56 questions. Try each one, then open the answer to check yourself and read the explanation.
The objective of accounting information is to enable users to
Answer: C (make decisions.)
Accounting information is produced so that owners, managers, lenders and others can make sound economic decisions. Preparing statements and budgets are means, not the objective.
Trade discounts are given for
Answer: A (bulk purchases.)
A trade discount is a reduction off the list price, usually for buying in large quantities or to traders. Prompt payment earns a cash discount instead.
When closing stock is overstated, it would reduce
Answer: A (cost of sales and increase gross profit.)
Closing stock is deducted to get cost of sales. A bigger closing stock makes cost of sales smaller, so gross profit becomes bigger.
Which of the following is not a source document?
Answer: A (Journal proper)
Invoices, debit notes and credit notes are the documents from which entries are made. The journal proper is a book of original entry, not a source document.
A fixed asset fully written-down by a trader is now considered to be worth ₦5,000. The double entry required to effect this is: debit
Answer: B (Asset Account; credit Capital Account.)
The asset's value goes up, so the Asset Account is debited. The gain belongs to the owner, so the Capital Account is credited.
Which of the following is a book of original entry?
Answer: D (Sales journal)
Transactions are first recorded in books of original entry such as the sales journal, then posted to the ledger.
A Balance Sheet shows only
Answer: C (assets and liabilities.)
A balance sheet lists what the business owns (assets) and what it owes (liabilities, including what it owes the owner as capital) at a date.
The process of entering transaction from one book to another is
Answer: B (posting.)
Transferring entries from a book of original entry to the ledger is called posting.
Use the following information to answer questions 9 and 10.
Stocks: 1/1/10 GH¢1,400; 31/12/10 GH¢1,900
Creditors: 1/1/10 GH¢2,000; 31/12/10 GH¢2,700
Cash paid to trade creditors: GH¢8,000
Mark-up on cost of sales: 20%
The total purchases is
Answer: A (GH¢8,700.)
Purchases = cash paid + closing creditors − opening creditors = 8,000 + 2,700 − 2,000 = GH¢8,700.
Use the following information to answer questions 9 and 10.
Stocks: 1/1/10 GH¢1,400; 31/12/10 GH¢1,900
Creditors: 1/1/10 GH¢2,000; 31/12/10 GH¢2,700
Cash paid to trade creditors: GH¢8,000
Mark-up on cost of sales: 20%
The cost of sales is
Answer: A (GH¢8,200.)
Cost of sales = opening stock + purchases − closing stock = 1,400 + 8,700 − 1,900 = GH¢8,200.
Which of the following is a Trading Account item?
Answer: D (Carriage inwards)
Carriage inwards is part of the cost of getting goods in, so it goes to the trading account. The others go to profit and loss.
The addition of prime cost and factory overheads is
Answer: C (cost of goods produced.)
Prime cost plus factory overheads gives the production (factory) cost, i.e. the cost of goods produced.
Capital receipt is collected
Answer: A (on sales of motor vehicle.)
Money from selling a fixed asset such as a motor vehicle is a capital receipt. Sales of stock and receipts from debtors are revenue receipts.
Which of the following is an example of factory overheads?
Answer: B (Salary of production officer)
A production officer supervises the factory but does not work directly on the product, so his salary is a factory overhead (indirect labour). A machine operator's wages are direct labour, part of prime cost.
Osa started business with Le40,000 cash. The accounting entry is debit
Answer: A (Cash Account; credit Capital Account.)
The business receives cash, so Cash is debited; the owner has given it, so Capital is credited.
Branch Stock Account is used to determine the
Answer: B (gross profit of the branch.)
When the branch stock account is kept like a trading account, the balancing figure on it is the branch's gross profit.
The name given to a budget in public service accounting is
Answer: D (estimate.)
Government budgets are called estimates: forecasts of revenue and expenditure for the coming year.
Use the following information to answer questions 18 to 20.
Balance Sheet as at 31st December, 2010
Capital ₦40,000; Less: Net loss ₦5,000 = ₦35,000; Less: drawings ₦2,000 = ₦33,000
Long term loan ₦20,000 (total ₦53,000)
Creditors ₦8,000
Accrued expenses ₦4,000
Total ₦65,000
Freehold premises ₦50,000
Stock ₦3,000
Debtors ₦4,000
Cash at bank ₦6,500
Cash in hand ₦1,500
Total ₦65,000
The amount of working capital is
Answer: D (₦3,000.)
Current assets = 3,000 + 4,000 + 6,500 + 1,500 = ₦15,000. Current liabilities = 8,000 + 4,000 = ₦12,000. Working capital = 15,000 − 12,000 = ₦3,000.
Use the following information to answer questions 18 to 20.
Balance Sheet as at 31st December, 2010
Capital ₦40,000; Less: Net loss ₦5,000 = ₦35,000; Less: drawings ₦2,000 = ₦33,000
Long term loan ₦20,000 (total ₦53,000)
Creditors ₦8,000
Accrued expenses ₦4,000
Total ₦65,000
Freehold premises ₦50,000
Stock ₦3,000
Debtors ₦4,000
Cash at bank ₦6,500
Cash in hand ₦1,500
Total ₦65,000
Working capital ratio is
Answer: A (5 : 4.)
Working capital (current) ratio = current assets : current liabilities = 15,000 : 12,000 = 5 : 4.
Use the following information to answer questions 18 to 20.
Balance Sheet as at 31st December, 2010
Capital ₦40,000; Less: Net loss ₦5,000 = ₦35,000; Less: drawings ₦2,000 = ₦33,000
Long term loan ₦20,000 (total ₦53,000)
Creditors ₦8,000
Accrued expenses ₦4,000
Total ₦65,000
Freehold premises ₦50,000
Stock ₦3,000
Debtors ₦4,000
Cash at bank ₦6,500
Cash in hand ₦1,500
Total ₦65,000
Acid test ratio is
Answer: D (1 : 1.)
Acid test ratio leaves out stock: (15,000 − 3,000) : 12,000 = 12,000 : 12,000 = 1 : 1.
Which of the following is not prepared by a partnership?
Answer: C (Income and Expenditure Account)
An Income and Expenditure Account is prepared by not-for-profit organisations such as clubs, not by a trading partnership.
A partner who only makes capital contribution but does not take part in the management of the partnership business is a/an
Answer: C (dormant partner.)
A dormant (sleeping) partner puts in capital but takes no part in running the business. A nominal partner only lends his name and usually puts in no capital.
Which of the following is a component of prime cost?
Answer: B (Royalty)
Prime cost = direct materials + direct labour + direct expenses. Royalty is paid per unit produced, so it is a direct expense. Factory rent, electricity and depreciation are factory overheads.
The concept which establishes the rule for the periodic recognition of revenue as soon as it is capable of objective measurement is
Answer: D (realization.)
The realisation concept says revenue is recognised when it is earned and can be measured objectively, usually when goods pass to the buyer.
Rent accrued in 2009 was D140. In 2010, D900 was paid while D160 was outstanding. Rent for 2010 was
Answer: C (D920)
Of the D900 paid, D140 settled 2009 rent, leaving D760 for 2010. Add the D160 still owing: 760 + 160 = D920.
Which of the following is not an input device?
Answer: D (Line printer)
A line printer produces output on paper. Card readers, tape readers and keyboards feed data into the computer.
The equivalent of Income and Expenditure Account in a trading concern is
Answer: B (Profit and Loss Account.)
Both compare income with expenses for the period to find a surplus or deficit; in a trading business that statement is the Profit and Loss Account.
The term used to denote the capital of a not-for-profit making organization is
Answer: D (accumulated fund.)
A club or society calls its capital the accumulated fund: assets minus liabilities.
The portion of authorized capital that has been allotted to subscribers is
Answer: C (issued capital.)
Issued capital is the part of the authorised capital actually issued (allotted) to shareholders.
Partners whose liabilities are restricted to their financial contribution to the partnership in the event of winding up are
Answer: B (limited partners.)
A limited partner can lose only the capital he put in; other partners have unlimited liability.
If creditors at 1/1/10 were Le 3,000; creditors at 31/12/10 Le 5,500 and payments to creditors Le 29,000. The purchases figure for 2010 is
Answer: C (Le 31,500)
Purchases = payments + closing creditors − opening creditors = 29,000 + 5,500 − 3,000 = Le 31,500.
The Sales Ledger Control Account is also referred to as
Answer: C (Total Debtors Account.)
The sales ledger control account summarises all debtors' accounts, so it is also called the Total Debtors Account.
Use the following information to answer questions 34 and 35.
The Health Department of Zango Local Government incurred the following expenditure in 2010:
Construction of hospital wards: Le 300,000
Purchase of hospital beds: Le 40,000
Salaries and wages: Le 80,000
Purchase of drugs: Le 55,000
Purchase of X-ray machine: Le 150,000
Capital expenditure for the year was
Answer: B (Le 490,000)
Capital items last for years: wards 300,000 + beds 40,000 + X-ray machine 150,000 = Le 490,000.
Use the following information to answer questions 34 and 35.
The Health Department of Zango Local Government incurred the following expenditure in 2010:
Construction of hospital wards: Le 300,000
Purchase of hospital beds: Le 40,000
Salaries and wages: Le 80,000
Purchase of drugs: Le 55,000
Purchase of X-ray machine: Le 150,000
The amount of recurrent expenditure was
Answer: C (Le 135,000)
Recurrent items are used up in the year: salaries and wages 80,000 + drugs 55,000 = Le 135,000.
Which of the following errors affects the agreement of a Trial Balance?
Answer: A (Wrong addition in the sales account)
A wrong addition changes only one side, so the trial balance will not agree. The others (commission, omission, principle) keep debits equal to credits.
Shares of ₦3 nominal value were issued at a price of ₦4. The difference of ₦1 is a
Answer: C (premium.)
Issuing a share above its nominal value gives a share premium: 4 − 3 = ₦1.
Which of the following is not the purpose of control account?
Answer: D (Monitor the cash book)
Control accounts check the arithmetic of the debtors' and creditors' ledgers, help locate errors and find missing figures. They are not used to monitor the cash book.
Which of the following is not part of the Central Processing Unit of a computer?
Answer: C (Input unit)
The CPU is made up of the arithmetic and logic unit, the control unit and the memory. Input units are separate peripheral devices.
The double entry to record the proceeds on disposal of assets is debit
Answer: A (Bank Account; credit Asset Disposal Account.)
Money received goes into the bank (debit Bank), and the sale proceeds are credited to the Asset Disposal Account.
An underwriter for a company's share is paid
Answer: B (commission.)
An underwriter agrees to buy any shares the public does not take up and is paid an underwriting commission for this.
Which of the following is found in a Memorandum of Association?
Answer: C (Object of the business)
The memorandum states the company's external matters, including its objects clause. Directors and dividends are dealt with in the articles.
Administrative, selling and distribution expenses in a manufacturing firm are recorded in
Answer: C (Profit and Loss Account.)
These are non-factory expenses, so they are charged to the Profit and Loss Account.
Which of the following is not a revenue to a local government?
Answer: C (Personal income tax)
Personal income tax is collected by state (or central) government. Fines, licences and tenement rates are local government revenues.
Use the following information to answer questions 47 and 48.
Cash in hand: D1,440
Cash at Bank: D2,440
Stock: D2,500
Furniture and fittings: D2,200
Creditors: D1,000
The capital is
Answer: A (D7,580.)
Assets = 1,440 + 2,440 + 2,500 + 2,200 = D8,580. Capital = assets − liabilities = 8,580 − 1,000 = D7,580.
Use the following information to answer questions 47 and 48.
Cash in hand: D1,440
Cash at Bank: D2,440
Stock: D2,500
Furniture and fittings: D2,200
Creditors: D1,000
The liability is
Answer: D (D1,000.)
The only amount owed to outsiders is creditors, D1,000.
Which of the following is not an item in the profit and loss account?
Answer: A (Drawings)
Drawings are taken by the owner for personal use; they reduce capital in the balance sheet and are not a business expense.
A loss made on the disposal of a fixed asset is debited to
Answer: C (Profit and Loss Account.)
A loss on disposal is an expense of the period, so it is debited to the Profit and Loss Account.
Explain the following types of accounts and in each case, state the rules regarding the recording of transactions in their debit and credit sides.
(a) Personal Account; (b) Real Account; (c) Nominal Account; (d) Liabilities Account; (e) Assets Account.
(a) Personal account: account of a person or organisation the business deals with (debtors, creditors, capital).
Rule: debit the receiver, credit the giver.
(b) Real account: account of property/things owned (land, buildings, cash, stock).
Rule: debit what comes in, credit what goes out.
(c) Nominal account: account of incomes, gains, expenses and losses (rent, wages, commission received).
Rule: debit expenses and losses, credit incomes and gains.
(d) Liabilities account: account of amounts the business owes (loans, creditors).
Rule: debit a decrease in the liability, credit an increase.
(e) Assets account: account of resources the business owns.
Rule: debit an increase in the asset, credit a decrease.
For each type give a one-line meaning, an example and its debit/credit rule.
(a) Explain five events that may lead to the dissolution of a partnership.
(b) State how the proceeds from dissolution of partnership are applied.
(a) Any five, explained:
- Expiry of the fixed period, or completion of the venture, the partnership was formed for.
- Death of a partner.
- Bankruptcy or insolvency of a partner, or of the firm.
- Retirement or withdrawal of a partner (notice to dissolve a partnership at will).
- Mutual agreement of the partners to end the business.
- Insanity or permanent incapacity of a partner.
- The business becoming illegal.
- Court order, e.g. persistent quarrels or continuous losses.
- Conversion into a limited company or amalgamation with another firm.
(b) Order of applying the proceeds (Partnership Act):
1. Pay the expenses of dissolution (realisation expenses).
2. Pay outside creditors (debts and liabilities to non-partners).
3. Repay partners' loans/advances to the firm.
4. Repay partners' capital; any balance left is shared in the profit-sharing ratio.
Part (b) is about order: outsiders first, then partners' loans, then capital.
(a) State three uses of control account.
(b) List five items that are debited in the sales ledger control account.
(c) List four subsidiary books from which sales ledger control account is compiled.
(a) Any three:
- Checks the arithmetical accuracy of the sales/purchases ledger.
- Helps to locate errors to a particular ledger.
- Gives quick totals of debtors and creditors for interim accounts.
- Acts as internal check against fraud by ledger clerks.
- Helps to find missing figures (e.g. credit sales) in incomplete records.
(b) Any five debit items: opening debtors balance; credit sales; dishonoured cheques; interest charged on overdue accounts; refunds to customers; bad debts recovered; closing credit balances (carried down); bills receivable dishonoured.
(c) Any four: sales day book; sales returns (returns inwards) day book; cash book; journal proper; bills receivable book.
Remember the debit side of the sales ledger control account is everything that increases what debtors owe.
(a) (i) Explain reserves. (ii) List two classification of reserves.
(b) State three ways in which reserves are utilized.
(c) List four examples of reserves.
(a)(i) Reserves are amounts set aside out of profits (or arising from capital gains) and retained in the business, not to meet any known liability.
(ii) Capital reserves and revenue reserves.
(b) Any three: to issue bonus shares; to write off preliminary expenses or other fictitious assets; to write off goodwill or other intangible assets; to provide for premium on redemption of shares or debentures; to pay dividends (revenue reserves); to redeem shares or debentures; to equalise dividends.
(c) Any four: share premium; capital redemption reserve; revaluation reserve; general reserve; debenture/sinking fund reserve; profit and loss balance (retained profit); pre-incorporation profit.
Distinguish reserves (set aside from profit) from provisions (for known liabilities or losses).
Audu and Bala are partners sharing profits and losses equally. The following trial balance has been extracted from the books of the firm for the year ended 31st December, 2010.
Capital Account: Audu — Cr ₦370,000
Capital Account: Bala — Cr ₦730,000
Drawings: Audu — Dr ₦10,000
Drawings: Bala — Dr ₦120,000
Purchases — Dr ₦2,400,000
Sales — Cr ₦3,500,000
Creditors — Cr ₦510,000
Debtors — Dr ₦600,000
Provision for bad debts — Cr ₦10,000
Provision for depreciation on equipment — Cr ₦170,000
Plant and equipment — Dr ₦700,000
Cash in hand — Dr ₦10,800
Cash at bank — Dr ₦400,000
Stock — Dr ₦370,000
Insurance — Dr ₦8,300
Selling expenses — Dr ₦400,000
Administrative expenses — Dr ₦330,000
Bank interest received — Cr ₦59,100
Totals — Dr ₦5,349,100; Cr ₦5,349,100
Additional information:
(i) Interest on capital is 6% per annum.
(ii) Salaries: Audu ₦75,000 per annum, Bala ₦90,000 per annum.
(iii) Closing stock was ₦130,000.
(iv) Audu's Capital Account including a credit for ₦40,000 invested on 31st December, 2010.
(v) Provision for bad debts is to be increased by 1% of sales.
(vi) Depreciation on equipment is to be at 10% per annum on cost.
(vii) No separate Current Accounts are maintained by the partners.
You are required to prepare: (a) Trading, profit and loss accounts for the year ended 31st December, 2010; (b) Appropriation Account, and (c) Partners' Capital Accounts.
(a) Trading, Profit and Loss Account for the year ended 31/12/2010
Sales 3,500,000
Less cost of sales: opening stock 370,000 + purchases 2,400,000 = 2,770,000 − closing stock 130,000 = 2,640,000
Gross profit 860,000
Add bank interest received 59,100 = 919,100
Less expenses: insurance 8,300; selling 400,000; administrative 330,000; increase in provision for bad debts (1% × 3,500,000) 35,000; depreciation (10% × 700,000) 70,000 = 843,300
Net profit ₦75,800
(b) Appropriation Account
Net profit 75,800
Less salaries: Audu 75,000, Bala 90,000 = 165,000
Less interest on capital: Audu 6% × 330,000 (excluding the ₦40,000 put in on 31 Dec) = 19,800; Bala 6% × 730,000 = 43,800; total 63,600
Total appropriations 228,600 → residual loss (152,800)
Share of loss: Audu 76,400, Bala 76,400
(c) Capital Accounts (Dr | Cr)
Audu: Cr balance b/d 370,000, salary 75,000, interest 19,800 = 464,800; Dr drawings 10,000, share of loss 76,400, balance c/d 378,400
Bala: Cr balance b/d 730,000, salary 90,000, interest 43,800 = 863,800; Dr drawings 120,000, share of loss 76,400, balance c/d 667,400
Closing capitals: Audu ₦378,400; Bala ₦667,400
Watch the ₦40,000 Audu paid in on the last day: it earns no interest for the year.
Ade presents a trial balance which showed a difference of ₦388. This has been transferred to the debit side of a Suspense Account. Further investigations revealed the following:
(i) Purchase of office equipment for ₦850 was debited to office expenses account.
(ii) Sales day book was overcast by ₦1,200.
(iii) An invoice for ₦658 received from a supplier was entered correctly in the purchase day book, but was posted to the debit side of the supplier's account.
(iv) A credit note for ₦720 issued to a debtor was entered in the returns inwards book at ₦270 and was posted to the ledger accordingly.
(v) A debtor who owed a sum of ₦420 died without leaving anything behind. This amount was written off his account as bad debt but no other entry was made in the books.
(vi) Cash drawings amounting to ₦900 have not been recorded in the books.
(vii) A payment of ₦280 for electricity was entered correctly in the cash book but as ₦820 in the electricity account.
(viii) A motor vehicle was bought for ₦1,500 by cheque. This transaction was only recorded in the cash book.
(ix) Discounts received ₦876 have not been posted from the cash book to ledger.
You are required to show the: (a) Journal entries necessary to correct the errors; (b) Suspense Account.
(a) Journal (Dr | Cr, ₦)
(i) Dr Office Equipment 850; Cr Office Expenses 850 (error of principle)
(ii) Dr Sales 1,200; Cr Suspense 1,200 (sales overcast)
(iii) Dr Suspense 1,316; Cr Supplier (creditor) 1,316 (658 wrongly debited, must be credited: 2 × 658)
(iv) Dr Returns Inwards 450; Cr Debtor 450 (credit note understated by 720 − 270)
(v) Dr Bad Debts 420; Cr Suspense 420 (missing debit entry)
(vi) Dr Drawings 900; Cr Cash 900 (omission)
(vii) Dr Suspense 540; Cr Electricity 540 (820 − 280 over-debited)
(viii) Dr Motor Vehicle 1,500; Cr Suspense 1,500 (missing debit entry)
(ix) Dr Suspense 876; Cr Discounts Received 876 (credit side not posted)
Each entry with a short narration.
(b) Suspense Account
Dr: difference in trial balance 388; creditor 1,316; electricity 540; discounts received 876 = 3,120
Cr: sales 1,200; bad debts 420; motor vehicle 1,500 = 3,120
The account balances (closes) at ₦3,120.
Only errors that upset the trial balance go through the suspense account; (i), (iv) and (vi) do not.
The receipts and payments of Show Boy Club for the year ended 31st December, 2010 are as follows:
Opening balance 1/1/10: D289,860
Proceeds from dance: D216,900
Transfer to bank deposit: D720,000
Rates: D60,000
Entrance fees received: D30,000
Wages paid: D433,800
Subscriptions received: D1,800,000
Equipment bought: D240,000
Repairs: D97,032
General expenses: D293,376
Stationery: D58,740
Interest received on bank deposit: D72,000
Donations received: D25,200
Additional information:
(i) Accrued wages at 31/12/10 - D28,800.
(ii) Rates prepaid amounted to D12,000.
(iii) General expenses included D18,000 owed since the previous year.
(iv) Out of the subscriptions received, D48,000 was in arrears for the previous year while D120,000 was paid in advance for the coming year. In addition, D72,000 was still owing as at 31st December, 2010.
(v) Assets of the club at 1st January, 2010 were: Club house D5,760,000; Equipment D3,600,000; Bank deposit D2,400,000.
(vi) Depreciation: Club house 5%; Equipment 10%.
You are required to prepare: (a) Statement of Affairs as at 1st January, 2010; (b) Receipts and Payments Account for the year ended 31st December, 2010; (c) Subscriptions Account; (d) Income and Expenditure Account for the year ended 31st December 2010.
(a) Statement of Affairs at 1/1/2010
Assets: club house 5,760,000; equipment 3,600,000; subscriptions in arrears 48,000; bank deposit 2,400,000; cash 289,860 = 12,097,860
Less liability: general expenses accrued 18,000
Accumulated fund D12,079,860
(b) Receipts and Payments Account
Receipts: balance b/d 289,860; dance 216,900; entrance fees 30,000; subscriptions 1,800,000; interest 72,000; donations 25,200 = 2,433,960
Payments: rates 60,000; wages 433,800; equipment 240,000; repairs 97,032; general expenses 293,376; stationery 58,740; transfer to bank deposit 720,000 = 1,902,948
Balance c/d D531,012
(c) Subscriptions Account
Dr: arrears b/d 48,000; income and expenditure 1,704,000; advance c/d 120,000 = 1,872,000
Cr: cash received 1,800,000; owing c/d 72,000 = 1,872,000
(Subscriptions for 2010 = 1,800,000 − 48,000 − 120,000 + 72,000 = 1,704,000)
(d) Income and Expenditure Account for 2010
Income: dance 216,900; entrance fees 30,000; interest 72,000; donations 25,200; subscriptions 1,704,000 = 2,048,100
Expenditure: rates (60,000 − 12,000) 48,000; wages (433,800 + 28,800) 462,600; depreciation club house (5% × 5,760,000) 288,000; depreciation equipment (10% × (3,600,000 + 240,000)) 384,000; repairs 97,032; general expenses (293,376 − 18,000) 275,376; stationery 58,740 = 1,613,748
Excess of income over expenditure D434,352
The transfer to bank deposit is not an expense; it only moves money from cash to the deposit account.
Magoro Enterprises has its head-office in Kano and operates a branch at Ibadan. All purchases are made by the head-office and invoiced to the branch at cost plus 20 per cent. All branch transactions are recorded in the books at head-office from where branch expenses are also paid. All cash received by the branch is sent to the head-office. Branch sales are strictly on cash basis.
On 1st January 2009, the stock of goods held by the branch amounted to ₦21,600 at invoice price. On the same date, the balance of the Branch Stock Adjustment Account was ₦3,600.
During the year ended 31st December, 2009, the following transactions took place at the branch:
Goods received from head-office at invoice price: ₦194,760
Goods returned to head-office at invoice price: ₦3,852
Sales: ₦200,556
Expenses: ₦24,162
On 31st December, 2009, the stock of goods at the branch at invoice price amounted to ₦11,952.
You are required to prepare: (a) Branch Stock Account; (b) Branch Stock Adjustment Account; (c) Branch Profit and Loss Account.
Loading = 20/120 = 1/6 of invoice price.
(a) Branch Stock Account (invoice price)
Dr: balance b/d 21,600; goods sent to branch 194,760 = 216,360
Cr: returns to head office 3,852; cash sales 200,556; balance c/d 11,952 = 216,360
(b) Branch Stock Adjustment Account
Cr: balance b/d 3,600; loading on goods sent (194,760 ÷ 6) 32,460 = 36,060
Dr: loading on returns (3,852 ÷ 6) 642; loading on closing stock c/d (11,952 ÷ 6) 1,992; gross profit to branch P&L 33,426 = 36,060
(c) Branch Profit and Loss Account
Gross profit 33,426 − expenses 24,162 = net profit ₦9,264 transferred to general profit and loss
Check: cost of sales = 200,556 ÷ 1.2 = 167,130; 200,556 − 167,130 = 33,426
Mark-up of 20% on cost means the loading is one-sixth of the invoice price.
For the year ended 31st December, 2010. The Central Government approved Le 100,000,000 to six Local Government Areas in the country.
The allocation was distributed on the following basis: 60% on equal basis. 40% on population.
Local Government — Population
Oruko — 2,000,000
Aha — 4,000,000
Suna — 2,000,000
Din — 2,000,000
Sika — 2,000,000
Tiri — 4,000,000
The following additional information relates to Suna Local Government:
(i) Revenue Generated: Renewal of licenses Le 175,000; Tenement rates Le 150,000; Fines Le 125,000; Park collections Le 150,000
(ii) Expenses Incurred: Stationery Le 450,000; Maintenance of vehicles Le 1,750,000; Salaries of traditional chiefs Le 1,080,000; Rehabilitation of roads Le 7,195,000; Rural electrification Le 2,125,000
(iii) Cash balance 1/1/10: Le 175,000
You are required to prepare: (a) A Statement showing the allocation made to each Local Government; and (b) Receipts and Payments Account of Suna Local Government for the year ended 31st December, 2010.
(a) Equal share: 60% × 100,000,000 = 60,000,000 ÷ 6 = 10,000,000 each
Population share: 40% × 100,000,000 = 40,000,000 ÷ 16,000,000 people = Le 2.50 per person
Oruko: 10,000,000 + 5,000,000 = Le 15,000,000
Aha: 10,000,000 + 10,000,000 = Le 20,000,000
Suna: 10,000,000 + 5,000,000 = Le 15,000,000
Din: 10,000,000 + 5,000,000 = Le 15,000,000
Sika: 10,000,000 + 5,000,000 = Le 15,000,000
Tiri: 10,000,000 + 10,000,000 = Le 20,000,000
Total Le 100,000,000
(b) Suna LG Receipts and Payments Account
Receipts: balance b/d 175,000; licences 175,000; tenement rates 150,000; fines 125,000; park collections 150,000; allocation from Central Government 15,000,000 = 15,775,000
Payments: stationery 450,000; vehicle maintenance 1,750,000; salaries of traditional chiefs 1,080,000; roads 7,195,000; rural electrification 2,125,000 = 12,600,000
Balance c/d Le 3,175,000
Work out the population share per head first, then multiply by each council's population.