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Question 1 Report
To show the evidence of payment to a government ministry, the revenue collector issues a
Answer Details
Question 2 Report
Use the following information to answer question below
April 11:Sold goods for cash N50,000
April 20: Bought goods for cash N30,000
April 26: Bought postage stamp N5,000
April 28: Cash sales N49,000
April 29: Cash purchases N11,000
April 30: Paid salaries N18,000
Total cash receipts for the period is
Answer Details
The total cash receipts for the period can be calculated by adding up all the cash received during the period. From the information given, the following cash transactions took place: Cash sales on April 11 = N50,000 Cash sales on April 28 = N49,000 Therefore, the total cash receipts for the period is: N50,000 + N49,000 = N99,000 So the correct option is (A) N99,000.
Question 3 Report
The net book value of the machine as at 31st December 2017 was
Question 4 Report
Use the following information to answer the question below
A firm bought a lathe machine for Le 45,600 on 1s January 2015. The life span was estimated to be 20 years while scrap at the end of the period was valued at Le 1,600. It was to be depreciated by the fixed installment method.
The depreciation per annum is
Answer Details
The fixed installment method of depreciation assumes that the asset loses an equal amount of value each year over its useful life. To determine the depreciation per annum using this method, we subtract the salvage value (scrap value) from the original cost of the asset and then divide the result by the useful life in years. In this case, the original cost of the lathe machine is Le 45,600, and the salvage value is Le 1,600. The useful life of the machine is 20 years. Therefore, the annual depreciation is: Depreciation = (Original cost - Salvage value) / Useful life Depreciation = (45,600 - 1,600) / 20 Depreciation = 44,000 / 20 Depreciation = 2,200 Therefore, the depreciation per annum for the lathe machine is Le 2,200.
Question 6 Report
Use the following information to answer the question below
April 11: Sold goods for cash N50,000
April 20: Bought goods for cash N30,000
April 26: Bought postage stamp N5,000
April 28: Cash sales N49,000
April 29: Cash purchases N11,000
April 30: Paid salaries N18,000
The cash balance at the end of the period is
Answer Details
To determine the cash balance at the end of the period, we need to add up all the cash inflows and subtract all the cash outflows. Starting with the cash inflows: - Cash sales on April 11: N50,000 - Cash sales on April 28: N49,000 Total cash inflows: N99,000 Moving on to the cash outflows: - Bought goods for cash on April 20: N30,000 - Bought postage stamp for cash on April 26: N5,000 - Cash purchases on April 29: N11,000 - Paid salaries on April 30: N18,000 Total cash outflows: N64,000 To determine the cash balance, we subtract the total cash outflows from the total cash inflows: Cash balance = Total cash inflows - Total cash outflows Cash balance = N99,000 - N64,000 Cash balance = N35,000 Therefore, the cash balance at the end of the period is N35,000.
Question 7 Report
Subscription owing $ 6,000 (31/12/2014);
Subscription in advance $ 4,000 (31/12/2014);
Cash received as subscription during the year was $ 80,000.
The subscription for the year 2014 was?
Answer Details
Question 8 Report
Debtors Control Account is kept in the
Question 9 Report
Use the following information to answer questions the question below
01/01/17 31/12/17
Trade creditors 630,000 780,000
Stock 540,000 480,000
Trade creditors
Stock
Cash paid to trade creditors in 2017 was N2,700,000. 00
The cost of goods sold was?
Question 10 Report
ln a not-for-profit organization, the accumulated fund is
Question 11 Report
Use the following information to answer questions the question below
01/01/17 31/12/17
Trade creditors 630,000 780,000
Stock 540,000 480,000
Trade creditors
Stock
Cash paid to trade creditors in 2017 was N2,700,000. 00
What was the purchase for 2017
Question 12 Report
The concept that recognizes revenue at the time of sale and not only when cash is received is
Answer Details
Question 15 Report
Where there is provision for depreciation, fixed asset is shown in the balance sheet at
i. cost less depreciation for the period only.
ii. cost less total depreciation to date.
iii. written down values
Answer Details
Question 16 Report
Sulah took two textile materials worth N500 from his business for his children's use. This would be treated as
Answer Details
This would be treated as "drawings". Drawings refer to the goods or cash that the owner of a business takes out of the business for personal use. In this case, Sulah took two textile materials worth N500 from his business for his children's use. Since this was not a sale or a loan, but rather an extraction of goods for personal use, it would be considered as "drawings" from the business. It is important for business owners to keep track of their drawings as it affects the profitability and financial position of their business.
Question 17 Report
When bank charges are deducted from a customer's account, the balance on the bank statement would be
Answer Details
The balance on the bank statement would be less than the cash book balance if bank charges are deducted from the customer's account. The cash book balance is the record of all the money that has come into and gone out of a customer's account as recorded by the customer. However, the bank statement is a record of all transactions in a customer's account as recorded by the bank. When the bank deducts charges such as service fees or overdraft fees, these charges are not recorded in the customer's cash book, but they are recorded in the bank's records and will appear on the bank statement. This means that the balance on the bank statement will be lower than the balance recorded in the customer's cash book.
Question 19 Report
The directors of Olu Ltd. recommended a dividend of 10% on 1,000,000 ordinary share capital of N2.00 each. The amount of dividend declared is
Answer Details
The amount of dividend declared is N200,000. To calculate this, you first need to find out the total value of the company's ordinary share capital, which is 1,000,000 shares x N2.00 per share = N2,000,000. Next, you take 10% of this amount to find the dividend, which is 10% of N2,000,000 = N200,000. So the directors of Olu Ltd. declared a dividend of N200,000.
Question 21 Report
Interim dividend paid in a year is
Question 24 Report
The document used to correct an undercharge on an invoice is
Question 25 Report
Use the following information to answer the question below
Opening capital ---10,800
Drawings----------- 2,500
Trade creditors ----2,560
Trade debtors ------2,880
Cash in hand -------1,000
Net profit------------- 6,000
The closing capital is
Answer Details
The closing capital can be calculated using the following formula: Closing Capital = Opening Capital + Net Profit - Drawings Plugging in the values from the information given, we get: Closing Capital = 10,800 + 6,000 - 2,500 Closing Capital = 14,300 Therefore, the closing capital is 14,300. This represents the total amount of capital that the business has at the end of the accounting period after taking into account the net profit earned during the period and the amount withdrawn by the owner. The closing capital is an important figure that helps the business owner to understand the financial health of the business and make decisions about its future operations.
Question 26 Report
When the letter "C" is written in front of an entry in the folio column of a cash book, it shows a
Answer Details
When the letter "C" is written in front of an entry in the folio column of a cash book, it shows that it is a contra entry. A contra entry is a type of transaction in accounting that involves two accounts. In this type of entry, the debit and credit entries cancel each other out, resulting in a net effect of zero. In other words, if you were to add up the two entries, the total would be zero. This type of entry is used when money is transferred from one account to another, such as when you transfer money from your checking account to your savings account.
Question 27 Report
Use the following information to answer the question below
Ajem and Ogah were in partnership sharing profits and losses in the ratio 2:3. Interest on capital and drawings were 5% and 3% respectively. The following details relate to the partnership for the year 2017.
Ogah Ajem
Capital Account 60,000 65,000
Current Account 40,000 50,000
Drawings 20,000 30,000
Salary 10,000 -
Netprofit was 100,000
Ajem's current account balance was
Answer Details
Question 28 Report
Quick ratio is calculated as X-y:z, where
Answer Details
The quick ratio is a measure of a company's ability to pay off its short-term debts with its most liquid assets. It is calculated by subtracting the value of a company's stock (raw materials, work in progress, finished goods) from its current assets, and then dividing the result by the company's current liabilities. So, the correct option is (3): x = current assets; y = stock and z = current liabilities. This is because the quick ratio formula subtracts the stock (inventory) value from the current assets to arrive at the most liquid assets available for paying off short-term obligations. And, the current liabilities reflect the company's immediate debts that must be paid off in the short term.
Question 29 Report
When closing stock is undervalued, the cost of goods sold would be
Answer Details
Question 30 Report
The partner whose liability goes beyond his capital is a
Answer Details
A general partner is a type of business partner whose liability goes beyond their capital. This means that if the business is sued or incurs debt, the general partner is personally responsible for paying those debts, even if they go beyond the amount of money they have invested in the business. In simple terms, a general partner is fully responsible for the financial obligations of the business, unlike a limited partner whose liability is limited to the amount of money they have invested. So, if you are a general partner in a business, you are responsible for all of the debts and obligations of the business, even if they are more than the amount of money you have invested.
Question 32 Report
Goods bought from Sanmah for Le1,600 was entered into Shamail's Account. This is an error of
Answer Details
Question 33 Report
Use the following information to answer the question below
Ajem and Ogah were in partnership sharing profits and losses in the ratio 2:3. Interest on capital and drawings were 5% and 3% respectively. The following details relate to the partnership for the year 2017.
Ogah Ajem
Capital Account 60,000 65,000
Current Account 40,000 50,000
Drawings 20,000 30,000
Salary 10,000 -
Netprofit was 100,000
Ogah's share of profit was
Answer Details
First, we need to calculate the interest on capital for both partners. Interest on Ogah's capital = 5% of 60,000 = 3,000 Interest on Ajem's capital = 5% of 65,000 = 3,250 Next, we need to calculate the interest on their drawings. Interest on Ogah's drawings = 3% of 20,000 = 600 Interest on Ajem's drawings = 3% of 30,000 = 900 Now, we can calculate the total amount of interest for each partner by adding the interest on their capital and the interest on their drawings. Total interest for Ogah = 3,000 + 600 = 3,600 Total interest for Ajem = 3,250 + 900 = 4,150 We can now calculate the adjusted capital for each partner by adding their capital account, current account balance, and subtracting their drawings and the interest on their drawings. Adjusted capital for Ogah = 60,000 + 40,000 - 20,000 - 600 = 79,400 Adjusted capital for Ajem = 65,000 + 50,000 - 30,000 - 900 = 84,100 The total adjusted capital for the partnership is the sum of the adjusted capital for both partners. Total adjusted capital = 79,400 + 84,100 = 163,500 Now, we can calculate each partner's share of the profit. Ogah's share of the profit = (2 / 5) x (100,000 - 10,000 - 3,600) = 51,150 Ajem's share of the profit = (3 / 5) x (100,000 - 10,000 - 4,150) = 48,850 Therefore, the answer is option A - 51,150.
Question 34 Report
Kadiri paid his debt to Suleman by cheque. The accounting entries in Kadiri s books are: debit
Question 35 Report
Use the following information to answer the question below
Cost of raw materials available------ 32,000
Manufacturing wages -----10,000
Factory expenses-----5,000
Royalty-------3,000
Factory rent ------2,000
Depreciation of plant and machinery---- 5,000
closing stock of raw materials-------- 3,000
Factory overhead cost is
Answer Details
Question 36 Report
Where fixed capital account is maintained, partners Share of profit is transferred to the
Answer Details
In accounting, partners' share of profit is transferred to the credit side of the partner's current account. The current account is a record of the transactions related to each partner's capital contributions, drawings, and share of profits or losses. So, when a profit is made, the partners' share of that profit is credited to their current account to show an increase in their capital balance. On the other hand, the fixed capital account is a record of the long-term investments made by the partners into the business, such as buildings, machinery, and equipment. The fixed capital account is not usually affected by the profits or losses of the business, but rather by any changes in the value of the long-term investments. So, in summary, the partners' share of profit is credited to their current account, while the fixed capital account is maintained separately.
Question 37 Report
Use the following information to answer the question below
Cost of raw materials available------ 32,000
Manufacturing wages -----10,000
Factory expenses-----5,000
Royalty-------3,000
Factory rent ------2,000
Depreciation of plant and machinery---- 5,000
closing stock of raw materials-------- 3,000
The prime cost is
Answer Details
Question 38 Report
Use the following information to answer the question below
Opening capital ---10,800
Drawings----------- 2,500
Trade creditors ----2,560
Trade debtors ------2,880
Cash in hand -------1,000
Net profit------------- 6,000
The working capital is
Answer Details
Question 39 Report
Companies issue shares to the public in order to
Answer Details
Companies issue shares to the public in order to raise capital. When a company issues shares, it is essentially selling ownership in the company to investors in exchange for funds. These funds can then be used to invest in new projects, expand the business, pay off debts, or for any other purpose that the company deems necessary. In return, shareholders receive a portion of the company's profits, as well as voting rights and other benefits depending on the type of shares they own.
Question 41 Report
In public sector accounting, salaries of employees are classified as
Answer Details
In public sector accounting, salaries of employees are classified as recurrent expenditure. Recurrent expenditure refers to regular and routine expenses incurred by an organization in carrying out its day-to-day activities. These expenses are incurred repeatedly and are necessary for the normal functioning of the organization. Salaries of employees are a type of recurrent expenditure as they are paid regularly, such as monthly or bi-weekly, to compensate employees for their services. This is in contrast to capital expenditure, which refers to the costs incurred for acquiring and improving assets such as land, buildings, and equipment. Therefore, since salaries are a routine and regular expense necessary for the day-to-day operations of an organization, they are classified as recurrent expenditure in public sector accounting.
Question 42 Report
The primary concern of shareholders in a business is the
Answer Details
The primary concern of shareholders in a business is the dividend payable. Dividends are payments made by a company to its shareholders, typically from the company's profits. Shareholders invest in a business with the expectation of receiving a return on their investment, and one way they can receive this return is through dividends. Shareholders generally want to see the company perform well so that they can receive higher dividends. While other factors such as the ability to pay interest and welfare of employees may also be important to shareholders, the primary concern is typically the dividend payable.
Question 43 Report
A quality of accounting information is that it should be
Answer Details
The quality of accounting information is that it should be "verifiable". This means that the information should be capable of being checked and confirmed by independent sources or methods. In other words, the accuracy and truthfulness of the accounting information should be able to be verified by others to ensure that it is reliable and trustworthy. Verifiability is important in ensuring that financial statements are free from bias or manipulation, which is crucial for making sound business decisions.
Question 44 Report
The concept which seeks to prevent profits from being overstated is
Answer Details
The concept that seeks to prevent profits from being overstated is "prudence." Prudence is a principle of accounting that requires caution and conservatism when making estimates or judgments about financial transactions. It encourages accountants to be careful not to overstate the value of assets or profits, and to recognize potential losses or liabilities in a timely manner. By applying the principle of prudence, accountants ensure that financial statements accurately reflect the financial position and performance of a business. This helps to maintain the credibility and integrity of financial reporting, and enables stakeholders to make informed decisions based on reliable information.
Question 46 Report
The following transactions were extracted from the books of Adamu, a sole trader for the month of March 2016.
March 4: Sold 80 bags of maize on credit to Papuk at N255 per bag subject to a trade discount of 5%.
March 10: Sold goods on credit to Abass for N1,170.
March 15: Received a cheque from Papuk for the amount due, less a discount of 10%.
March 20: Received cash of N900 from Abass.
You are required to prepare:
(a) Sales Journal;
(b) Customers' Accounts in the Sales Ledger;
(c) Sales Ledger Control Account
(a) Sales Journal:
| Date | Invoice No. | Customer Name | Amount | Trade Discount | Net Amount |
|---|---|---|---|---|---|
| March 4 | 001 | Papuk | N20,400 | N1,020 (5%) | N19,380 |
| March 10 | 002 | Abass | N1,170 | - | N1,170 |
(b) Customers' Accounts in the Sales Ledger:
Papuk
| Date | Invoice No. | Details | Debit | Credit | Balance |
|---|---|---|---|---|---|
| March 4 | 001 | Sales | - | N19,380 | N19,380 |
| March 15 | - | Discount | N2,040 | - | N17,340 |
Abass
| Date | Invoice No. | Details | Debit | Credit | Balance |
|---|---|---|---|---|---|
| March 10 | 002 | Sales | - | N1,170 | N1,170 |
| March 20 | - | Payment | N900 | - | N270 |
(c) Sales Ledger Control Account:
| Date | Invoice No. | Details | Debit | Credit | Balance |
|---|---|---|---|---|---|
| March 4 | 001 | Sales |
Answer Details
(a) Sales Journal:
| Date | Invoice No. | Customer Name | Amount | Trade Discount | Net Amount |
|---|---|---|---|---|---|
| March 4 | 001 | Papuk | N20,400 | N1,020 (5%) | N19,380 |
| March 10 | 002 | Abass | N1,170 | - | N1,170 |
(b) Customers' Accounts in the Sales Ledger:
Papuk
| Date | Invoice No. | Details | Debit | Credit | Balance |
|---|---|---|---|---|---|
| March 4 | 001 | Sales | - | N19,380 | N19,380 |
| March 15 | - | Discount | N2,040 | - | N17,340 |
Abass
| Date | Invoice No. | Details | Debit | Credit | Balance |
|---|---|---|---|---|---|
| March 10 | 002 | Sales | - | N1,170 | N1,170 |
| March 20 | - | Payment | N900 | - | N270 |
(c) Sales Ledger Control Account:
| Date | Invoice No. | Details | Debit | Credit | Balance |
|---|---|---|---|---|---|
| March 4 | 001 | Sales |
Question 47 Report
Ubochi and Hassanah started a partnership business on 1st January 2015. They contributed D 300,000 and D 250,000 respectively as capital. Their partnership deed stated that:
i. interest of 8% should be paid on capital per annum
ii. Hassanah would be paid D 10,000 monthly as a salary
iii. interest on drawings is 5%
iv. the profits are to be shared in the ratio 3:2 respectively. At the end of the year, the profit made was D300,000. During the period, Ubochi and Hassanah made drawings of D20,000 and D15,000 respectively.
You are required to prepare:
(a) Profit and Loss Appropriation Account for the year ended 31st December 2015;
(b) Partners' Current Accounts.
a) Profit and Loss Appropriation Account
The Profit and Loss Appropriation Account is a summary of the profits earned by the business and how they are to be divided among the partners. To prepare the Profit and Loss Appropriation Account for the year ended 31st December 2015, we need to consider the following:
The Profit and Loss Appropriation Account would show the following:
Debit: Interest on Capital D 44,000
Debit: Salary D 120,000
Debit: Interest on Drawings D 1,500
Debit: Total D 165,500
Credit: Profit D 300,000
Credit: Total D 300,000
b) Partners' Current Accounts
The Partners' Current Accounts are individual accounts for each partner that show their capital balance, drawings, interest on capital and drawings, and their share of profit/loss. To prepare the Partners' Current Accounts, we need to consider the following:
The Partners' Current Accounts would show the following:
Ubochi's Current Account:
Debit: Capital D 300,000
Debit: Drawings D 20,000
Debit: Interest on Capital D 26,400
Debit: Interest on Drawings D
Answer Details
a) Profit and Loss Appropriation Account
The Profit and Loss Appropriation Account is a summary of the profits earned by the business and how they are to be divided among the partners. To prepare the Profit and Loss Appropriation Account for the year ended 31st December 2015, we need to consider the following:
The Profit and Loss Appropriation Account would show the following:
Debit: Interest on Capital D 44,000
Debit: Salary D 120,000
Debit: Interest on Drawings D 1,500
Debit: Total D 165,500
Credit: Profit D 300,000
Credit: Total D 300,000
b) Partners' Current Accounts
The Partners' Current Accounts are individual accounts for each partner that show their capital balance, drawings, interest on capital and drawings, and their share of profit/loss. To prepare the Partners' Current Accounts, we need to consider the following:
The Partners' Current Accounts would show the following:
Ubochi's Current Account:
Debit: Capital D 300,000
Debit: Drawings D 20,000
Debit: Interest on Capital D 26,400
Debit: Interest on Drawings D
Question 48 Report
(a) What are closing entries?
(b) Distinguish between a branch and a department.
(c) State four reasons for the preparation of branch accounts.
(a) Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary accounts such as revenue, expenses, and dividends to a permanent account such as retained earnings. The purpose of closing entries is to reset the temporary accounts to zero to prepare them for the next accounting period.
(b) A branch is a separate business location that operates under the same legal entity as the parent company. A department, on the other hand, is a subunit of the parent company that operates within the same location as the parent company.
(c) The four reasons for the preparation of branch accounts are:
Answer Details
(a) Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary accounts such as revenue, expenses, and dividends to a permanent account such as retained earnings. The purpose of closing entries is to reset the temporary accounts to zero to prepare them for the next accounting period.
(b) A branch is a separate business location that operates under the same legal entity as the parent company. A department, on the other hand, is a subunit of the parent company that operates within the same location as the parent company.
(c) The four reasons for the preparation of branch accounts are:
Question 49 Report
(a) what are the sources of revenue to a federal government
(b) What are the advantages of cash basis in public sector accounting
(c) Mention five reasons for public sector accounting
(a) Sources of revenue to a federal government may include:
(b) The advantages of cash basis in public sector accounting include:
(c) Five reasons for public sector accounting are:
Answer Details
(a) Sources of revenue to a federal government may include:
(b) The advantages of cash basis in public sector accounting include:
(c) Five reasons for public sector accounting are:
Question 50 Report
What are the Limitations of ratio analysis
Ratio analysis is a useful tool to evaluate a company's financial performance and health. However, it is not without limitations. Here are some of the key limitations of ratio analysis:
In summary, ratio analysis is a valuable tool for evaluating a company's financial performance, but it has limitations. Investors and analysts should consider these limitations and use other methods of analysis to gain a more comprehensive understanding of a company's financial health.
Answer Details
Ratio analysis is a useful tool to evaluate a company's financial performance and health. However, it is not without limitations. Here are some of the key limitations of ratio analysis:
In summary, ratio analysis is a valuable tool for evaluating a company's financial performance, but it has limitations. Investors and analysts should consider these limitations and use other methods of analysis to gain a more comprehensive understanding of a company's financial health.
Question 51 Report
Explain the following items and outline how they are treated in the final accounts:
(a) increase in provision for doubtful debts
(b) decrease in provision for doubtful debts
(c) provision for discount on debtors
(d) provision for discount on creditors
(e) provision for depreciation
(a) Increase in provision for doubtful debts: A provision for doubtful debts is an estimate of the amount of money that a company may not receive from its customers. If a company expects that the number of unpaid debts may increase, it will increase the provision for doubtful debts. This will result in a decrease in the profit of the company, as the increase in the provision will be considered as an expense in the income statement. In the final accounts, the increase in provision for doubtful debts will be shown as a deduction from the debtors in the balance sheet.
(b) Decrease in provision for doubtful debts: If the company's customers pay off their debts and the company no longer expects any bad debts, it may decrease the provision for doubtful debts. This will result in an increase in the profit of the company, as the decrease in the provision will be considered as an income in the income statement. In the final accounts, the decrease in provision for doubtful debts will be shown as an addition to the debtors in the balance sheet.
(c) Provision for discount on debtors: A provision for discount on debtors is an estimate of the amount of money that a company may have to give as a discount to its customers for paying their debts early. This provision is created to reflect the expected loss of income due to the discount. In the final accounts, the provision for discount on debtors will be shown as a deduction from the debtors in the balance sheet.
(d) Provision for discount on creditors: A provision for discount on creditors is an estimate of the amount of money that a company may have to pay as a discount to its suppliers for paying their debts early. This provision is created to reflect the expected loss of income due to the discount. In the final accounts, the provision for discount on creditors will be shown as an addition to the creditors in the balance sheet.
(e) Provision for depreciation: Depreciation is the decrease in the value of an asset over time due to wear and tear, obsolescence, or other factors. A provision for depreciation is created to reflect the decrease in the value of fixed assets, such as buildings, machinery, and vehicles. In the final accounts, the provision for depreciation will be shown as a deduction from the fixed assets in the balance sheet. The provision for depreciation is also shown as an expense in the income statement, which reduces the profit of the company.
Answer Details
(a) Increase in provision for doubtful debts: A provision for doubtful debts is an estimate of the amount of money that a company may not receive from its customers. If a company expects that the number of unpaid debts may increase, it will increase the provision for doubtful debts. This will result in a decrease in the profit of the company, as the increase in the provision will be considered as an expense in the income statement. In the final accounts, the increase in provision for doubtful debts will be shown as a deduction from the debtors in the balance sheet.
(b) Decrease in provision for doubtful debts: If the company's customers pay off their debts and the company no longer expects any bad debts, it may decrease the provision for doubtful debts. This will result in an increase in the profit of the company, as the decrease in the provision will be considered as an income in the income statement. In the final accounts, the decrease in provision for doubtful debts will be shown as an addition to the debtors in the balance sheet.
(c) Provision for discount on debtors: A provision for discount on debtors is an estimate of the amount of money that a company may have to give as a discount to its customers for paying their debts early. This provision is created to reflect the expected loss of income due to the discount. In the final accounts, the provision for discount on debtors will be shown as a deduction from the debtors in the balance sheet.
(d) Provision for discount on creditors: A provision for discount on creditors is an estimate of the amount of money that a company may have to pay as a discount to its suppliers for paying their debts early. This provision is created to reflect the expected loss of income due to the discount. In the final accounts, the provision for discount on creditors will be shown as an addition to the creditors in the balance sheet.
(e) Provision for depreciation: Depreciation is the decrease in the value of an asset over time due to wear and tear, obsolescence, or other factors. A provision for depreciation is created to reflect the decrease in the value of fixed assets, such as buildings, machinery, and vehicles. In the final accounts, the provision for depreciation will be shown as a deduction from the fixed assets in the balance sheet. The provision for depreciation is also shown as an expense in the income statement, which reduces the profit of the company.
Question 52 Report
On 30th September 2017, Adedeji's cash book showed a debit balance of N7,600. However, his bank statement showed an overdraft balance of N1,880. On investigation, the following details were discovered:
i. A standing order of N160 had not been entered in the cash book
ii. Bank charges of N40 did not appear in the cash book
iii. Cash paid into the bank for N400 had been entered in the cash book as N360
iv. A cheque of N200 received from a customer was dishonoured
v. The bank received a credit transfer of N400 from a customer
vi. A cheque of N1,360 paid to Dexter Ltd had been entered in the cash book as N1,720
vii. A receipt of N40 shown on the bank statement had not been entered in the cash book;
viii. A cheque drawn amounting to N160 paid is still with the supplier
ix. Receipts of N3,600 paid into the bank on 30th September 2017 did not appear on the bank statement until October 2017
x. A cheque of N1,080 paid into the bank had been Wrongly credited by the bank as GH¢ 600
xi. A transfer of N6,000 to the bank had not been recorded in the cash book.
You are required to prepare
(a) Adjusted Cash Book;
The adjusted cash book is a corrected version of the original cash book that takes into account any discrepancies or errors that were discovered between the cash book and the bank statement. To prepare the adjusted cash book, we need to consider the following:
By making these adjustments, we can arrive at the adjusted cash book, which accurately reflects the true balance of Adedeji's account.
Answer Details
The adjusted cash book is a corrected version of the original cash book that takes into account any discrepancies or errors that were discovered between the cash book and the bank statement. To prepare the adjusted cash book, we need to consider the following:
By making these adjustments, we can arrive at the adjusted cash book, which accurately reflects the true balance of Adedeji's account.
Question 53 Report
(a) Give reasons for including outstanding liabilities in the Balance Sheet
(b) How do you record an income generating activity of a bar in a not-for-profit-making organization:
(a) Outstanding liabilities are included in the balance sheet because they represent debts that a company owes to others and are expected to be paid in the future. Including these debts in the balance sheet provides an overall picture of the company's financial position, including its assets and obligations. Outstanding liabilities also serve as a basis for calculating a company's net worth, which is the difference between its total assets and total liabilities.
(b) To record an income generating activity of a bar in a not-for-profit-making organization, you would first record the revenue generated from the sale of drinks and food. This would be recorded in the revenue account. Then, you would subtract the expenses incurred from operating the bar, such as the cost of goods sold, salaries, rent, utilities, and other operating expenses. These expenses would be recorded in the appropriate expense accounts. The net income from the bar operation would then be recorded as part of the organization's overall net income, which would be reflected in the statement of activities or the income statement. It is important to note that in a not-for-profit organization, the purpose of generating income from activities like the bar is not to make a profit, but rather to support the organization's mission and programs.
Answer Details
(a) Outstanding liabilities are included in the balance sheet because they represent debts that a company owes to others and are expected to be paid in the future. Including these debts in the balance sheet provides an overall picture of the company's financial position, including its assets and obligations. Outstanding liabilities also serve as a basis for calculating a company's net worth, which is the difference between its total assets and total liabilities.
(b) To record an income generating activity of a bar in a not-for-profit-making organization, you would first record the revenue generated from the sale of drinks and food. This would be recorded in the revenue account. Then, you would subtract the expenses incurred from operating the bar, such as the cost of goods sold, salaries, rent, utilities, and other operating expenses. These expenses would be recorded in the appropriate expense accounts. The net income from the bar operation would then be recorded as part of the organization's overall net income, which would be reflected in the statement of activities or the income statement. It is important to note that in a not-for-profit organization, the purpose of generating income from activities like the bar is not to make a profit, but rather to support the organization's mission and programs.
Question 54 Report
(a) Outline three reasons for which a cheque would be dishonored.
(b) Explain the following terms:
i. petty cash float.
ii. contra entries.
iii. imprest system
(c) State three advantages of keeping petty cash book using imprest system.
(a) Three reasons for which a cheque would be dishonored are:
(b)
i. Petty cash float: Petty cash float refers to a small amount of cash that is kept on hand by a business to cover small expenses, such as office supplies or minor repairs. This cash is usually held by a designated employee who is responsible for making small purchases on behalf of the business.
ii. Contra entries: Contra entries refer to entries made in a business's accounting system that offset each other. For example, if a business owes money to another business, and that other business also owes money to the first business, the two amounts can be offset against each other, resulting in a contra entry.
iii. Imprest system: The imprest system is a method of managing petty cash that involves maintaining a fixed amount of cash on hand, and then replenishing that amount as needed. Under this system, a designated employee is given a fixed amount of petty cash at the start of each period (usually a week or a month). This employee then makes small purchases on behalf of the business using this cash, and at the end of the period, any remaining cash is counted and reconciled, and the employee is reimbursed for any expenses made.
(c) Three advantages of keeping a petty cash book using the imprest system are:
Answer Details
(a) Three reasons for which a cheque would be dishonored are:
(b)
i. Petty cash float: Petty cash float refers to a small amount of cash that is kept on hand by a business to cover small expenses, such as office supplies or minor repairs. This cash is usually held by a designated employee who is responsible for making small purchases on behalf of the business.
ii. Contra entries: Contra entries refer to entries made in a business's accounting system that offset each other. For example, if a business owes money to another business, and that other business also owes money to the first business, the two amounts can be offset against each other, resulting in a contra entry.
iii. Imprest system: The imprest system is a method of managing petty cash that involves maintaining a fixed amount of cash on hand, and then replenishing that amount as needed. Under this system, a designated employee is given a fixed amount of petty cash at the start of each period (usually a week or a month). This employee then makes small purchases on behalf of the business using this cash, and at the end of the period, any remaining cash is counted and reconciled, and the employee is reimbursed for any expenses made.
(c) Three advantages of keeping a petty cash book using the imprest system are:
Question 55 Report
(a) What is a Ledger
(b) List out the uses of an invoice to the seller and the buyer
(c) Advantages of dividing the ledger into different classes
(a) A ledger is a record-keeping book or database that contains financial transactions of a business. It is used to track and monitor the financial activities of a company, including sales, purchases, expenses, and payments.
(b) An invoice serves as a critical document that outlines the transaction details between the buyer and the seller. Some uses of an invoice to the seller include:
Some uses of an invoice to the buyer include:
(c) Dividing the ledger into different classes has several advantages, including:
Overall, dividing the ledger into different classes can help businesses manage their finances more effectively and efficiently.
Answer Details
(a) A ledger is a record-keeping book or database that contains financial transactions of a business. It is used to track and monitor the financial activities of a company, including sales, purchases, expenses, and payments.
(b) An invoice serves as a critical document that outlines the transaction details between the buyer and the seller. Some uses of an invoice to the seller include:
Some uses of an invoice to the buyer include:
(c) Dividing the ledger into different classes has several advantages, including:
Overall, dividing the ledger into different classes can help businesses manage their finances more effectively and efficiently.
Question 56 Report
(a) State three effects of drawings on the business of a sole proprietor.
(b) Explain how the following items are treated in the balance sheet:
i. accrued expenses
ii. prepaid expenses
iii. accrued income.
(a) Three effects of drawings on the business of a sole proprietor are:
(b) The treatment of the following items in the balance sheet are:
Answer Details
(a) Three effects of drawings on the business of a sole proprietor are:
(b) The treatment of the following items in the balance sheet are:
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