts ₦120
Bills receivable ₦600
Cheques dishonoured ₦1,045
Bills Payable ₦1,020
You are required to prepare (i) Sales Ledger Control Account (ii) Purchases Ledger Control Account
(i) Sales Ledger Control Account: Dr balance b/d 4,000; credit sales 25,500; dishonoured cheques 1,045; total 30,545 / Cr bank 23,600; discount allowed 540; returns inwards 760; bad debts 85; purchases ledger (contra) 500; bills receivable 600; balance c/d 4,460; total 30,545
(ii) Purchases Ledger Control Account: Dr bank 15,000; discount received 400; returns outwards 215; sales ledger (contra) 500; bills payable 1,020; balance c/d 2,665; total 19,800 / Cr balance b/d 3,300; credit purchases 16,500; total 19,800
Left out: cash purchases and cash sales (no debtor/creditor), trade discount (never in the ledger), provision for bad debts (not a debtor's account)
Cash sales, cash purchases, trade discount and provisions never enter control accounts.
The following balances were extracted from the books of Goody Enterprises for the year ended 31st December 1990.
Insurance ₦800
Commission paid ₦3,500
Rents and Rates ₦2,460
Delivery expenses ₦700
Purchases: Department A ₦30,000; B ₦45,000; C ₦25,000; total ₦100,000
Sales: Department A ₦52,000; B ₦68,000; C ₦30,000; total ₦150,000
Administrative expenses ₦4,560
Discount received ₦770
Salaries ₦18,300
Advertising ₦1,210
Depreciation ₦2,100
Opening Stock: Department A ₦7,000; B ₦12,000; C ₦3,000; total ₦22,000
Closing Stock: Department A ₦10,000; B ₦15,000; C ₦5,000; total ₦30,000
Additional information: Expenses are to be apportioned on the following bases: (a) Salaries, depreciation, rents and rates, administration and general expenses – equally (b) Discount received – Purchases (c) Advertising commission and delivery expenses – Sales (d) Insurance – ratio 5: 3: 2 to A, B and C respectively. You are required to prepare Department Trading, Profit and Loss Account for the year ended 31st December 1990.
Departmental Trading, Profit and Loss Account for the year ended 31 December 1990 (A | B | C | Total)
Sales 52,000 | 68,000 | 30,000 | 150,000
Cost of sales (opening + purchases − closing): 27,000 | 42,000 | 23,000 | 92,000
Gross profit 25,000 | 26,000 | 7,000 | 58,000
Add discount received (by purchases 30:45:25): 231 | 346.50 | 192.50 | 770
Expenses: insurance (5:3:2) 400 | 240 | 160; commission (by sales 52:68:30) 1,213 | 1,587 | 700; rent and rates (equal) 820 each; delivery (by sales) 243 | 317 | 140; administration (equal) 1,520 each; salaries (equal) 6,100 each; advertising (by sales) 419 | 549 | 242; depreciation (equal) 700 each
Total expenses 11,415 | 11,833 | 10,382 | 33,630
Net profit A ₦13,816; B ₦14,514; C net loss (₦3,190); total net profit ₦25,140
Work out each basis as a ratio first (sales 52:68:30, purchases 30:45:25) and check the department columns add to the totals.
The following Trial Balance was extracted from the books of Olusola Afolabi as at 31st December, 1990.
Capital: Cr ₦74,053
Purchases and Sales: Dr ₦73,130, Cr ₦105,460
Returns: Dr ₦618, Cr ₦435
Debtors and Creditors: Dr ₦12,642, Cr ₦15,750
Stock – 1st January 1990: Dr ₦21,600
Carriage Inwards: Dr ₦290
Motor Vehicles (at cost): Dr ₦27,000
Freehold property (at cost): Dr ₦52,000
Office Equipment (at cost): Dr ₦10,500
Salaries: Dr ₦9,750
Electricity: Dr ₦380
Provision for depreciation: Motor Vehicles Cr ₦10,300; Office Equipment Cr ₦2,650
Provision for bad debts: Cr ₦700
Insurance: Dr ₦290
Rates: Dr ₦400
Motor Vehicles expenses: Dr ₦925
Advertisement: Dr ₦320
Rental Income: Cr ₦820
Bad Debt: Dr ₦247
Discount: Dr ₦194, Cr ₦128
Totals: ₦210,286, ₦210,286
Additional information: (a) Closing Stock ₦25,780 (b) Rental Income owed by tenant ₦380 (c) Accrued salaries ₦564 (d) Provision for bad debts is to be increased to ₦830 Prepaid expenses: (e) Insurance ₦54 Rate ₦96 (f) Provision for depreciation. Motor Vehicles - 10% on cost. Office Equipment – 10% on reducing balances.
You are required to prepare: (i) Trading, Profit and Loss Account for the year ended 31st December 1990 and (ii) A Balance Sheet as at that date.
(i) Trading, Profit and Loss Account for the year ended 31 December 1990
Sales 105,460 − returns inwards 618 = 104,842
Opening stock 21,600 + purchases 73,130 + carriage inwards 290 − returns outwards 435 = 94,585 − closing stock 25,780 = cost of sales 68,805
Gross profit ₦36,037
Add rental income (820 + 380) 1,200; discount received 128 = 37,365
Expenses: salaries (9,750 + 564) 10,314; electricity 380; increase in provision (830 − 700) 130; insurance (290 − 54) 236; rates (400 − 96) 304; motor expenses 925; advertisement 320; bad debts 247; discount allowed 194; depreciation: motor vehicles 10% × 27,000 = 2,700; office equipment 10% × (10,500 − 2,650) = 785; total 16,535
Net profit ₦20,830
(ii) Balance Sheet as at 31 December 1990
Fixed assets: freehold 52,000; office equipment 10,500 − 3,435 = 7,065; motor vehicles 27,000 − 13,000 = 14,000; total 73,065
Current assets: stock 25,780; debtors 12,642 − 830 = 11,812; prepaid insurance 54, rates 96; rent receivable 380; total 38,122
Current liabilities: creditors 15,740 (see note); accrued salaries 564; total 16,304; working capital 21,818
Net assets ₦94,883 = capital 74,053 + net profit 20,830 = ₦94,883
Office equipment is depreciated on its reducing balance (cost less depreciation to date), not on cost.
The Federal Government allocation to the Ministry of Education for 1990 is ₦300 million. During the year, the following expenditure was incurred:
Construction of 1,000 classrooms ₦50,000,000
Purchase of Saloon cars for inspectorate division ₦2,000,000
Purchase of buses for schools ₦15,000,000
Sinking of boreholes for schools ₦10,500,000
Fixtures and fittings ₦3,000,000
Furniture ₦1,250,000
Renovation of classrooms ₦650,000
Laying of rugs ₦50,000
Additional Information: (a) Recurrent expenditure: (i) Maintenance of vehicles ₦870,200 (ii) Staff emoluments ₦90,000,000 (iii) Electricity ₦130,800 (iv) Cleaning materials ₦30,000 (v) Stationery ₦330,000 (vi) Medical expenses ₦250,000 (vii) Telephone, telegrams and postages ₦10,000 (viii) Leave transport grant ₦450,000 (ix) Disturbance allowance ₦110,000 (x) Transport and Travelling ₦510,000 (xi) Excursions ₦120,000 (xii) Hospitality ₦90,000 (xiii) Special grants ₦300,000 (xiv) Staff development ₦3,000,000
(b) Receipt: (i) School fees ₦5,000,000 (ii) Registration of private schools ₦400,000 (iii) Rent from properties ₦100,000 (iv) Fixed deposit interest ₦90,000 (v) Miscellaneous ₦1,000,000 (vi) Sales of unservicable assets ₦800,000
You are required to prepare the Revenue and Expenditure for the year ended 31st December 1990
Ministry of Education: Revenue and Expenditure Account for the year ended 31 December 1990
Revenue: government allocation 300,000,000; own revenue: school fees 5,000,000, registration 400,000, rent 100,000, interest 90,000, miscellaneous 1,000,000 = 6,590,000; sale of assets 800,000; total ₦307,390,000
Capital expenditure: classrooms 50,000,000; saloon cars 2,000,000; buses 15,000,000; boreholes 10,500,000; fixtures 3,000,000; furniture 1,250,000; renovation 650,000; rugs 50,000; total ₦82,450,000
Recurrent expenditure: vehicles 870,200; emoluments 90,000,000; electricity 130,800; cleaning 30,000; stationery 330,000; medical 250,000; telephone 10,000; leave grant 450,000; disturbance 110,000; transport 510,000; excursions 120,000; hospitality 90,000; special grants 300,000; staff development 3,000,000; total ₦96,201,000
Total expenditure 178,651,000; excess of revenue over expenditure ₦128,739,000
In government accounts capital items are charged as expenditure in the year they are bought.