57 questions. Try each one, then open the answer to check yourself and read the explanation.
The source document used to make entries in the purchases day book is
Answer: C (invoice.)
Credit purchases are entered in the purchases day book from the invoices received from suppliers.
A book that contains individual accounts of suppliers is the
Answer: A (purchases ledger.)
Suppliers (creditors) have their personal accounts in the purchases (bought) ledger; customers are in the sales ledger.
In the operation of an imprest system of petty cash, the
Answer: C (petty cashier regularly begins each period with the same amount of money.)
Under the imprest system the petty cashier is topped up at the end of each period by the amount spent, so every period starts with the same fixed float.
An example of a credit entry in a profit and loss account is
Answer: D (discounts received.)
Discounts received are a gain, so they are credited to the profit and loss account. Carriage and discounts allowed are expenses (debits).
Which of the following subsidiary books involves cash movement?
Answer: D (Petty cash book)
The petty cash book records actual cash paid out. The day books and returns book record credit transactions with no cash.
The accounting treatment for a dishonoured cheque is; debit
Answer: A (Customer's Account; credit Bank Account.)
When a customer's cheque bounces, the money leaves the bank (credit Bank) and the customer owes the amount again (debit Customer).
Net turnover is referred to as
Answer: C (sales.)
Turnover means sales; net turnover is sales less returns inwards.
Which of the following transactions will result in disagreement between the cash book and the bank statement?
Answer: C (Cheque paid directly into the bank account by a customer)
A customer paying straight into the bank appears on the bank statement before the business records it in the cash book. The other items do not involve the bank at all.
Purchases Account is overcast by ₦200, while Wages Account is undercast by ₦200. This is
Answer: B (a compensating error.)
The ₦200 too much on one debit account is cancelled by ₦200 too little on another, so the two errors compensate and the trial balance still agrees.
Which of the following is used to record the disposal of a fixed asset?
Answer: A (Journal Proper)
Unusual transactions such as buying or selling fixed assets are first recorded in the journal proper.
Use the following information to answer questions 11 and 12.
Cost of motor vehicle – 1/1/12: ₦85,000
Residual value: ₦5,000
Estimated useful lifespan 10 years
The business makes use of the straight line method for providing depreciation.
The annual depreciation is
Answer: C (₦8,000.)
Straight line: (cost − residual value) ÷ life = (85,000 − 5,000) ÷ 10 = ₦8,000 a year.
Use the following information to answer questions 11 and 12.
Cost of motor vehicle – 1/1/12: ₦85,000
Residual value: ₦5,000
Estimated useful lifespan 10 years
The business makes use of the straight line method for providing depreciation.
The accumulated depreciation as at 31/12/2013 is
Answer: C (₦16,000.)
From 1/1/12 to 31/12/13 is two years: 2 × 8,000 = ₦16,000.
An error of principle is made, if
Answer: A (an entry has been made in the wrong class of account.)
An error of principle puts an item in the wrong type of account, e.g. treating a fixed asset as an expense.
Which of the following is entered in the general journal?
Answer: D (Acquisition of fixed assets.)
Goods bought and sold and returns have their own day books; acquisition of fixed assets is recorded in the general journal.
The cost of carriage outward is classified as
Answer: A (a selling and distribution expense.)
Carriage outwards is the cost of delivering goods to customers, so it is a selling and distribution expense.
The purchase of ten ceiling fans by Akpan Electronic Enterprises will be recorded as
Answer: D (an acquisition of stock.)
Akpan deals in electronics, so ceiling fans are goods bought for resale: they are stock (purchases), not fixed assets.
Which of the following accounts would appear in the nominal ledger?
I. Sanison's account (a debtor)
II. Motor vehicle account
III. Sales account
IV. Rent and rates account
Answer: D (III and IV only)
Nominal accounts are those of incomes and expenses, such as sales and rent and rates. A debtor's account is personal and motor vehicle is a real account.
The sum of direct cost in a manufacturing account is
Answer: B (prime cost.)
Direct materials + direct labour + direct expenses = prime cost.
Net profit in a business is
Answer: D (sales revenue less cost of sales expenses.)
Net profit is what remains after cost of sales and all other expenses are taken from sales revenue. Sales less cost of sales alone is gross profit.
An example of a self balancing account is the
Answer: C (control account.)
Control (total) accounts make each ledger self-balancing, so they are called self-balancing accounts.
Use the following information to answer questions 21 and 22.
The total sales of a business was GH¢ 2,160,000. The average mark-up for the year was 50%.
The gross profit is
Answer: D (GH¢ 720,000.)
A 50% mark-up on cost means sales are 150% of cost, so gross profit is 50/150 = ⅓ of sales: 2,160,000 ÷ 3 = GH¢720,000.
Use the following information to answer questions 21 and 22.
The total sales of a business was GH¢ 2,160,000. The average mark-up for the year was 50%.
The cost of sales is
Answer: B (GH¢ 1,440,000.)
Cost of sales = sales ÷ 1.5 = 2,160,000 ÷ 1.5 = GH¢1,440,000 (or sales − gross profit = 2,160,000 − 720,000).
Which of the following is not an administrative expenses in a manufacturing organization?
Answer: A (Discounts allowed)
Discounts allowed are a selling (finance) expense, not an administrative one.
When an asset is sold, the entries for the accumulated depreciation are: debit
Answer: B (Provision for Depreciation Account; credit Asset Disposal Account.)
The provision for depreciation (a credit balance) is closed by debiting it and crediting the asset disposal account.
A petty cash account has an imprest of D28,000. The account has a debit balance of D5,000. How much cash is needed to restore the imprest?
Answer: C (D23,000)
Cash needed = imprest − cash in hand = 28,000 − 5,000 = D23,000.
In a not-for-profit making organization, when the total income is less than the total expenditure, the difference is a
Answer: D (deficit.)
In an income and expenditure account, an excess of expenditure over income is called a deficit.
The accounting concept underlying the treatment of personal expenses of the business owner as drawing is
Answer: C (entity.)
Because the business is separate from its owner (entity concept), the owner's personal expenses are not business expenses; they are drawings.
Which of the following items is not contained in the Receipts and Payments Account?
Answer: C (Outstanding wages and salaries)
A receipts and payments account shows only cash actually received or paid. Outstanding wages have not been paid, so they are left out.
The concept that states that a business should not lay claim to any profits before it is earned with reasonable certainty is
Answer: B (prudence concept.)
Prudence (conservatism) says profits should not be anticipated; they are recognised only when reasonably certain, while losses are provided for.
When shares are issued above their nominal value, the excess above the nominal value is
Answer: D (credited to Share Premium Account.)
The extra amount received above nominal value is a share premium, credited to the Share Premium Account (a capital reserve).
Shares issued below nominal value are referred to as shares at
Answer: B (discount.)
Issuing shares for less than their nominal value is issuing them at a discount.
Use the following information to answer questions 32 to 34.
Capital: Aye Le 20,000; Bee Le 30,000
Drawings: Aye Le 8,000; Bee Le 2,000
Profit for the year: Le 10,000
Interest on capital – 6%
Interest on drawings – 10%
Profit sharing is in the ratio of capital.
The divisible profit is
Answer: D (Le 8,000.)
Interest on capital = 6% × 50,000 = 3,000 (deducted). Interest on drawings = 10% × 10,000 = 1,000 (added). Divisible profit = 10,000 − 3,000 + 1,000 = Le 8,000.
Use the following information to answer questions 32 to 34.
Capital: Aye Le 20,000; Bee Le 30,000
Drawings: Aye Le 8,000; Bee Le 2,000
Profit for the year: Le 10,000
Interest on capital – 6%
Interest on drawings – 10%
Profit sharing is in the ratio of capital.
Aye's share of profit is
Answer: D (Le 3,200.)
Capital ratio 20,000 : 30,000 = 2 : 3. Aye gets 2/5 × 8,000 = Le 3,200.
Use the following information to answer questions 32 to 34.
Capital: Aye Le 20,000; Bee Le 30,000
Drawings: Aye Le 8,000; Bee Le 2,000
Profit for the year: Le 10,000
Interest on capital – 6%
Interest on drawings – 10%
Profit sharing is in the ratio of capital.
Bee's share of profit is
Answer: C (Le 4,800.)
Bee gets 3/5 × 8,000 = Le 4,800.
The accounting ratio used to measure the average number of days for which suppliers remain unpaid is
Answer: B (creditors' payment period.)
The creditors' payment period shows how many days, on average, the business takes to pay its suppliers.
When the purchase consideration exceeds the value of business, the difference is
Answer: C (goodwill.)
Paying more than the value of the net assets acquired gives goodwill.
An example of input device of a computer is
Answer: A (an optical character reader.)
An optical character reader reads printed characters into the computer, so it is an input device. Plotters, VDUs and printers are output devices.
The accounting concept which states that expenditure involving insignificant amounts should be regarded as expenses and not assets is
Answer: B (materiality.)
Under the materiality concept, small items (e.g. a stapler) are simply written off as expenses even if they last long.
A company made a net profit of ₦2,000,000 for the year and its net profit percentage is 25%. What is the total sales for the year?
Answer: A (₦8,000,000)
Net profit percentage = net profit ÷ sales × 100, so sales = 2,000,000 ÷ 0.25 = ₦8,000,000.
Which of the following information is recorded in the returns outwards book?
Answer: A (Goods purchased on credit and subsequently returned to supplier)
The returns outwards book records goods bought on credit for resale that are sent back to suppliers.
Use the following information to answer questions 42 and 43.
Branch stock account (at selling price): D346,000 – debit
Branch mark-up account: D62,000 – credit
Calculate the stock figure to be included in the balance sheet at the year end.
Answer: C (D284,000)
Stock must be shown at cost: selling price 346,000 − mark-up (unrealised profit) 62,000 = D284,000.
Use the following information to answer questions 42 and 43.
Branch stock account (at selling price): D346,000 – debit
Branch mark-up account: D62,000 – credit
The concept applied in answering questions 42 above is
Answer: C (prudence.)
Stock is reduced to cost by removing the unrealised mark-up, so profit is not taken before the goods are sold. That is the prudence concept.
Subscription in advance is classified in the balance sheet as
Answer: B (a liability.)
Subscriptions received for a future year are owed back to members as service, so they are a current liability.
Which of the following items is not treated in the Profit and Loss Account?
Answer: C (Carriage inwards)
Carriage inwards is added to the cost of purchases in the trading account, not the profit and loss account.
The document prepared by a local/district government to present its annual estimates for a planning period is
Answer: B (a budget.)
Annual estimates of revenue and expenditure for a coming period make up the budget.
A manufacturing account is drawn up by
Answer: C (firms which make and sell articles.)
Only businesses that make the goods they sell need a manufacturing account to find the cost of production.
Which of the following is not a factory overhead cost?
Answer: A (Manufacturing wages)
Manufacturing (direct) wages are part of prime cost. Rent, depreciation and the guard's salary are indirect factory overheads.
A collection of fields relating to one logically definable unit of business information is known as
Answer: D (record.)
Related fields about one item (e.g. one customer's name, address and balance) together form a record.
(a) What is a Cash Book?
(b) State seven benefits of keeping accounting records in a business.
(c) List five source documents used in preparing the cash book.
(a) The cash book is a book of original entry (and also a ledger account) in which all cash and bank receipts are debited and all cash and bank payments are credited.
(b) Any seven: shows profit or loss; shows the financial position (assets and liabilities); shows amounts owed by debtors and to creditors; helps management planning and decision making; provides evidence for tax assessment; helps to detect and prevent fraud; provides information for lenders and investors; allows comparison with past periods and other firms; serves as a permanent record for reference.
(c) Any five: receipts; cheque counterfoils (stubs); paying-in slips; payment vouchers; bank statements; cash sales slips; petty cash vouchers.
Source documents for the cash book are those that show money received or paid.
(a) Define and list two classification of each of the following: (i) assets; (ii) liabilities.
(b) State and explain the factors to be considered in determining the annual depreciation charge for a fixed asset.
(a)(i) Assets: resources owned or controlled by the business from which future benefits are expected.
Classification: fixed (non-current) assets, e.g. land, machinery; current assets, e.g. stock, debtors, cash. (Tangible/intangible also accepted.)
(ii) Liabilities: amounts the business owes to outsiders, to be settled in future.
Classification: long-term (non-current) liabilities, e.g. debentures, long-term loans; current liabilities, e.g. creditors, accrued expenses, bank overdraft.
(b) Factors:
- Cost of the asset: purchase price plus costs of getting it ready for use (carriage, installation, legal fees).
- Estimated useful life: number of years the business expects to use the asset.
- Estimated residual (scrap) value: what the asset is expected to fetch at the end of its life.
- Method of depreciation chosen (straight line, reducing balance etc.).
Annual straight-line charge = (cost − residual value) ÷ useful life ties the three main factors together.
Describe three features of each of the following financial statements:
(a) receipts and payments account; (b) income and expenditure account; (c) trading account; (d) profit and loss account; (e) appropriation account of a partnership.
(a) Receipts and payments account (any three): summary of the cash book of a non-profit organisation; records only actual cash/bank receipts and payments; includes both capital and revenue items; starts with an opening balance and ends with a closing cash balance (asset); no adjustment for accruals or prepayments.
(b) Income and expenditure account (any three): prepared by non-profit organisations; records only revenue income and expenditure of the period; adjusted for accruals, prepayments and depreciation; its balance is a surplus or deficit transferred to the accumulated fund.
(c) Trading account (any three): compares net sales with cost of goods sold; includes opening and closing stock, purchases, returns and carriage inwards; its balance is gross profit or gross loss; prepared by trading businesses.
(d) Profit and loss account (any three): starts with gross profit; adds other incomes (discounts received, rent received); deducts operating expenses (selling, administrative, financial); balance is net profit or net loss transferred to capital/appropriation; adjusted for accruals and prepayments.
(e) Partnership appropriation account (any three): begins with net profit (or loss) from the profit and loss account; adds interest on drawings; deducts interest on capital, partners' salaries and commission; shares the residual profit or loss in the profit-sharing ratio.
Give three distinct points for each statement; one line each is enough.
Classify the following:
(i) Purchase of land (ii) Purchase of motor vehicle (iii) Rent received (iv) Repairs to motor vehicle (v) Fuel cost for running the vehicle (vi) Sale of land previously bought (vii) Interest on loan to purchase land (viii) Wages of cleaner (ix) Payments for carriage inwards on machine bought (x) Installation cost of machine (xi) Cost of repairs to a factory building (xii) Cost of papers used in the accounts department (xiii) Proceeds from disposal of motor vehicle (xiv) Commission received from a transaction (xv) Legal fees paid in buying a land
into: (a) capital expenditure; (b) revenue expenditure; (c) capital receipts; (d) revenue receipts.
(a) Capital expenditure: (i) purchase of land; (ii) purchase of motor vehicle; (ix) carriage inwards on machine; (x) installation cost of machine; (xv) legal fees on buying land.
(b) Revenue expenditure: (iv) repairs to motor vehicle; (v) fuel; (vii) interest on loan; (viii) wages of cleaner; (xi) repairs to factory building; (xii) cost of papers.
(c) Capital receipts: (vi) sale of land; (xiii) proceeds from disposal of motor vehicle.
(d) Revenue receipts: (iii) rent received; (xiv) commission received.
Costs of buying an asset and getting it ready for use are capital; running and financing costs are revenue.
Alex Co. Limited is a manufacturing company. The following balances were extracted from its books on 30th September, 2012:
Stock – 30/10/2011: Raw materials Le 9,600; Work-in-progress Le 13,000; Finished goods Le 11,200
Sales: Le 190,000
Carriage on raw materials: Le 490
General expenses: Le 8,400
Selling expenses: Le 17,280
Discounts allowed: Le 480
Discounts received: Le 640
Carriage outwards: Le 760
Production wages: Le 42,000
Office salaries: Le 1,620
Purchase of raw materials: Le 56,000
Returns inwards: Le 3,000
Factory rent: Le 13,600
Office insurance: Le 9,600
Depreciation of plant and machinery: Le 1,640
Stock – 30/09/2012: Raw materials Le 11,800; Work-in-progress Le 13,040; Finished goods Le 14,400
Additional information: Goods manufactured during the year are to be transferred to the Trading Account at Le 130,000.
You are required to prepare the necessary accounts to show the following: (a) Cost of raw materials used; (b) Prime cost; (c) Cost of production; (d) Gross manufacturing profit; (e) Gross profit on sales; (f) Net profit.
Manufacturing Account for the year ended 30/9/2012
(a) Raw materials used: 9,600 + 56,000 + 490 − 11,800 = Le 54,290
(b) Prime cost: 54,290 + production wages 42,000 = Le 96,290
Factory overheads: rent 13,600 + depreciation 1,640 = 15,240 → 111,530
Add opening WIP 13,000, less closing WIP 13,040
(c) Cost of production Le 111,490
(d) Manufacturing profit: transfer value 130,000 − 111,490 = Le 18,510
Trading Account
Sales 190,000 − returns inwards 3,000 = 187,000
Cost of sales: 11,200 + 130,000 − 14,400 = 126,800
(e) Gross profit on sales Le 60,200
Profit and Loss Account
Gross profit 60,200 + manufacturing profit 18,510 + discounts received 640 = 79,350
Less: general expenses 8,400; selling expenses 17,280; discounts allowed 480; carriage outwards 760; office salaries 1,620; office insurance 9,600 = 38,140
(f) Net profit Le 41,210
Goods are transferred at Le 130,000, so the manufacturing account shows a profit as well as the trading account.
Johnson's cash book showed an overdrawn balance of ₦3,000 on 31st December, 2012 on his current account, while the balance as per the bank statement was an overdrawn balance of ₦800. Further investigation showed the following:
(i) Cheque drawn amounting to ₦5,000 had not been presented for payment.
(ii) Cheques amounting to ₦2,500 entered in the cash book as paid into the bank had not yet been cleared by the bank.
(iii) A cheque book costing ₦400 had been charged in the bank statement but not entered in the cash book.
(iv) A dividend of ₦400 paid direct to the bank had not been recorded in the cash book.
(v) A cheque for ₦1,200 drawn on his current account had been charged by the bank to his deposit account.
(vi) A cheque for ₦500 paid into the bank had been dishonoured and shown as such by the bank, but no entry had been made in the cash book.
(vii) The payment side of the cash book had been undercast by ₦700.
(viii) Bank charges of ₦300 entered in the bank statement had not been entered in the cash book.
You are required to prepare: (i) Adjusted Cash Book; (ii) Bank Reconciliation Statement.
(i) Adjusted Cash Book (bank column)
Dr: dividend received 400; balance c/d (overdraft) 4,500 = 4,900
Cr: balance b/d (overdraft) 3,000; cheque book 400; dishonoured cheque 500; undercast payments 700; bank charges 300 = 4,900
Corrected balance: overdraft ₦4,500 (credit b/d)
(ii) Bank Reconciliation Statement at 31/12/2012
Overdraft per adjusted cash book (4,500)
Add unpresented cheques 5,000 → 500
Less uncredited cheques (2,500) → (2,000)
Add bank error: cheque wrongly charged to deposit account 1,200 → (800)
Overdraft per bank statement ₦800 ✓
Items the bank knows but Johnson didn't go in the cash book; timing differences and bank errors go in the reconciliation.
The trial balance of Ewan as at December 2010, is as follows:
Share capital: Cr D100,000
Motor van (at cost): Dr D120,000
Provision for depreciation: Motor van 1/1/2010: Cr D44,000
Sales and purchases: Dr D389,814; Cr D538,266
Returns inwards and outwards: Dr D526; Cr D165
Rents and rates: Dr D7,500
Insurance: Dr D8,000
General expenses: Dr D9,000
Salaries and wages: Dr D59,628
Interest: Dr D5,000
Debtors and creditors: Dr D50,820; Cr D13,512
Bad debts: Dr D1,629
Provision for doubtful debts - 1/1/2010: Cr D2,053
Directors' salaries: Dr D28,000
Stock - 1/1/2010: Dr D85,716
Profit and Loss Account 1/1/2010: Cr D87,400
12% Debentures: Cr D50,000
Bank: Dr D69,763
Totals: Dr D835,396; Cr D835,396
Additional information: (i) Unpaid salaries and wages at 31st December, 2010 — D7,000. (ii) The provision for doubtful debts is to be made on debtors at 10%. (iii) Rents and rates owing at 31st December, 2010 — D4,000. (iv) Depreciation on motor van is to be charged at 20% per annum on cost. (v) Insurance paid in advance at 31st December 2010 — D2,800. (vi) Stock at 31st December, 2010 — D95,000. (vii) 10% dividend is proposed for 2010.
You are required to prepare: (a) Trading and Profit and Loss Account for the year ended 31st December, 2010. (b) Profit and Loss Appropriation Account for the year ended 31st December, 2010.
(a) Trading Account
Sales 538,266 − returns inwards 526 = 537,740
Cost of sales: opening stock 85,716 + purchases (389,814 − 165) 389,649 = 475,365 − closing stock 95,000 = 380,365
Gross profit D157,375
Profit and Loss Account: expenses
Insurance (8,000 − 2,800) 5,200; general expenses 9,000; salaries and wages (59,628 + 7,000) 66,628; debenture interest (12% × 50,000; 5,000 paid + 1,000 owing) 6,000; bad debts 1,629; increase in provision (10% × 50,820 = 5,082 − 2,053) 3,029; directors' salaries 28,000; rent and rates (7,500 + 4,000) 11,500; depreciation of van (20% × 120,000) 24,000
Total expenses 154,986
Net profit D2,389
(b) Appropriation Account
Net profit 2,389 + balance b/f 87,400 = 89,789
Less proposed dividend (10% × 100,000) 10,000
Retained profit c/f D79,789
The interest in the trial balance is debenture interest: a full year at 12% is D6,000, so D1,000 is still owing.
The trial balance of Asibi as at December 31, 2010 failed to agree. A Suspense Account was opened for the difference. Draft final accounts were prepared which showed a net profit of GH¢4,000 for the year to December 31, 2010. The following errors were subsequently discovered:
(i) The Purchases Day Book total of GH¢8,000 had been posted to the ledger as GH¢16,000.
(ii) The Sales Account had been undercast by GH¢12,000.
(iii) Discounts received of GH¢700 had been debited to discounts allowed account.
(iv) An accrued telephone charge of GH¢600 was omitted.
(v) Loose tools bought for GH¢400 had been debited to purchases account.
(vi) Purchase of stock for GH¢7,000 had not been posted to the ledger.
(vii) Bad debts of GH¢950 written off in the debtor's account had not been treated in the expense account.
(viii) Asibi had withdrawn goods to the value of GH¢300 for her personal use. No entries had been made in the books.
You are required to prepare a Statement showing the effect of the errors on the draft net profit and the corrected net profit for the year.
Statement of corrected net profit (GH¢)
Net profit per draft accounts 4,000
Add (errors that understated profit):
(i) purchases overstated (16,000 − 8,000) 8,000
(ii) sales undercast 12,000
(iii) discount received wrongly debited to discounts allowed (700 × 2) 1,400
(v) loose tools charged to purchases 400
(viii) goods withdrawn, purchases to be reduced 300
Total added 22,100 → 26,100
Less (errors that overstated profit):
(iv) accrued telephone omitted 600
(vi) purchases not posted 7,000
(vii) bad debts not charged 950
Total deducted 8,550
Corrected net profit GH¢17,550
Ask for each error: did it make expenses too high or income too low (add back), or the opposite (deduct)?
The following balances were extracted from the books of Duru Stores Limited on September 30, 2012:
Ordinary share capital: ₦150,000
6% Debentures: ₦45,000
Freehold premises (at cost): ₦127,500
Plant and machinery at cost: ₦105,900
Retained profits: ₦65,883
Provision for depreciation - plant and machinery: ₦38,100
Debtors: ₦31,664
Creditors: ₦34,730
Accrued rent: ₦2,440
Bank and cash balances: ₦22,890
Stock: ₦48,219
You are required to: (a) Prepare a Balance Sheet as at September 30, 2012. (b) Calculate the following: (i) Acid test ratio; (ii) Capital employed; (iii) Working capital; (iv) Current ratio.
(a) Balance Sheet as at 30/9/2012
Fixed assets: freehold premises 127,500; plant and machinery 105,900 − 38,100 = 67,800; total 195,300
Current assets: stock 48,219; debtors 31,664; bank and cash 22,890 = 102,773
Less current liabilities: creditors 34,730; accrued rent 2,440 = 37,170
Working capital 65,603
Net assets 260,903
Financed by: ordinary share capital 150,000; retained profits 65,883 = 215,883; 6% debentures 45,000 = 260,883
(The printed balances leave a difference of ₦20, shown as a suspense balance to make the two sides agree.)
(b)(i) Acid test ratio = (102,773 − 48,219) : 37,170 = 54,554 : 37,170 = 1.47 : 1
(ii) Capital employed = fixed assets + working capital = 195,300 + 65,603 = ₦260,903
(iii) Working capital = 102,773 − 37,170 = ₦65,603
(iv) Current ratio = 102,773 : 37,170 = 2.76 : 1
Acid test leaves out stock; current ratio includes it.