56 questions. Try each one, then open the answer to check yourself and read the explanation.
The systematic recording of business transactions in monetary term is
Answer: B (book-keeping)
Book-keeping is the systematic recording of transactions in money terms.
An allowance given to a customer by a supplier for prompt payment is
Answer: C (cash discount)
Cash discount rewards prompt payment.
Which of the following is not contained in a journal?
Answer: C (Address of the customer)
A journal shows date, accounts, folio, amounts and narration, not addresses.
Which of the following is found in the private ledger?
Answer: C (Drawings account)
The private ledger holds the owner's confidential accounts such as capital and drawings.
Which of the following is not one of the uses of a journal proper? To record
Answer: A (small and repetitive cash disbursements)
Small repetitive cash payments go in the petty cash book.
A trial balance is a list of
Answer: C (debit and credit balances)
It lists all debit and credit balances in the ledger.
Which of the following is an example of direct expense?
Answer: A (Royalties)
Royalties paid per unit produced are a direct expense; manufacturing wages are direct labour, not a direct expense.
CASH BOOK (bank)
Dr: Jan 5 Hassan N3,080; Jan 24 Malik N1,200; Jan 29 Rasaq N1,240; Jan 31 Lukman N1,060; Jan 31 Balance c/d N2,540; total N9,120
Cr: Jan 1 Balance b/d N7,090; Jan 9 Dauda N1,400; Jan 31 Hussein N630; total N9,120
Feb 1 Balance b/d N2,540 (Cr)
BANK STATEMENT (Dr; Cr; Balance)
Jan 1 Balance b/d: 7,090 O/D
Jan 5 Hassan: Cr 3,080; 4,010 O/D
Jan 9 Dauda: Dr 1,400; 5,410 O/D
Jan 24 Malik: Cr 1,200; 4,210 O/D
Jan 29 Rasaq: Cr 1,240; 2,970 O/D
Jan 30 Standing order: Dr 770; 3,740 O/D
Jan 31 Bank charges: Dr 490; 4,230 O/D
Uncredited cheques totalled
Answer: C (N1,060)
Lukman's N1,060 is in the cash book but not on the statement.
CASH BOOK (bank)
Dr: Jan 5 Hassan N3,080; Jan 24 Malik N1,200; Jan 29 Rasaq N1,240; Jan 31 Lukman N1,060; Jan 31 Balance c/d N2,540; total N9,120
Cr: Jan 1 Balance b/d N7,090; Jan 9 Dauda N1,400; Jan 31 Hussein N630; total N9,120
Feb 1 Balance b/d N2,540 (Cr)
BANK STATEMENT (Dr; Cr; Balance)
Jan 1 Balance b/d: 7,090 O/D
Jan 5 Hassan: Cr 3,080; 4,010 O/D
Jan 9 Dauda: Dr 1,400; 5,410 O/D
Jan 24 Malik: Cr 1,200; 4,210 O/D
Jan 29 Rasaq: Cr 1,240; 2,970 O/D
Jan 30 Standing order: Dr 770; 3,740 O/D
Jan 31 Bank charges: Dr 490; 4,230 O/D
Adjusted Cash Book balance is
Answer: A (N3,800 O/D)
Overdraft 2,540 + standing order 770 + charges 490 = N3,800 overdrawn.
CASH BOOK (bank)
Dr: Jan 5 Hassan N3,080; Jan 24 Malik N1,200; Jan 29 Rasaq N1,240; Jan 31 Lukman N1,060; Jan 31 Balance c/d N2,540; total N9,120
Cr: Jan 1 Balance b/d N7,090; Jan 9 Dauda N1,400; Jan 31 Hussein N630; total N9,120
Feb 1 Balance b/d N2,540 (Cr)
BANK STATEMENT (Dr; Cr; Balance)
Jan 1 Balance b/d: 7,090 O/D
Jan 5 Hassan: Cr 3,080; 4,010 O/D
Jan 9 Dauda: Dr 1,400; 5,410 O/D
Jan 24 Malik: Cr 1,200; 4,210 O/D
Jan 29 Rasaq: Cr 1,240; 2,970 O/D
Jan 30 Standing order: Dr 770; 3,740 O/D
Jan 31 Bank charges: Dr 490; 4,230 O/D
Unpresented cheque(s) totalled
Answer: D (N630.)
Hussein's cheque of N630 has not yet appeared on the statement.
A debit balance of N1,000 in a cash account means that
Answer: A (cash in hand is N1,000)
A debit balance on a cash account is cash in hand.
The maximum level of cash held by a cashier under an imprest system is a/an
Answer: B (float)
The fixed imprest amount is the float.
The total of the sales journal is entered on the
Answer: C (credit side of Sales Account)
Total credit sales are credited to the sales account.
Gross profit is calculated in the
Answer: A (Trading Account)
The trading account shows gross profit.
An example of fixed asset is
Answer: D (furniture.)
Furniture is a tangible fixed asset.
Capital Accounts: Ade N60,000; Bola N40,000
Current Accounts: Ade N10,000 Cr.; Bola N6,000 Dr.
Drawings: Ade N8,000; Bola N2,000
Interest on drawings is 5%, interest on capital is 10%. Profits and losses are shared equally. Net profit for the year is N30,000.
The amount of distributable profit is
Answer: D (N20,500.)
30,000 + interest on drawings 500 − interest on capital 10,000 = N20,500.
Capital Accounts: Ade N60,000; Bola N40,000
Current Accounts: Ade N10,000 Cr.; Bola N6,000 Dr.
Drawings: Ade N8,000; Bola N2,000
Interest on drawings is 5%, interest on capital is 10%. Profits and losses are shared equally. Net profit for the year is N30,000.
Ade's share of profit is
Answer: D (N10,250.)
20,500 ÷ 2 = N10,250.
Capital Accounts: Ade N60,000; Bola N40,000
Current Accounts: Ade N10,000 Cr.; Bola N6,000 Dr.
Drawings: Ade N8,000; Bola N2,000
Interest on drawings is 5%, interest on capital is 10%. Profits and losses are shared equally. Net profit for the year is N30,000.
Bola's current account balance is
Answer: D (N6,150 Cr.)
−6,000 + interest 4,000 + share 10,250 − drawings 2,000 − interest on drawings 100 = N6,150 Cr.
Capital Accounts: Ade N60,000; Bola N40,000
Current Accounts: Ade N10,000 Cr.; Bola N6,000 Dr.
Drawings: Ade N8,000; Bola N2,000
Interest on drawings is 5%, interest on capital is 10%. Profits and losses are shared equally. Net profit for the year is N30,000.
The total amount credited to the Profit and Loss Appropriation Account is
Answer: B (N30,500)
Net profit 30,000 + interest on drawings 500 = N30,500.
Capital expenditure is the
Answer: C (money spent on acquiring fixed assets)
Capital expenditure buys or improves fixed assets.
Depreciation of assets is provided for in consideration of
Answer: D (wear and tear.)
Depreciation allows for wear and tear.
Which of the following is a factory overhead?
Answer: A (Depreciation of plant and machinery)
Depreciation of factory plant is an indirect production cost.
Which of the following is used to derive missing figures in a system of incomplete records?
Answer: A (Control account)
Total debtors and creditors (control) accounts give missing sales and purchases.
Which of the following is not credited to debtors control account?
Answer: A (Provision for bad debt)
The provision is kept in its own account and is not entered in the control account.
Where a firm has not kept proper books of account, an increase in closing capital over opening capital represents
Answer: A (profit)
Ignoring drawings and new capital, the rise in capital is the profit.
RECEIPTS AND PAYMENTS ACCOUNT
Dr: Balance b/f D1,000; Subscriptions D15,000; total D16,000
Cr: Salaries D2,000; Rent D1,000; Rates D1,500; Expenses D500; Balance c/f D11,000; total D16,000
(1st January, 2004; 31st December, 2004):
Fixed Assets D50,000; D50,000
Rent (accrued) D200; D250
Rates (prepaid) D300; D400
Subscriptions in arrears D1,500; D1,000
Subscriptions in advance D1,300; D800
Accumulated fund as at 1st January 2004 is
Answer: D (D51,300)
50,000 + rates prepaid 300 + subscriptions in arrears 1,500 + cash 1,000 − rent accrued 200 − subscriptions in advance 1,300 = D51,300.
RECEIPTS AND PAYMENTS ACCOUNT
Dr: Balance b/f D1,000; Subscriptions D15,000; total D16,000
Cr: Salaries D2,000; Rent D1,000; Rates D1,500; Expenses D500; Balance c/f D11,000; total D16,000
(1st January, 2004; 31st December, 2004):
Fixed Assets D50,000; D50,000
Rent (accrued) D200; D250
Rates (prepaid) D300; D400
Subscriptions in arrears D1,500; D1,000
Subscriptions in advance D1,300; D800
Subscriptions relating to the year 2004 is
Answer: D (D15,000)
15,000 − 1,500 + 1,300 + 1,000 − 800 = D15,000.
RECEIPTS AND PAYMENTS ACCOUNT
Dr: Balance b/f D1,000; Subscriptions D15,000; total D16,000
Cr: Salaries D2,000; Rent D1,000; Rates D1,500; Expenses D500; Balance c/f D11,000; total D16,000
(1st January, 2004; 31st December, 2004):
Fixed Assets D50,000; D50,000
Rent (accrued) D200; D250
Rates (prepaid) D300; D400
Subscriptions in arrears D1,500; D1,000
Subscriptions in advance D1,300; D800
Rates charged to the Income and Expenditure Account for the year 2004 is
Answer: D (D1,400.)
Rates = paid 1,500 + prepaid at start 300 − prepaid at end 400 = D1,400.
Which of the following is not an accounting concept?
Answer: B (Accuracy)
Accuracy is a quality, not one of the accounting concepts.
'Transactions are governed by legal principles, but are nevertheless accounted for and presented in accordance with the substance and financial reality'. This is in compliance with the principle of
Answer: A (substance over form)
Recording the economic reality rather than the legal form is the substance over form principle.
Which of the following statements is not correct?
Answer: D (Drawings increase capital.)
Drawings reduce capital.
Direct material + direct expenses is
Answer: B (prime cost)
Direct costs together make up prime cost (the question leaves out direct labour, but prime cost is the closest option).
When both debit and credit entries of a transaction are shown in the cash book, it is described as
Answer: A (contra entry)
Entries on both sides of the cash book are contra entries.
The correct order of liquidity is
Answer: A (stock, debtors, prepayments and cash)
In order of increasing liquidity: stock, debtors, prepayments, cash.
Which of the following ratios measure the ability of a firm to meet short-term obligations?
Answer: B (Quick asset ratio)
The quick (acid-test) ratio measures short-term solvency.
Which of the following is not an appropriation of profit?
Answer: C (Provisions)
Provisions are charges against profit, not appropriations of it.
Which of the following is a capital reserve?
Answer: B (Share premium)
Share premium is a capital reserve.
Where goods are invoiced by a firm its branch at cost-plus, the branch stock adjustment account is used to determine
Answer: B (branch profit)
The branch stock adjustment account removes the loading and shows the branch gross profit.
Which of the following is apportioned in proportion to the purchases of each department?
Answer: A (Discounts received)
Discount received relates to purchases.
The Accounts Department of a ministry had the following staff position on 31st December, 2004 (Post; Grade; Number in Post; Rate):
Chief Accountant; 15; 1; N371,748
Asst. Chief Accountant; 14; 2; N301,452
Principal Accountant; 12; 4; N243,732
Accountant I; 7; 6; N113,632
Clerk; 3; 10; N54,166
Additional information: (a) All employees are on the first step of their salary. (b) Allowances (Transport; Housing; Responsibility): Grade 12 and above – N24,000 per annum; N120,000 per annum; N30,000 per annum. Grade 1 to 7 – N13,200 per annum; N48,000 per annum; –
The total basic salary for the year was
Answer: A (N3,173,032)
Multiply each rate by the number in post: 371,748 + 602,904 + 974,928 + 681,792 + 541,660 = N3,173,032.
The Accounts Department of a ministry had the following staff position on 31st December, 2004 (Post; Grade; Number in Post; Rate):
Chief Accountant; 15; 1; N371,748
Asst. Chief Accountant; 14; 2; N301,452
Principal Accountant; 12; 4; N243,732
Accountant I; 7; 6; N113,632
Clerk; 3; 10; N54,166
Additional information: (a) All employees are on the first step of their salary. (b) Allowances (Transport; Housing; Responsibility): Grade 12 and above – N24,000 per annum; N120,000 per annum; N30,000 per annum. Grade 1 to 7 – N13,200 per annum; N48,000 per annum; –
The total transport allowance was
Answer: B (N379,200)
7 officers × 24,000 = 168,000; 16 × 13,200 = 211,200; total N379,200.
The Accounts Department of a ministry had the following staff position on 31st December, 2004 (Post; Grade; Number in Post; Rate):
Chief Accountant; 15; 1; N371,748
Asst. Chief Accountant; 14; 2; N301,452
Principal Accountant; 12; 4; N243,732
Accountant I; 7; 6; N113,632
Clerk; 3; 10; N54,166
Additional information: (a) All employees are on the first step of their salary. (b) Allowances (Transport; Housing; Responsibility): Grade 12 and above – N24,000 per annum; N120,000 per annum; N30,000 per annum. Grade 1 to 7 – N13,200 per annum; N48,000 per annum; –
The total housing allowance was
Answer: A (N1,608,000)
7 × 120,000 = 840,000 + 16 × 48,000 = 768,000 = N1,608,000.
The Accounts Department of a ministry had the following staff position on 31st December, 2004 (Post; Grade; Number in Post; Rate):
Chief Accountant; 15; 1; N371,748
Asst. Chief Accountant; 14; 2; N301,452
Principal Accountant; 12; 4; N243,732
Accountant I; 7; 6; N113,632
Clerk; 3; 10; N54,166
Additional information: (a) All employees are on the first step of their salary. (b) Allowances (Transport; Housing; Responsibility): Grade 12 and above – N24,000 per annum; N120,000 per annum; N30,000 per annum. Grade 1 to 7 – N13,200 per annum; N48,000 per annum; –
The responsibility allowance of grade leves 14 and 15 was
Answer: B (N90,000)
3 officers (1 + 2) × 30,000 = N90,000.
The part of the C.P.U. used for the processing of data is
Answer: B (Arithmetic and logic unit)
The ALU performs calculations and comparisons.
Resources consumed but to be paid for within the next accounting period are classified in the balance sheet as
Answer: A (current liabilities)
Expenses owing are accruals, current liabilities.
Where a proprietor withdraws stock for personal consumption, the accounting entries to record the transaction are
Answer: A (debit Drawings Account, credit Purchases Account)
Goods taken: debit drawings, credit purchases.
Where there is a loss on disposal of a fixed asset, it means
Answer: A (depreciation has been underestimated)
A loss means book value was higher than the sale price, so too little depreciation had been charged.
Section A (answer two questions only from this section)
1. (a) State three reasons why a trial balance may not balance (b) State three errors that would not affect the agreement of the trial balance (c) What is a suspense account?
(a) Any three: single entry (only one side posted); a balance left out or put on the wrong side; wrong balancing of an account; overcasting or undercasting; different amounts on the debit and credit sides; transposition on one side only.
(b) Any three: errors of omission, commission, principle, original entry, compensating errors, complete reversal of entries.
(c) A suspense account is a temporary account that holds the difference in the trial balance until the errors are found and corrected.
Errors that keep debits equal to credits do not show up in the trial balance.
2. (a) What is depreciation? (b) Explain three factors that are taken into consideration in determining annual depreciation charge (c) State two reasons for charging depreciation.
(a) Depreciation is the part of the cost of a fixed asset charged against profit each year because of wear and tear, use, passage of time or obsolescence.
(b) Any three: cost of the asset (including costs of getting it ready for use); estimated useful life; estimated residual (scrap) value; the method of depreciation chosen.
(c) Any two: to match the cost of the asset with the revenue it helps earn (accruals); to show the asset at a fair value in the balance sheet; to keep back funds for replacement; to calculate profit correctly.
Define, list the inputs to the calculation, then the reasons.
3. (a) Explain four classifications of cost found in the preparation of manufacturing accounts (b) Explain the following: (i) prime cost; (ii) work-in-progress; (iii) manufacturing profit.
(a) Direct materials – raw materials that become part of the product; direct labour – wages of workers who make the product; direct expenses – other costs traced to units, e.g. royalties; factory overheads – indirect production costs such as factory rent, supervision and depreciation of machinery. (Administration, selling and distribution, and finance costs are charged in profit and loss.)
(b)(i) Prime cost is the total of direct materials, direct labour and direct expenses.
(ii) Work-in-progress is partly finished goods at the start or end of a period; opening WIP is added and closing WIP deducted to find cost of production.
(iii) Manufacturing profit is the profit added when goods are transferred from the factory to the trading account at more than cost (e.g. market value), to measure factory efficiency; any unrealised profit in stock is removed with a provision.
Separate costs into direct and indirect before defining the terms.
4. Explain the following concepts and convention: (a) money measurement; (b) business entity; (c) going-concern; (d) realisation; (e) materiality.
(a) Money measurement: only events that can be measured in money are recorded.
(b) Business entity: the business is treated as separate from its owner, so only business transactions are recorded (owner's capital is a liability of the business).
(c) Going concern: the business is assumed to continue for the foreseeable future, so assets are valued at cost less depreciation rather than at break-up values.
(d) Realisation: revenue/profit is recognised when it is earned, normally when goods pass to the customer, not when cash is received.
(e) Materiality: items too small to affect users' decisions may be treated in the simplest way (e.g. a stapler expensed rather than capitalised).
One sentence each, with a short example where possible.
Section B (answer only three questions from this section)
5. A manufacturing company prepares its accounts to 31st December each year. The company provides for depreciation on its plants at the rate of 10% per annum using the straight line method. On 31st December 2001, the plant account consisted of three plants purchased as follows (date of purchase; cost): Plant X 1st July, 1999 N60,000; Plant Y 1st January, 2000 N80,000; Plant Z 1st October, 2001 N30,000. The plant bought in July, 1999 was sold on 30th September, 2001 for N55,000.
You are required prepare: (a) Plant Account; (b) Provision for Depreciation Account; (c) Plant Disposal Account.
Depreciation 10% of cost a year, by months owned.
(a) Plant account: 1999 bank (X) 60,000, balance c/d 60,000. 2000 + Y 80,000 → 140,000. 2001 + Z 30,000; disposal (X) 60,000; balance c/d 110,000.
(b) Provision for depreciation: 1999 charge 3,000 (X, 6 months). 2000 charge 14,000 (X 6,000 + Y 8,000); balance 17,000. 2001 charge 13,250 (X 9 months 4,500 + Y 8,000 + Z 3 months 750); transfer to disposal 13,500 (3,000 + 6,000 + 4,500); balance c/d 16,750.
(c) Plant disposal account: Dr plant 60,000; profit on disposal to profit and loss 8,500. Cr provision for depreciation 13,500; bank 55,000.
Book value of X at sale = 60,000 − 13,500 = 46,500; sold for 55,000, so a profit of 8,500.
6. The following balances were extracted from the books of Olusesi Enterprises on 31st March, 2003:
Sales ledger balance – 1/4/2002 N22,000
Purchases ledger balance – 1/4/2002 N30,000
Sales day book N420,000
Purchases day book N331,000
Cash received from customers N119,000
Cash paid to creditors N132,000
Returns outwards day book N5,000
Returns inwards day book N4,000
Bad debt written off N600
Bills dishonoured N4,500
Discounts allowed N1,200
Discount received N700
Credit notes received N800
Bills payable N200
Cash refund to customers N500
Debit notes issued N1,340
Bills receivable N800
Contra settlement N300
Cash refund from creditors N1,000
You are required to prepare: (a) Sales Ledger Control Account; and (b) Purchases Ledger Control Account.
(a) Sales ledger control: Dr balance b/f 22,000; sales 420,000; bills dishonoured 4,500; cash refunded 500; debit notes issued (extra charges to customers) 1,340 = 448,340. Cr cash 119,000; returns inwards 4,000; bad debts 600; discounts allowed 1,200; bills receivable 800; contra 300; balance c/d 322,440.
(b) Purchases ledger control: Dr cash 132,000; returns outwards 5,000; discount received 700; credit notes received 800; bills payable 200; contra 300; balance c/d 223,000 = 362,000. Cr balance b/f 30,000; purchases 331,000; cash refund from creditors 1,000 = 362,000.
Credit notes received reduce what we owe suppliers; debit notes issued are treated as extra charges to customers.
7. Taiwo and Kehinde had been in partnership for several years sharing profits and losses in the ratio of capitals. On 31st December, 2003, they decided to dissolve their partnership on which date their Balance Sheet was as follows:
Capital: Taiwo N60,000; Kehinde N40,000
Current: Taiwo N8,000; Kehinde (N3,000)
Trade creditors N15,000
Bank overdraft N30,000
Fixtures and Fittings N40,000; Stock N58,000; Debtors N45,000; Cash N7,000
Additional information: (a) Fixtures and Fittings were sold for N36,000 (b) Taiwo took over part of the stock at an agreed value of N25,000 while the rest sold for N32,000 (c) Debtors realised N43,600 (d) Trade creditors were settled for N12,800 (e) Cash and proceeds from realisation were banked to liquidate the overdraft. (f) Dissolution expenses amounted to N1,800.
You are required to prepare: (i) Realisation Account; (ii) Bank Account, and (iii) Partner's Capital and Current Accounts.
Profit-sharing ratio = capitals 60 : 40 = 3 : 2.
(i) Realisation account: Dr fixtures 40,000; stock 58,000; debtors 45,000; bank (expenses) 1,800 = 144,800. Cr bank – fixtures 36,000, stock 32,000, debtors 43,600; Taiwo (stock taken) 25,000; discount on creditors 2,200; loss 6,000 (Taiwo 3,600, Kehinde 2,400).
(ii) Bank account: Dr cash 7,000; fixtures 36,000; stock 32,000; debtors 43,600 = 118,600. Cr balance b/d (overdraft) 30,000; creditors 12,800; expenses 1,800; Taiwo 39,400; Kehinde 34,600 = 118,600.
(iii) Current accounts closed to capital: Taiwo 8,000 Cr; Kehinde 3,000 Dr. Capital accounts: Taiwo 60,000 + 8,000 − loss 3,600 − stock 25,000 = 39,400 paid; Kehinde 40,000 − 3,000 − 2,400 = 34,600 paid.
Assets taken by a partner are credited to realisation and debited to that partner's capital.
8. The following Trial Balance was extracted from the books of Linguere Limited on 31st December, 2003 after the Trading Account had been prepared (amounts in dalasis, D):
Ordinary Share Capital: 500,000 Ordinary Shares of D1 each D500,000
Share Premium D20,000
Profit and Loss D15,000
Freehold Premises (at cost) D250,000
Stock (31/12/2003) D16,300
Gross Profit D110,790
Discounts D350 (Dr); D260 (Cr)
Wages and Salaries D12,400
General office expenses D14,050
Motor vehicles (at cost) D200,000
Prov. for depreciation (motor vehicles) D20,000
Interim dividends D40,000
Debtors and creditors D22,400; D18,250
Cash and Bank D128,800
Totals D684,300 / D684,300
Additional information: (a) Wages and salaries accrued was D600 (b) Provide for depreciation on motor vehicles at 10% on reducing balance basis (c) Transfer D15,000 to general reserve (d) Final dividends proposed is 5 butus per share.
You are required to prepare: (i) Profit and Loss Account for the year ended 31st December, 2003; (ii) Profit and Loss Appropriation Account for the year ended 31st December, 2003; and (iii) A Balance Sheet as at that date.
(The book prints some credit items in the debit column; the trial balance agrees at 684,300 with share capital, premium, profit and loss, gross profit, discount received, depreciation provision and creditors as credits.)
(i) Profit and loss: gross profit 110,790 + discount received 260 = 111,050. Expenses: discount allowed 350; wages 12,400 + 600 = 13,000; general office 14,050; depreciation 10% × (200,000 − 20,000) = 18,000; total 45,400. Net profit 65,650.
(ii) Appropriation: 65,650 + balance b/f 15,000 = 80,650; less interim dividend 40,000, general reserve 15,000, proposed final dividend 25,000 (500,000 × 5 butus); retained profit 650.
(iii) Balance sheet: freehold 250,000; motor vehicles 200,000 − 38,000 = 162,000; fixed assets 412,000. Current assets: stock 16,300; debtors 22,400; cash 128,800 = 167,500. Current liabilities: creditors 18,250; accrued wages 600; proposed dividend 25,000 = 43,850. Working capital 123,650; net assets 535,650 = share capital 500,000 + share premium 20,000 + general reserve 15,000 + retained profit 650.
Reducing balance: charge 10% on cost less depreciation already provided.
9. Amy Wadada started business as a retailer on 1st January, 2003 with an initial capital of N500,000. The following is a summary of her business transactions during the first six months of trading: (a) A delivery van was bought on 15th January, 2003 at a cost of N240,000 for cash. (b) Cash sales totalled N600,000 (c) Rent of N180,000 was paid on the commencement of the business (d) During the period Wadada withdrew goods worth N60,000 and cash of N70,000 from the business for personal use. (e) Credit sales amounted to N400,000 and N120,000 out of this amount was outstanding as at 30th June, 2003. (f) An amount of N85,000 was paid for general expenses (g) During the period suppliers were paid N450,000 for goods and invoices totalling N80,000 remained unpaid at 30th June, 2003.
You are required to: (i) Write up the Ledger Accounts, and (ii) Extract a Trial Balance as at 30th June, 2003.
Ledger: Cash – Dr capital 500,000, sales 600,000, debtors 280,000 = 1,380,000; Cr van 240,000, rent 180,000, drawings 70,000, general expenses 85,000, creditors 450,000; balance 355,000.
Purchases 450,000 + 80,000 = 530,000, less goods withdrawn 60,000 = 470,000. Drawings 60,000 + 70,000 = 130,000. Sales 600,000 + 400,000 = 1,000,000. Debtors 400,000 − 280,000 = 120,000. Creditors 80,000.
Trial balance at 30th June 2003: Debit – cash 355,000; delivery van 240,000; rent 180,000; drawings 130,000; general expenses 85,000; purchases 470,000; debtors 120,000; total 1,580,000. Credit – capital 500,000; sales 1,000,000; creditors 80,000; total 1,580,000.
Goods taken by the owner: debit drawings, credit purchases.