57 questions. Try each one, then open the answer to check yourself and read the explanation.
One of the internal users of accounting information is the
Answer: B (management.)
Management works inside the business; the others are outside users.
A crane hired by a building construction company would be classified as
Answer: B (a direct manufacturing cost.)
Hire of special plant used directly on the construction job is a direct expense, part of direct (prime) cost.
A business should not lay claim to any profit before it is earned. This is in accordance with the
Answer: B (prudence concept.)
Prudence: profits are not anticipated, but losses are provided for.
Use the following information to answer questions 4 and 5.
Trade creditors (31/12/2020): $4,000
Paid for purchases in 2021: Cheques $110,000
Carriage inwards: $1,000
Trade creditors (31/12/2021): $6,000
The total purchases in 2021 is
Answer: C ($113,000.)
Credit purchases = 110,000 + 6,000 − 4,000 = 112,000; adding carriage inwards of 1,000 gives $113,000.
Use the following information to answer questions 4 and 5.
Trade creditors (31/12/2020): $4,000
Paid for purchases in 2021: Cheques $110,000
Carriage inwards: $1,000
Trade creditors (31/12/2021): $6,000
The balance c/d on trade creditors will be recorded in the balance sheet as
Answer: D (short-term liability.)
Trade creditors are paid within the year, so they are a short-term (current) liability.
The accounting concept which is the basis upon which assets of a business are valued is the
Answer: C (historical cost concept.)
Assets are recorded at what they cost: the historical cost concept.
Use the following information to answer questions 7 to 9.
The following transactions relate to Osei Enterprises for the year ended 31st December, 2020:
Purchases: D 160,000
Returns outwards: D 880
Carriage inwards: D 740
Returns inwards: D 620
Sales: D 195,000
Salaries: D 27,600
Closing stock: D 14,100
The cost of goods available for sale is
Answer: A (D 159,860.)
No opening stock: 160,000 − 880 + 740 = D 159,860.
Use the following information to answer questions 7 to 9.
The following transactions relate to Osei Enterprises for the year ended 31st December, 2020:
Purchases: D 160,000
Returns outwards: D 880
Carriage inwards: D 740
Returns inwards: D 620
Sales: D 195,000
Salaries: D 27,600
Closing stock: D 14,100
The gross profit is
Answer: C (D 48,620.)
Net sales 194,380 − cost of sales (159,860 − 14,100 = 145,760) = D 48,620.
Use the following information to answer questions 7 to 9.
The following transactions relate to Osei Enterprises for the year ended 31st December, 2020:
Purchases: D 160,000
Returns outwards: D 880
Carriage inwards: D 740
Returns inwards: D 620
Sales: D 195,000
Salaries: D 27,600
Closing stock: D 14,100
The net profit is
Answer: C (D 21,020.)
48,620 − salaries 27,600 = D 21,020.
The concept which underlies double entry bookkeeping is
Answer: B (duality concept.)
Every transaction has two aspects, a debit and a credit: duality.
Which of the following items is a tangible asset?
Answer: C (Machinery)
Machinery can be touched; goodwill, leases and copyrights are intangible.
Discount allowed is shown in financial statements as
Answer: A (an expense.)
Discount allowed is a cost of collecting debts quickly, an expense in profit and loss.
The reason for treating carriage inwards in the trading account is because
Answer: D (it is an expense on goods purchased.)
Carriage inwards is part of the cost of bringing purchases in, so it adds to cost of sales.
Wages of machine operators in manufacturing account are treated as
Answer: B (direct labour.)
Machine operators work directly on the product: direct labour.
Use the following information to answer questions 15 and 16.
Sammy acquired plant and machinery costing ₦12,000 with an estimated useful life of 4 years and residual value of ₦2,000. The sum of the years digits method is used.
The depreciation to be charged for the third year will be
Answer: C (₦2,000.)
Depreciable amount 10,000; digits 4+3+2+1 = 10; year 3 uses 2/10, so 10,000 × 2/10 = ₦2,000.
Use the following information to answer questions 15 and 16.
Sammy acquired plant and machinery costing ₦12,000 with an estimated useful life of 4 years and residual value of ₦2,000. The sum of the years digits method is used.
The value of the asset at the end of the first year is
Answer: A (₦8,000.)
First-year charge = 10,000 × 4/10 = 4,000; 12,000 − 4,000 = ₦8,000.
The allocation of funds from treasury to accounting heads in public sector is
Answer: B (vote.)
The amount approved for each head or sub-head of expenditure is called a vote.
The source of funds available to a local government/district assembly includes
Answer: A (common fund allocation.)
Local governments receive statutory allocations from the common fund; excise duties and foreign loans belong to central government.
Carriage inwards on raw materials is recorded in the
Answer: A (manufacturing account.)
It is part of the cost of raw materials, so it goes in the manufacturing account.
Use the following information to answer questions 20 and 21.
The health department of Banjul Local Government incurred the following expenditure in 2020:
Construction of hospital wards: Le 200,000
Purchase of hospital beds: Le 20,000
Purchase of stationeries: Le 15,000
Salaries and wages: Le 60,000
Purchase of drugs: Le 50,000
Purchase of x-ray machine: Le 100,000
The capital expenditure for the year is
Answer: C (Le 320,000.)
Wards 200,000 + beds 20,000 + x-ray machine 100,000 = Le 320,000.
Use the following information to answer questions 20 and 21.
The health department of Banjul Local Government incurred the following expenditure in 2020:
Construction of hospital wards: Le 200,000
Purchase of hospital beds: Le 20,000
Purchase of stationeries: Le 15,000
Salaries and wages: Le 60,000
Purchase of drugs: Le 50,000
Purchase of x-ray machine: Le 100,000
The recurrent expenditure for the year is
Answer: D (Le 125,000.)
Stationeries 15,000 + salaries 60,000 + drugs 50,000 = Le 125,000.
Reliability as a quality of accounting information means that accounting
Answer: D (information is prepared based on evidence.)
Reliable information is backed by evidence and free from bias.
The error that affects the agreement of a trial balance totals is
Answer: D (casting error.)
A casting (addition) error in one account makes the debit and credit totals differ.
Profit distributed to ordinary shareholders of a limited liability company is
Answer: C (dividend.)
Profit paid out to shareholders is a dividend.
The purchases day book is used to record
Answer: B (credit purchases.)
Only credit purchases of goods go in the purchases day book.
In the final account of a limited liability company, debenture interest paid is recorded in the
Answer: B (profit and loss account.)
Debenture interest is an expense charged to profit and loss.
Memorandum branch account is prepared to determine
Answer: B (gross profit.)
The memorandum branch trading account shows the branch's gross profit.
Use the following information to answer questions 29 and 30.
Tauras Ltd. was incorporated with the legal right to issue five million ordinary shares. The company has issued three million of the shares at GH¢0.60 per share. To date, the company has made calls of GH¢0.40 per share. All calls have been paid by shareholders except for GH¢100,000 owing from one shareholder.
The paid-up share capital is
Answer: D (GH¢1,100,000.)
Called up = 3,000,000 × 0.40 = 1,200,000; less calls in arrears 100,000 = GH¢1,100,000.
Use the following information to answer questions 29 and 30.
Tauras Ltd. was incorporated with the legal right to issue five million ordinary shares. The company has issued three million of the shares at GH¢0.60 per share. To date, the company has made calls of GH¢0.40 per share. All calls have been paid by shareholders except for GH¢100,000 owing from one shareholder.
The authorized number of shares is
Answer: B (5,000,000.)
The company may legally issue five million shares.
The accounts maintained in the nominal ledger are
Answer: B (expenses and income.)
Nominal accounts are for income and expenses.
Which of the following items are apportioned on the basis of purchases in preparing departmental accounts?
Answer: C (Carriage inwards.)
Carriage inwards relates to goods bought, so it follows purchases.
The two column cash book records
Answer: C (all receipts and payments both in cash and by cheque.)
The two-column (cash and bank) book records both cash and cheque transactions.
Use the following information to answer questions 34 and 35.
The transactions of All Girls' Social Club for the year 2021 are as follows:
Bar Sales D 30,000; Bar purchases D 17,000 and Rent D 1,200
31st December: 2020 / 2021
Stock at bar: D 1,400 / D 1,600
Owing for bar supplies: D 6,500 / D 7,300
The value of purchases for the year is
Answer: A (D 17,800.)
17,000 paid + 7,300 owing at end − 6,500 owing at start = D 17,800.
Use the following information to answer questions 34 and 35.
The transactions of All Girls' Social Club for the year 2021 are as follows:
Bar Sales D 30,000; Bar purchases D 17,000 and Rent D 1,200
31st December: 2020 / 2021
Stock at bar: D 1,400 / D 1,600
Owing for bar supplies: D 6,500 / D 7,300
The net profit on the bar to be transferred to the income and expenditure account for the year ended 31st December 2021 is
Answer: D (D 11,200.)
Cost of bar sales = 1,400 + 17,800 − 1,600 = 17,600; gross profit 12,400; less rent 1,200 = D 11,200.
Which of the following rules is applicable in the absence of a partnership agreement? Interest is payable
Answer: C (on any contribution in excess of agreed capital at 5% per annum.)
Without an agreement, only advances beyond agreed capital earn 5% interest.
A reason a business is not able to keep full set of accounting records is that
Answer: D (double entry is expensive to maintain.)
Small traders often avoid double entry because it costs money and skill to keep.
Beauty started business with ₦40,000, made a profit of ₦50,000 and ended the year with ₦70,000 capital. What would have accounted for the closing capital?
Answer: B (Drawings of ₦20,000 was made)
40,000 + 50,000 = 90,000; the capital is only 70,000, so ₦20,000 was withdrawn as drawings.
If sales is D 12,000 and the gross profit mark-up percentage is 25%. What is the cost of sales?
Answer: A (D 9,600)
Sales = 125% of cost, so cost = 12,000 ÷ 1.25 = D 9,600.
The accumulated fund for a not-for-profit making organization is
Answer: C (assets − liabilities.)
Like capital, the accumulated fund equals assets minus liabilities.
Use the following information to answer questions 41 to 43.
The following transactions were recorded in the cash book of Ibusah for the month of February 2019:
Balance b/f: D 200,000
Commission received: D 180,000
Receipts from Ojah: D 98,300
Electricity bill: D 40,000
Rent: D 73,400
Drawings: D 28,600
Insurance: D 12,800
The total income for the month is
Answer: B (D 278,300.)
New receipts: commission 180,000 + receipts from Ojah 98,300 = D 278,300 (the opening balance is not income).
Use the following information to answer questions 41 to 43.
The following transactions were recorded in the cash book of Ibusah for the month of February 2019:
Balance b/f: D 200,000
Commission received: D 180,000
Receipts from Ojah: D 98,300
Electricity bill: D 40,000
Rent: D 73,400
Drawings: D 28,600
Insurance: D 12,800
The balance brought down at the end of the month is
Answer: B (D 323,500.)
200,000 + 278,300 − payments (40,000 + 73,400 + 28,600 + 12,800 = 154,800) = D 323,500.
Which of the following items is classified as capital expenditure in public sector accounting?
Answer: B (Construction works' cost)
Construction works create long-lasting assets, so they are capital expenditure.
Use the following information to answer questions 45 and 46.
Capital (01/01/2020): Le 1,934,600
Capital (31/12/2020): Le 2,530,000
Expenses: Le 345,900
Drawings for 2020: Le 72,500
Additional capital for 2020: Le 250,000
The gross profit for the year is
Answer: A (Le 763,800.)
Net profit = 2,530,000 − 1,934,600 + 72,500 − 250,000 = 417,900; gross profit = net profit + expenses 345,900 = Le 763,800.
Use the following information to answer questions 45 and 46.
Capital (01/01/2020): Le 1,934,600
Capital (31/12/2020): Le 2,530,000
Expenses: Le 345,900
Drawings for 2020: Le 72,500
Additional capital for 2020: Le 250,000
The net profit for 2020 is
Answer: C (Le 417,900.)
Closing capital − opening capital + drawings − additional capital = 2,530,000 − 1,934,600 + 72,500 − 250,000 = Le 417,900.
A partnership is formed by
Answer: B (two or more individuals.)
A partnership is two or more persons in business together.
Use the following information to answer questions 48 and 49.
Ant and Bee withdrew GH¢14,000 and GH¢10,000 respectively at 8% per annum from the partnership.
The interest on drawings for Ant is
Answer: B (GH¢1,120.)
8% × 14,000 = GH¢1,120.
Use the following information to answer questions 48 and 49.
Ant and Bee withdrew GH¢14,000 and GH¢10,000 respectively at 8% per annum from the partnership.
The total interest on drawings to be charged to profit and loss appropriation account is
Answer: A (GH¢1,920.)
1,120 + 8% × 10,000 (800) = GH¢1,920.
Which of the following is found in the profit and loss account of a company?
Answer: C (Directors' remuneration)
Directors' remuneration is an expense charged before net profit; dividends and reserve transfers are appropriations of that profit.
(a) What are incomplete records?
(b) Outline three limitations of keeping incomplete records.
(c) State three reasons a business keeps incomplete records.
(a) Incomplete records (single entry): a system where the business does not keep a full set of double-entry records – usually only a cash book and some personal accounts.
(b) Any three: no trial balance to check arithmetical accuracy; errors and fraud are hard to detect; true profit or loss cannot be found exactly; financial position cannot be shown accurately; not acceptable for tax or bank loans; poor information for decisions and cost control.
(c) Any three: small size of the business; owner lacks accounting knowledge; cannot afford qualified accountants; double entry is costly and time-consuming; no legal requirement to keep full records; records lost or destroyed (fire, theft); desire to hide information (e.g. to avoid tax).
Define, then give three weaknesses and three reasons.
Identify the errors in the following transactions and state if they would affect the agreement of the trial balance totals:
(a) Purchase of consumables posted to purchases account:
(b) An invoice amount incorrectly posted to purchases day book.
(c) Returns outwards posted to the personal account only;
(d) The total sales of ₦120,000 was recorded as ₦102,000;
(e) Payment of cheque to Ige entered on the receipt side of the cash book and credited to Ige's account.
(a) Error of principle – does not affect the trial balance.
(b) Error of original entry – does not affect the trial balance.
(c) Error of single entry (partial omission) – affects the trial balance.
(d) Undercasting (casting error) of the sales total – affects the trial balance.
(e) Error of complete reversal of entries – does not affect the trial balance.
Name each error, then say whether debits still equal credits.
List five users of accounting information and state their respective interest in the accounting information.
Any five, each with its interest:
- Owners/shareholders: profitability, safety of investment, dividends.
- Management: planning, control and decision making; progress against targets.
- Banks/lenders: ability to repay loans and interest (creditworthiness).
- Suppliers/creditors: ability to pay debts on time.
- Customers: continuity of supply and credit terms.
- Employees/trade unions: job security, ability to pay wages, basis for bargaining.
- Government/tax authorities: tax assessment and regulation.
- Potential investors: whether to invest.
- Competitors/analysts/public: performance comparison and research.
One user and one clear interest per line.
(a) Explain accounting ratio giving one example of liquidity ratio.
(b) State three uses of accounting ratios.
(c) Outline three limitations to the use of accounting ratios.
(a) An accounting ratio is a figure expressing the relationship between two related items in the financial statements (e.g. current assets to current liabilities), used to assess performance and position. Example of a liquidity ratio: current ratio (current assets ÷ current liabilities) or acid test (quick) ratio.
(b) Any three: measure profitability; assess liquidity/ability to pay debts; assess efficiency of management (stock and debtors turnover); compare performance over years or with other firms; aid forecasting and planning; help lenders and investors decide.
(c) Any three: based on past figures; affected by inflation; different accounting policies hinder comparison; ignore non-money factors; can be window-dressed; no universally ideal ratio; differences in size and industry.
Define, give one liquidity ratio, then three uses and three limits.
The following is the trial balance of Abete Trading Company as at 31st December, 2020: (Dr / Cr, Le)
Provision for depreciation of fixed assets / 9,260
Stock at 1st January, 2020 3,600
Purchases and sales 100,000 / 174,000
General expenses 17,000
Fixed assets 42,600
Returns 2,400 / 4,800
Discounts 400 / 2,000
Salaries and wages 21,000
Suspense account 3,060
Totals 190,060 / 190,060
Additional information: (i) Stock in hand on 31st December, 2020 was Le 4,000. (ii) Investigation revealed the following errors which necessitated the opening of suspense account:
- Drawings of Le 1,000 was posted to salaries and wages account;
- Furniture bought at Le 1,560 was wrongly debited to fixed asset at Le 300;
- Purchases day book was undercast by Le 2,000;
- Discount allowed of Le 200 to a customer had not been posted to the customer's account.
(iii) Depreciation of fixed assets is 10% per annum.
You are required to:
(a) Correct the errors through journal entries (no narration is required);
(b) Prepare Trading, Profit and Loss Account for the year ended 31st December, 2020.
(a) Journal (Le): Dr Drawings 1,000, Cr Salaries and wages 1,000.
Dr Fixed assets (furniture) 1,260, Cr Suspense 1,260.
Dr Purchases 2,000, Cr Suspense 2,000.
Dr Suspense 200, Cr Debtors (customer) 200.
(Suspense: 3,060 + 200 − 1,260 − 2,000 = nil.)
(b) Trading, Profit and Loss Account (Le): Sales 174,000 − returns inwards 2,400 = 171,600. Opening stock 3,600 + purchases (100,000 + 2,000 = 102,000 − returns outwards 4,800 = 97,200) = 100,800 − closing stock 4,000 = cost of sales 96,800. Gross profit 74,800; add discount received 2,000 = 76,800.
Expenses: salaries and wages (21,000 − 1,000) 20,000; discount allowed 400; general expenses 17,000; depreciation 10% × (42,600 + 1,260 = 43,860) 4,386 = 41,786.
Net profit Le 35,014.
Correct the errors first, then use the corrected purchases, salaries and fixed assets figures.
The following were extracted from the books of Edum Republic for the year ended 31/12/2021.
Receipts from oil and gas: $522,500,000
Import duties: $250,000,000
Export duties: $180,500,000
Receipts from agriculture: $60,000,000
Permit and licence fees: $92,000,000
Personal and other income taxes: $230,500,000
Miscellaneous income: $100,500,000
Additional information: The country is structured into six (6) Regions/States A, B, C, D, E, F. The population of each of the Regions/States are: A: 400,000; B: 350,000; C: 250,000; D: 100,000; E: 300,000; F: 200,000.
Revenue is shared 30% to the Federal/Central government, 10% to education trust fund and 60% to be shared by the Regions/States on the basis of population.
You are required to compute:
(a) The total revenue for the country for year 2021;
(b) Revenue for the Federal/Central Government for year 2021;
(c) Revenue for the Regions/States collectively and individually for year 2021.
(a) Total revenue = 522,500,000 + 250,000,000 + 180,500,000 + 60,000,000 + 92,000,000 + 230,500,000 + 100,500,000 = $1,436,000,000.
(b) Federal/Central Government: 30% × 1,436,000,000 = $430,800,000 (education trust fund, 10% = $143,600,000, is also held at the centre; together 574,400,000).
(c) Regions/States collectively: 60% × 1,436,000,000 = $861,600,000. Total population 1,600,000.
Individually (population ÷ 1,600,000 × 861,600,000): A 400,000 → $215,400,000; B 350,000 → $188,475,000; C 250,000 → $134,625,000; D 100,000 → $53,850,000; E 300,000 → $161,550,000; F 200,000 → $107,700,000 (total $861,600,000).
Add all revenue, take the percentages, then share the 60% by population.
Taiwo, Kehinde and Alaba has been in partnership sharing profits and losses in the ratio 3:5:2 respectively. Their balance sheet as at 31st October, 2020 on which they decided to dissolve the partnership was as follows:
Taiwo, Kehinde and Alaba Balance Sheet as at 31st October, 2020 (₦)
Capital Accounts: Taiwo 5,512,500; Kehinde 9,712,500; Alaba 4,987,500 = 20,212,500
Current Accounts: Taiwo 551,250; Kehinde 656,250; Alaba 918,750 = 2,126,250
Total 22,338,750
Represented by: Fixed Assets (Cost / Accumulated Depreciation / Net Book Value):
Buildings 11,287,500 / 3,780,000 / 7,507,500
Motor Vehicles 15,750,000 / 6,300,000 / 9,450,000
Furniture 5,250,000 / 1,575,000 / 3,675,000
Totals 32,287,500 / 11,656,000 / 20,632,500
Current Assets: Stock 3,150,000; Debtors 3,150,000 = 6,300,000
Current liabilities: Trade creditors 2,490,000; Bank Overdrafts 2,103,750 = (4,593,750)
Working capital 1,706,250; Total 22,338,750
Dissolution conditions were as follows:
(i) Debtors paid ₦1,895,250 in full settlement of their debts. (ii) Trade discounts received was 3% and the dissolution expenses was agreed to be ₦656,250; (iii) Taiwo took over a motor vehicle with a book value of ₦2,835,000 for ₦2,625,000. The remaining motor vehicles were sold for ₦7,408,800; (iv) Other assets realized: Buildings ₦11,812,500; Furniture ₦4,200,000; Stock ₦2,625,000 (total ₦18,637,500).
You are required to prepare the firm's:
(a) Realization Account;
(b) Partners' Capital Accounts in columnar form.
(a) Realization Account (₦): Dr Buildings 7,507,500; Motor vehicles 9,450,000; Furniture 3,675,000; Stock 3,150,000; Debtors 3,150,000; Bank – dissolution expenses 656,250; Profit on realization 3,052,500 (Taiwo 3/10 915,750; Kehinde 5/10 1,526,250; Alaba 2/10 610,500) = 30,641,250.
Cr Bank – buildings 11,812,500; motor vehicles 7,408,800; furniture 4,200,000; stock 2,625,000; debtors 1,895,250; Taiwo's capital (motor vehicle) 2,625,000; Creditors – discount received (3% × 2,490,000) 74,700 = 30,641,250.
(b) Partners' Capital Accounts (₦) – Taiwo | Kehinde | Alaba:
Cr Balance b/d 5,512,500 | 9,712,500 | 4,987,500; Current accounts 551,250 | 656,250 | 918,750; Realization profit 915,750 | 1,526,250 | 610,500 = 6,979,500 | 11,895,000 | 6,516,750
Dr Realization (motor vehicle taken) 2,625,000 | – | –; Bank (final settlement) 4,354,500 | 11,895,000 | 6,516,750.
(Bank check: receipts 27,941,550 = overdraft 2,103,750 + creditors 2,415,300 + expenses 656,250 + partners 22,766,250.)
The 3% discount on creditors is a realization gain; Taiwo's vehicle is credited to realization at the agreed price.
Easyway Limited produces disposable products for the health sector. Information available for the year ended 31st December, 2021 is as follows:
Sales: GH¢342,000
Raw materials purchased: GH¢140,500
Direct labour: GH¢70,300
Depreciation of plant and machinery: GH¢24,400
Delivery expenses: GH¢10,000
Discounts allowed: GH¢5,000
Direct expenses: GH¢10,000
Rent: GH¢12,000
Electricity: GH¢13,000
Depreciation of vehicles: GH¢5,600
Stocks (01/01/2021 / 31/12/2021): Raw materials GH¢60,400 / GH¢52,600; Work-in-progress GH¢45,000 / GH¢40,200; Finished goods GH¢39,200 / GH¢20,900
Additional information: Apportion rent, electricity and depreciation of vehicles to factory and office in the ratio 3:2 respectively.
You are required to prepare Manufacturing, Trading, Profit and Loss Account for the year ended 31st December, 2021.
Manufacturing (GH¢): raw materials 60,400 + 140,500 − 52,600 = 148,300; direct labour 70,300; direct expenses 10,000; Prime cost 228,600.
Factory overheads: depreciation of plant 24,400; rent (3/5) 7,200; electricity (3/5) 7,800; depreciation of vehicles (3/5) 3,360 = 42,760; total 271,360; add opening WIP 45,000, less closing WIP 40,200; Production cost 276,160.
Trading: sales 342,000; finished goods 39,200 + 276,160 − 20,900 = cost of sales 294,460; Gross profit 47,540.
Profit and loss: delivery 10,000; discounts allowed 5,000; rent (2/5) 4,800; electricity (2/5) 5,200; depreciation of vehicles (2/5) 2,240 = 27,240; Net profit GH¢20,300.
Split rent, electricity and vehicle depreciation 3:2 before building the accounts.
On 1st June, 2021, Iroko Plc issued 300,000 ordinary shares of D 10 at par payable as follows: D 6 on Application; D 3 on Allotment; D 1 on First and Final call.
450,000 applications were received with application monies. The directors decided to: (i) reject 50,000 applications and return the monies received. (ii) issue the shares to the remaining applicants on the basis of three (3) shares for every four (4) shares applied; (iii) credit the excess application monies to allotment.
All the calls were made and monies received accordingly.
You are required to prepare the following Ledger Accounts:
(a) Share Application Account;
(b) Allotment Account;
(c) First and Final Call Account;
(d) Bank Account;
(e) Ordinary Share Capital Account.
Application money received 450,000 × 6 = 2,700,000; refund 50,000 × 6 = 300,000; 400,000 applicants get 300,000 shares; money needed on application 300,000 × 6 = 1,800,000; excess 600,000 to allotment.
(a) Share Application Account (D): Dr Bank (refund) 300,000; Allotment 600,000; Ordinary share capital 1,800,000 = 2,700,000 | Cr Bank 2,700,000.
(b) Allotment Account: Dr Ordinary share capital (300,000 × 3) 900,000 | Cr Application 600,000; Bank 300,000.
(c) First and Final Call Account: Dr Ordinary share capital 300,000 | Cr Bank 300,000.
(d) Bank Account: Dr Application 2,700,000; Allotment 300,000; First and final call 300,000 = 3,300,000 | Cr Application (refund) 300,000; Balance c/d 3,000,000.
(e) Ordinary Share Capital Account: Cr Application 1,800,000; Allotment 900,000; First and final call 300,000 = 3,000,000 | Dr Balance c/d 3,000,000.
Work out refund and the excess carried to allotment first; share capital ends at 300,000 × D10 = D3,000,000.