55 questions. Try each one, then open the answer to check yourself and read the explanation.
When bank charges are discovered in a bank statement, the adjustment is effected in the
Answer: B (cash book.)
Bank charges are a real cost the business did not know about, so the cash book is updated.
The double entry for interest on drawings by a partner is: debit
Answer: A (Partner's Current Account; credit Appropriation Account.)
Interest on drawings is charged to the partner (debit current account) and added to profit for sharing (credit appropriation).
Use the following information to answer questions 5 and 6.
Provision for doubtful debts: Le 1,000 Cr
Bad debts: Le 500 Dr
Debtors: Le 50,000 Dr
Additional bad debts to be written off: Le 500
New provision for doubtful debts to stand at 5% of debtors
The net figure for debtors in the balance sheet is
Answer: A (Le 47,025.)
Debtors after bad debts = 49,500; provision 5% = 2,475; net 49,500 − 2,475 = Le 47,025.
An office equipment bought for use was found to be defective and returned to the supplier. The subsidiary book to record this transaction is
Answer: D (general journal.)
Returns outwards journal is only for goods bought for resale; returning a fixed asset goes in the general journal.
In a situation of incomplete records, profit is determined as
Answer: C (closing capital + drawings − opening capital.)
Profit = closing capital + drawings − opening capital (less any new capital).
The document which serves as the authority to incur expenditure in public sector is
Answer: A (warrant.)
A warrant authorises the release and spending of approved funds.
A total of D 9,160 was entered in the sales account as D 9,610. To correct this error: debit
Answer: C (Sales Account D 450; credit Suspense Account D 450)
Sales were over-credited by 450, so debit Sales 450; the other side goes to suspense.
Use the following information to answer questions 12 to 14.
Ata, Bubu and Chikum were in partnership sharing profits and losses in proportion to their capital contributions: (Capital / Drawings)
Ata: ₦40,000 / ₦8,000
Bubu: ₦30,000 / ₦5,000
Chikum: ₦20,000
Net profit for the year was N 40,500 and the interest on capital was 5% per annum.
The profit available for sharing by the partners is
Answer: C (₦36,000.)
Interest on capital = 5% × 90,000 = 4,500; 40,500 − 4,500 = ₦36,000.
Use the following information to answer questions 12 to 14.
Ata, Bubu and Chikum were in partnership sharing profits and losses in proportion to their capital contributions: (Capital / Drawings)
Ata: ₦40,000 / ₦8,000
Bubu: ₦30,000 / ₦5,000
Chikum: ₦20,000
Net profit for the year was N 40,500 and the interest on capital was 5% per annum.
The balance in Chikum's Current Account is
Answer: B (₦9,000.)
Interest 1,000 + profit share (20/90 × 36,000 = 8,000) with no drawings = ₦9,000.
Use the following information to answer questions 12 to 14.
Ata, Bubu and Chikum were in partnership sharing profits and losses in proportion to their capital contributions: (Capital / Drawings)
Ata: ₦40,000 / ₦8,000
Bubu: ₦30,000 / ₦5,000
Chikum: ₦20,000
Net profit for the year was N 40,500 and the interest on capital was 5% per annum.
Bubu's share of profit is
Answer: B (₦12,000.)
30/90 × 36,000 = ₦12,000.
Recognition of profit when goods are sold and the buyer takes ownership of them is in line with
Answer: A (realization concept.)
Revenue is realised when ownership passes to the buyer.
The purpose of preparing trading account is to ascertain
Answer: B (gross profit.)
The trading account shows gross profit.
A trader adds 25% on cost as profit. The profit on sales of $300,000 would be
Answer: B ($60,000)
25% on cost = 20% of sales: 300,000 × 1/5 = $60,000.
The accounting concept which distinguishes an enterprise from its owners is
Answer: D (business entity concept.)
The business entity concept separates the business from its owners.
Eze introduces his private car into his business. The aspect of accounting equation of the business that would be affected are
Answer: A (Assets and Capital.)
The car increases assets and the owner's capital.
Debtors and credit sales for a period are D 120,000 and D 600,000 respectively. The debtor's payment period would be
Answer: C (73 days.)
120,000 ÷ 600,000 × 365 = 73 days.
Use the following information to answer questions 21 to 23.
Receipts and Payments Accounts of Abaluare Youth Club for the year ended 31st December 2018 (₦)
Receipts: Balance b/f 650,000; Subscriptions 9,660,000; Annual dance tickets 1,500,000; Donations 800,000 = 12,610,000
Payments: Wages and salaries 2,400,000; Rent and rates 600,000; Anniversary dance expenses 955,000; Travelling expenses 140,000; Kitchen equipment 4,000,000; Balance c/d 4,515,000 = 12,610,000
Subscriptions for 2017 and 2019 received during the year were ₦180,000 and ₦150,000 respectively.
Subscriptions credited to Income and Expenditure Account for 2018 was
Answer: D (₦9,330,000.)
9,660,000 − 180,000 (for 2017) − 150,000 (for 2019) = ₦9,330,000.
Use the following information to answer questions 21 to 23.
Receipts and Payments Accounts of Abaluare Youth Club for the year ended 31st December 2018 (₦)
Receipts: Balance b/f 650,000; Subscriptions 9,660,000; Annual dance tickets 1,500,000; Donations 800,000 = 12,610,000
Payments: Wages and salaries 2,400,000; Rent and rates 600,000; Anniversary dance expenses 955,000; Travelling expenses 140,000; Kitchen equipment 4,000,000; Balance c/d 4,515,000 = 12,610,000
Subscriptions for 2017 and 2019 received during the year were ₦180,000 and ₦150,000 respectively.
Total expenses debited to Income and Expenditure Account for 2018 was
Answer: D (₦4,095,000.)
Revenue payments only: 2,400,000 + 600,000 + 955,000 + 140,000 = ₦4,095,000; kitchen equipment is capital.
Use the following information to answer questions 21 to 23.
Receipts and Payments Accounts of Abaluare Youth Club for the year ended 31st December 2018 (₦)
Receipts: Balance b/f 650,000; Subscriptions 9,660,000; Annual dance tickets 1,500,000; Donations 800,000 = 12,610,000
Payments: Wages and salaries 2,400,000; Rent and rates 600,000; Anniversary dance expenses 955,000; Travelling expenses 140,000; Kitchen equipment 4,000,000; Balance c/d 4,515,000 = 12,610,000
Subscriptions for 2017 and 2019 received during the year were ₦180,000 and ₦150,000 respectively.
The surplus for the year 2018 was
Answer: B (₦7,535,000.)
Income 9,330,000 + 1,500,000 + 800,000 = 11,630,000 − expenses 4,095,000 = ₦7,535,000.
A non-cash expense chargeable against profit and loss account is
Answer: C (provision for doubtful debts.)
A provision is a book entry with no cash paid.
The cost incurred on goods purchased for production which can be traced to a particular unit is classified as
Answer: C (direct materials.)
Goods bought and used in making a product, traceable to each unit, are direct materials.
Use the following information to answer questions 26 and 27.
A manufacturing company's cost of production was D 200,000. The finished goods were transferred to the warehouse at D 220,000. At the end of the year, 9% of these goods were still in stock.
The value of closing stock of finished goods in the trading account is
Answer: C (D 19,800.)
In the trading account the stock is at transfer value: 9% × 220,000 = D 19,800.
Use the following information to answer questions 26 and 27.
A manufacturing company's cost of production was D 200,000. The finished goods were transferred to the warehouse at D 220,000. At the end of the year, 9% of these goods were still in stock.
The value of closing stock of finished goods that would be shown in the balance sheet is
Answer: D (D 18,000.)
The balance sheet shows stock at cost (unrealised manufacturing profit removed): 9% × 200,000 = D 18,000.
Items shown in manufacturing account include I. Purchases of raw materials II. Purchases of finished goods III. Carriage inwards IV. Carriage outwards
Answer: B (I and III only.)
Raw material purchases and carriage inwards on them belong in manufacturing; finished goods purchases go to trading and carriage outwards to profit and loss.
Use the following information to answer questions 29 to 31.
Kwamenah bought goods worth Le 50,000 from Doe and Sons Limited on the following terms: 3% trade discount; 10% cash discount. Kwamenah returned defective goods worth Le 8,000 the next day and made payment for the remaining goods on the due date.
The cash paid by Kwamenah was
Answer: D (Le 36,660.)
Goods kept = 50,000 − 8,000 = 42,000; less 3% trade discount = 40,740; less 10% cash discount = about Le 36,666, i.e. option D.
Use the following information to answer questions 29 to 31.
Kwamenah bought goods worth Le 50,000 from Doe and Sons Limited on the following terms: 3% trade discount; 10% cash discount. Kwamenah returned defective goods worth Le 8,000 the next day and made payment for the remaining goods on the due date.
Kwamenah would record the 10% discount in the
Answer: B (cash book.)
Cash discount is recorded in the discount column of the cash book when payment is made.
Use the following information to answer questions 29 to 31.
Kwamenah bought goods worth Le 50,000 from Doe and Sons Limited on the following terms: 3% trade discount; 10% cash discount. Kwamenah returned defective goods worth Le 8,000 the next day and made payment for the remaining goods on the due date.
Doe and Son Limited would enter the 3% discount in the
Answer: A (sales journal.)
Trade discount is deducted on the invoice, so the seller's sales journal shows the sale net of it; it never goes through the cash book.
A partner who contributes capital but does not participate in the day-to-day running of the business is
Answer: D (a sleeping partner.)
A sleeping (dormant) partner provides capital but takes no part in management.
An example of real account is
Answer: C (Office Computer Account)
A real account records an asset, here the office computer.
The concept that guides a firm to adopt a regular method of recording transactions in it books over a period is
Answer: B (consistency concept.)
Consistency means using the same methods period after period.
A business extracted its trial balance and discovered that the total of credit side exceeded the total of the debit side. Pending further investigation, difference would be
Answer: B (debited to Suspense Account)
The short debit side is made up by debiting a suspense account.
Use the following information to answer questions 36 to 38.
Cash Book of Ogidigbi Enterprises (GH¢)
Dr: Balance b/f 127,000; Amount received from debtors 409,000 = 536,000
Cr: Salaries 142,000; Electricity 238,000; Stationery 126,000; Balance c/d 30,000 = 536,000
Other balances were as follows (01/01/2017 / 31/12/2017):
Salaries owing GH¢40,000 / GH¢55,000
Electricity prepaid GH¢58,000 / GH¢60,000
Stationery outstanding GH¢49,000 / GH¢36,000
The Salaries that would be charged to Profit and Loss Account for the year 2017 is
Answer: B (GH¢157,000.)
142,000 − 40,000 owing at start + 55,000 owing at end = GH¢157,000.
Use the following information to answer questions 36 to 38.
Cash Book of Ogidigbi Enterprises (GH¢)
Dr: Balance b/f 127,000; Amount received from debtors 409,000 = 536,000
Cr: Salaries 142,000; Electricity 238,000; Stationery 126,000; Balance c/d 30,000 = 536,000
Other balances were as follows (01/01/2017 / 31/12/2017):
Salaries owing GH¢40,000 / GH¢55,000
Electricity prepaid GH¢58,000 / GH¢60,000
Stationery outstanding GH¢49,000 / GH¢36,000
The Electricity that would be charged to Profit and Loss Account for the year 2017 is
Answer: D (GH¢236,000.)
238,000 + 58,000 prepaid at start − 60,000 prepaid at end = GH¢236,000.
Use the following information to answer questions 36 to 38.
Cash Book of Ogidigbi Enterprises (GH¢)
Dr: Balance b/f 127,000; Amount received from debtors 409,000 = 536,000
Cr: Salaries 142,000; Electricity 238,000; Stationery 126,000; Balance c/d 30,000 = 536,000
Other balances were as follows (01/01/2017 / 31/12/2017):
Salaries owing GH¢40,000 / GH¢55,000
Electricity prepaid GH¢58,000 / GH¢60,000
Stationery outstanding GH¢49,000 / GH¢36,000
The Stationery that would be shown in the Balance Sheet as at 31st December 2017 is
Answer: C (GH¢36,000.)
The stationery still outstanding at year end, GH¢36,000, is a current liability.
Accounting equation of a business shows the
Answer: C (assets and the sources of financing them.)
Assets = capital + liabilities: the assets and where the money for them came from.
The internal users of accounting information are the
Answer: B (employees.)
Employees work inside the business.
A computer set bought for ₦150,000 was disposed for ₦45,000 after some years of use. The profit on disposal was ₦7,500. Accumulated depreciation at the time of disposal was
Answer: A (₦112,500.)
Book value = 45,000 − 7,500 profit = 37,500; accumulated depreciation = 150,000 − 37,500 = ₦112,500.
Accumulated fund of a club is equivalent to its
Answer: A (net worth.)
Accumulated fund = assets − liabilities, the club's net worth.
Use the following information to answer questions 43 to 45.
Stock 01/01/2018: Sportswear GH¢11,400; Cosmetics GH¢28,500
Purchases: Sportswear GH¢80,000; Cosmetics GH¢120,000
Sales: Sportswear GH¢150,000; Cosmetics GH¢250,000
Wages paid: Sportswear GH¢7,600; Cosmetics GH¢6,500
Stock 31/12/2018: Sportswear GH¢15,200; Cosmetics GH¢27,600
The cost of sales for Sportswear Department was
Answer: D (GH¢76,200.)
11,400 + 80,000 − 15,200 = GH¢76,200.
Use the following information to answer questions 43 to 45.
Stock 01/01/2018: Sportswear GH¢11,400; Cosmetics GH¢28,500
Purchases: Sportswear GH¢80,000; Cosmetics GH¢120,000
Sales: Sportswear GH¢150,000; Cosmetics GH¢250,000
Wages paid: Sportswear GH¢7,600; Cosmetics GH¢6,500
Stock 31/12/2018: Sportswear GH¢15,200; Cosmetics GH¢27,600
The cost of sales for Cosmetics Department was
Answer: B (GH¢120,900.)
28,500 + 120,000 − 27,600 = GH¢120,900.
Use the following information to answer questions 43 to 45.
Stock 01/01/2018: Sportswear GH¢11,400; Cosmetics GH¢28,500
Purchases: Sportswear GH¢80,000; Cosmetics GH¢120,000
Sales: Sportswear GH¢150,000; Cosmetics GH¢250,000
Wages paid: Sportswear GH¢7,600; Cosmetics GH¢6,500
Stock 31/12/2018: Sportswear GH¢15,200; Cosmetics GH¢27,600
The gross profit for Sportswear Department was
Answer: B (GH¢73,800.)
Cost of sales = 11,400 + 80,000 − 15,200 = GH¢76,200. Gross profit = sales − cost of sales = 150,000 − 76,200 = GH¢73,800. Wages are a departmental expense charged in the profit and loss account.
Income received in advance is treated in the balance sheet as a
Answer: A (current liability.)
Income received for a future period is owed back in services, so it is a current liability.
Discount allowed ₦2,000; Bad debts ₦1,000; Cheque received from customers ₦24,000; Returns inwards ₦500; Sales ledger balance at the beginning ₦2,000. The amount of sales is
Answer: C (₦25,500.)
With no closing balance, sales = 2,000 + 1,000 + 24,000 + 500 − 2,000 opening = ₦25,500.
The document which contains the internal regulations of a limited liability company is the
Answer: C (Article of Association.)
The articles of association set out the internal rules.
The excess of net assets acquired over purchase consideration is
Answer: A (capital reserve.)
When less is paid than the net assets are worth, the gain is a capital reserve (negative goodwill).
A method of charging depreciation at a fixed percentage of the net book value is
Answer: B (reducing balance method.)
Reducing balance applies a fixed rate to the net book value each year.
(a) Outline two differences between bookkeeping and accounting.
(b) List one source document used for each of the following transactions: (i) sales; (ii) purchases; (iii) cash deposit; (iv) salary; (v) returns outwards.
(c) State three purposes of source documents.
(a) Any two: bookkeeping is the recording of transactions; accounting also classifies, summarises, interprets and communicates them. Bookkeeping is routine clerical work; accounting needs professional judgement. Bookkeeping records feed into accounting, which prepares financial statements for decisions.
(b) (i) Sales: sales invoice (or cash receipt/sales docket). (ii) Purchases: purchase invoice. (iii) Cash deposit: bank paying-in (deposit) slip. (iv) Salary: payroll/pay slip or payment voucher. (v) Returns outwards: debit note (or credit note received).
(c) Any three: evidence that a transaction took place; source of entries in the books of original entry; basis for checking and audit; reference for settling disputes; help prevent fraud; support for tax records.
Contrast recording with the wider accounting process, then name the matching documents.
(a) What is a not-for-profit making organization?
(b) Outline two differences between a for-profit organization and a not-for-profit making organization.
(c) Explain the following sources of funding in a not-for-profit making organization: (a) subscription; (b) life membership fee; (c) entrance fee; (d) donation.
(a) An organisation set up to provide services or welfare to its members or society, not to make profit, e.g. clubs, societies, churches.
(b) Any two: aim – profit vs service/welfare; result – profit/loss vs surplus/deficit; capital – owner's capital vs accumulated fund; statements – trading, profit and loss vs receipts and payments and income and expenditure; owners – proprietors/shareholders share profit vs members do not share surplus.
(c) Subscription: the regular (usually annual) fee paid by members.
Life membership fee: a lump sum paid once for membership for life, usually spread over several years.
Entrance fee: a one-time fee paid by a new member on joining.
Donation: a voluntary gift of money or goods from members or outsiders.
Define, contrast with a business, then explain each income source.
(a) Explain the term fixed capital account.
(b) State three conditions that would result to a change in profit and loss sharing ratio of a partnership.
(c) Outline three circumstances that would give rise to the creation of goodwill in a partnership.
(a) Fixed capital account: each partner's capital account stays at the agreed amount; profit shares, interest, salaries and drawings go to a separate current account.
(b) Any three: admission of a new partner; retirement of a partner; death of a partner; change in partners' capital contributions; change in partners' duties or agreement.
(c) Any three: admission of a new partner; retirement or death of a partner; change in profit-sharing ratio; sale of the business or amalgamation; conversion to a company.
Define fixed capital, then list events that change the ratio and that call for goodwill.
(a) List: (i) three books of accounts used in public sector accounting; (ii) four users of public sector accounting information.
(b) State four differences between the private sector accounting and the public sector accounting.
(a)(i) Any three: cash book; vote book (vote expenditure book); departmental vote book; treasury cash book; revenue collectors' books; ledgers (personal advances, deposits); payment and receipt vouchers.
(ii) Any four: legislature/parliament; government (executive) and ministries; the public/taxpayers; auditor-general; donor agencies and lenders; investors and researchers; civil servants and unions.
(b) Any four: aim – profit vs service to the public; source of funds – capital and sales vs taxes, grants and loans; basis – accruals vs mainly cash; regulation – Companies Act vs constitution and financial regulations; owners – shareholders vs the public; budget is binding in the public sector; no profit and loss account / no dividends in the public sector.
List the books and users, then contrast aim, funding, basis and regulation.
The following transactions were extracted from the books of Odis Enterprises for the year ended 31st December 2018: (i) cash received from trade debtors GH¢100,000; (ii) cash paid to suppliers GH¢72,000; (iii) expenses paid during the year were: rent GH¢2,500, general expenses GH¢1,800; (iv) a cash of GH¢5,200 was withdrawn by the proprietor for personal use; (v) fixed assets valued at GH¢8,000 on 31st December 2017 were to be depreciated at 10% per annum.
Additional information (31st December 2017 / 31st December 2018, GH¢):
Trade debtors 11,000 / 13,200
Trade creditors 4,000 / 6,500
Rent owing -- / 500
Cash 12,100 / 30,600
Stock 15,900 / 17,000
You are required to prepare:
(a) Statement of Affairs as at 1st January 2018;
(b) Cash Book;
(c) Trading, Profit and Loss Account for the year ended 31st December 2018.
(a) Statement of Affairs at 1/1/2018 (GH¢): fixed assets 8,000; stock 15,900; debtors 11,000; cash 12,100 = 47,000; less creditors 4,000; capital 43,000.
(b) Cash Book: Dr balance b/d 12,100; debtors 100,000 = 112,100 | Cr suppliers 72,000; rent 2,500; general expenses 1,800; drawings 5,200; balance c/d 30,600 = 112,100.
(c) Sales = 100,000 + 13,200 − 11,000 = 102,200. Purchases = 72,000 + 6,500 − 4,000 = 74,500.
Trading: sales 102,200; opening stock 15,900 + purchases 74,500 − closing stock 17,000 = cost of sales 73,400; gross profit 28,800.
Profit and loss: rent (2,500 + 500 owing) 3,000; general expenses 1,800; depreciation (10% × 8,000) 800 = 5,600. Net profit GH¢23,200.
Work out opening capital, then credit sales and purchases from the debtors and creditors movements.
The books of Omiye Social Club showed the following information for the year ended 31st December 2015
RECEIPTS AND PAYMENTS ACCOUNT (₦)
Receipts: Balance 01/01/2015 3,000; Subscriptions 130,000; Proceeds from concert 9,000; Interest on deposit 2,400; Income from dance 7,200 = 151,600
Payments: Salaries 10,600; Maintenance 13,000; Stationery 1,200; Postage 600; Dance expenses 4,000; General expenses 5,400; Balance c/d 116,800 = 151,600
Balances as at 1st January 2015 were as follows: Accumulated fund ₦266,000; Bank deposit ₦80,000; Club house ₦160,000; Furniture and fittings ₦24,000
Additional information: (i) Outstanding as at 31st December 2015: stationery ₦400; general expenses ₦1,200. (ii) Salaries of ₦10,600 paid including ₦1,000 owed since 2014. (iii) Depreciate club house by 10% and furniture and fittings by 15%.
You are required to prepare: (a) Income and Expenditure Account for the year ended 31st December 2015; (b) Balance Sheet as at that date.
(a) Income and Expenditure Account (₦): Income – subscriptions 130,000; concert 9,000; interest on deposit 2,400; dance (7,200 − 4,000) 3,200 = 144,600.
Expenditure – salaries (10,600 − 1,000) 9,600; maintenance 13,000; stationery (1,200 + 400) 1,600; postage 600; general expenses (5,400 + 1,200) 6,600; depreciation – club house (10% × 160,000) 16,000, furniture (15% × 24,000) 3,600 = 51,000.
Surplus ₦93,600.
(b) Balance Sheet at 31 December 2015: Fixed assets – club house 160,000 − 16,000 = 144,000; furniture 24,000 − 3,600 = 20,400. Current assets – bank deposit 80,000; cash 116,800. Total assets 361,200. Less accruals (stationery 400 + general expenses 1,200) 1,600. Net 359,600.
Accumulated fund 266,000 + surplus 93,600 = 359,600.
Last year's salary arrears (1,000) are not this year's expense; the opening accumulated fund already allows for it.
The following balances were extracted from the books of Abobaku Local Government for the year ended 31st December 2019 (D):
Construction of an office block 3,850,000
Renovation of classroom blocks 1,065,000
Court fines 90,000
Building permits 650,000
Rehabilitation of street lights 470,500
Wages and salaries 7,880,450
Medical services 1,334,650
Provision of pipe borne water 2,500,000
Interest on investments 250,000
Lorry park levies 380,000
Market tolls 560,000
Property rates 1,200,000
General administration 630,700
Motor vehicle procured 6,653,000
Extension of office building 950,000
Grants from donor agencies 2,000,000
Royalties 4,500,000
Subvention from Central/Federal Government 20,000,000
Donations to charity homes 250,000
Entertainment permits 70,000
Staff training 550,000
Entertainment expenses 200,000
Marriage registration fees 80,000
Allowances to community leaders 370,800
Birth certificate fees 160,000
Maintenance of motor vehicles 650,000
You are required to prepare for the year ended 31st December 2019: (a) Statement of Recurrent Expenditure; (b) Statement of Capital Expenditure; (c) Statement of Revenue.
(a) Recurrent expenditure (D): wages and salaries 7,880,450; medical services 1,334,650; general administration 630,700; donations to charity homes 250,000; staff training 550,000; entertainment expenses 200,000; allowances to community leaders 370,800; maintenance of motor vehicles 650,000; rehabilitation of street lights 470,500 (repair of existing assets). Total 12,337,100.
(b) Capital expenditure: construction of office block 3,850,000; renovation of classroom blocks 1,065,000; provision of pipe-borne water 2,500,000; motor vehicle procured 6,653,000; extension of office building 950,000. Total 15,018,000.
(c) Revenue: court fines 90,000; building permits 650,000; interest on investments 250,000; lorry park levies 380,000; market tolls 560,000; property rates 1,200,000; grants from donor agencies 2,000,000; royalties 4,500,000; subvention 20,000,000; entertainment permits 70,000; marriage registration fees 80,000; birth certificate fees 160,000. Total 29,940,000.
Sort each line into running costs, lasting assets or income before adding.
Yallawa Stores Ltd has two departments. The following balances were extracted from its books as at 31st December 2017. (Le)
Purchases: Department A 720,000; Department B 520,000
Rent and rates 50,000
Commission 55,000
Insurance 5,000
Sales: Department A 1,500,000; Department B 1,250,000
Discount received 124,000
Advertising 20,000
Salaries and wages 250,000
Depreciation 35,000
Administration and general expenses 50,000
Opening stock: Department A 150,000; Department B 100,000
Closing stock: Department A 175,000; Department B 142,000
Additional information: Expenses are to be apportioned to the departments as follows: (i) commission - on the basis of sales; (ii) salaries and wages - 3:2 for Department A and B respectively; (iii) discount received - 10% of purchases; (iv) other expenses are to be apportioned equally.
You are required to prepare a Departmental Trading, Profit and Loss Account for the year ended 31st December 2017.
Trading (Le) – A | B: sales 1,500,000 | 1,250,000; opening stock 150,000 | 100,000 + purchases 720,000 | 520,000 − closing stock 175,000 | 142,000 = cost of sales 695,000 | 478,000; gross profit 805,000 | 772,000.
Add discount received (10% of purchases) 72,000 | 52,000 = 877,000 | 824,000.
Expenses – A | B: commission (sales 6:5) 30,000 | 25,000; salaries and wages (3:2) 150,000 | 100,000; rent and rates 25,000 | 25,000; insurance 2,500 | 2,500; advertising 10,000 | 10,000; depreciation 17,500 | 17,500; administration and general 25,000 | 25,000 = 260,000 | 205,000.
Net profit: A Le 617,000; B Le 619,000 (total 1,236,000).
Apportion first: commission 6:5, salaries 3:2, discount 10% of each department's purchases, the rest equally.
The following information was extracted from the books of Okere Manufacturing Company for the year ended 31st December 2016. ($)
Stock (01/01/16): raw materials 61,450; finished goods 84,650; work-in-progress 3,140
Wages 14,150
Carriage inwards of raw materials 650
Purchases of raw materials 42,360
Royalties 1,040
Plant and machinery ($50,000) 40,000
Factory expenses 11,430
Factory power 6,050
Rent 2,400
Insurance 3,000
Discount allowed 1,430
Carriage outwards 610
Sales 292,400
Salesmen salaries 41,200
Office stationery 4,300
Additional information: (i) Closing stock as at 31/12/16: raw materials $30,420; finished goods $7,200; work-in-progress $1,680 (ii) Rent paid in advance $550 (iii) Insurance outstanding $600 (iv) Office stationery accrued $700 (v) Depreciation on plant and machinery at 10% per annum on cost.
You are required to prepare a Manufacturing, Trading, Profit and Loss Account for the year ended 31st December 2016.
Manufacturing ($): raw materials 61,450 + purchases 42,360 + carriage inwards 650 − closing 30,420 = 74,040; wages 14,150; royalties 1,040; Prime cost 89,230. Factory overheads: factory expenses 11,430; factory power 6,050; depreciation of plant (10% × 50,000) 5,000 = 22,480; total 111,710; add opening WIP 3,140, less closing WIP 1,680; Cost of production 113,170.
Trading: sales 292,400; finished goods 84,650 + 113,170 − 7,200 = cost of sales 190,620; gross profit 101,780.
Profit and loss: rent (2,400 − 550) 1,850; insurance (3,000 + 600) 3,600; discount allowed 1,430; carriage outwards 610; salesmen salaries 41,200; office stationery (4,300 + 700) 5,000 = 53,690. Net profit $48,090.
Depreciate on cost ($50,000), not book value; rent and insurance are treated as office costs here.