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Question 1 Report
An example of accounts in the nominal ledger is
Answer Details
The nominal ledger, also sometimes called the general ledger, is the main book of accounts used in a double- entry bookkeeping system. It records all the financial transactions of a business during an accounting period. These transactions are categorized into different types of accounts.
Question 2 Report
Purchase Ledger Control Account
| # | # | ||
Cash paid to debtors  |  
   15000 | Balance c/d | 5000 | 
Bills payable  |  
   3000 | Purchase journal | 30000 | 
Discount receive  |  
   2500 | 
  |  
   |
Return outward  |  
   1500 | ||
Sales ledger  |  
   1200 | ||
Balance c/d  |  
   11800 | ||
| 35000 | 35000 | 
The amount #30,000 represents
Answer Details
The amount of #30,000 represents credit purchases. In accounting, the Purchase Ledger Control Account is used to track what a business owes to its suppliers. This account is part of the liabilities section of the balance sheet since it reflects amounts that need to be paid for goods or services received on credit.
Here's a breakdown of why the amount represents credit purchases:
This is significant because businesses often purchase items on credit to improve cash flow and benefit from any creditor terms like discounts for early payment. Hence, the #30,000 recorded in the Purchase Ledger Control Account is indicative of the total amount of purchases made on credit during the period.
Question 3 Report
An amount paid in cash to John is Dr to John and Cr to
Answer Details
The transaction involves paying an amount in cash to John. In accounting terms, when a payment is made to a person or an entity, a debit and credit entry is recorded to keep the accounts balanced. Here's how it works in this scenario:
1. Debit (Dr) to John: Since the payment is being made to John, his account is debited. This is because John's account balance increases from the perspective of the payer's books (as they no longer owe that amount to John). Debiting his account shows a reduction of liability.
2. Credit (Cr) to Cash: The credit entry is made to the Cash account because when cash is paid out, it represents a decrease in the cash balance of the business or individual making the payment. This is why the Cash account is credited.
In summary, when an amount is paid in cash to John:
So, in this specific scenario, the correct credit entry is made to the Cash account.
Question 4 Report
Prime cost consist of direct material and ___ cost
Answer Details
Prime cost refers to the direct costs associated with producing a good. These are costs that can be easily traced and directly linked to each unit of production. It consists of direct materials, direct labour and direct cost.
Question 5 Report
Rent accrued at the end of an accounting period is a
Answer Details
Rent accrued: This refers to the expense incurred for using an asset (property, equipment, etc.) for a period, ever though the rent payment hasn't been made yet.
Current liability: A current liability is a short-term financial obligation that a company expects to settle within one year or the operating cycle (whichever is longer). Rent accrued falls under this category because it's a debt that needs to be paid to the landlord soon.
Question 6 Report
Ordinary shares are also known as
Answer Details
Ordinary shares, also known as common shares or equity shares, represent ownership in a company. When individuals or investors purchase ordinary shares, they become shareholders and have ownership rights in the company.
Equity refers to the ownership interest or residual claim on the assets of a company after deducting liabilities. Ordinary shares represent the equity portion of a company's capital structure, and shareholders who hold ordinary shares have voting rights and the potential to receive dividends.
Question 7 Report
Which of the following is a written acknowledgement of a loan to a company?
Answer Details
The written acknowledgement of a loan to a company is known as a debenture.
Let's explain further: A debenture is a type of long-term security issued by a company. It acts as a contract that specifies the details of the loan, including the amount borrowed, the interest rate, and the repayment schedule. Unlike some other forms of debt, debentures do not have any physical assets pledged as collateral. This means they are backed solely by the creditworthiness and reputation of the issuer.
In summary, a debenture serves as a formal and written promise from the company to pay back the borrowed money with interest at a future date. It is a common tool for companies to raise capital while providing investors an opportunity to earn interest on their investment.
Question 8 Report
The following balances were extracted from the books of Adama Ltd on 31st August 2007
| # | |
Sales  |  
   200000 | 
Drawings  |  
   10000 | 
Land and building  |  
   70000 | 
Furniture  |  
   10000 | 
Debtors  |  
   50000 | 
Creditors  |  
   35000 | 
Capital  |  
   85000 | 
Bank  |  
   10000 | 
General expenses  |  
   10000 | 
Stock ( 31-08-2007)  |  
   10000 | 
Purchases  |  
   140000 | 
Stock (1-09- 2006)  |  
   20000 | 
The gross profit is
Answer Details
To calculate the Gross Profit, we need to determine the difference between Sales and Cost of Goods Sold (COGS).
Step 1: Determine Sales
The sales figure is already given as #200,000.
Step 2: Calculate Cost of Goods Sold (COGS)
So, COGS = (#160,000 - #10,000) = #150,000
Step 3: Calculate Gross Profit
Gross Profit = Sales - COGS = #200,000 - #150,000 = #50,000
Therefore, the Gross Profit is #50,000.
Question 9 Report
Pending the location of an error, the difference in the Trial Balance is posted to a __
Answer Details
When a difference is noticed in the Trial Balance due to errors that have not yet been located, it is temporarily posted to a suspense account.
Here's a simple explanation:
A **Trial Balance** is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal. If the totals do not match, it indicates an error. Sometimes, despite efforts to find the error, the exact location or cause is not immediately identified. When this happens, the difference is placed in a suspense account to temporarily hold and find where the error might be.
The suspense account acts as a placeholder. It's important because it allows the books to be balanced and further accounting and financial reporting processes to proceed normally while the error is being investigated and rectified. Once the error is located and corrected, the suspense account is cleared.
Question 10 Report
An example of fictitious assets is
Answer Details
Fictitious assets are intangible assets that do not have a physical form and lack inherent value. They represent deferred expenses or prepaid costs that provide benefits over future periods. For example: Preliminary Expense: Discount on Issue of Shares, Goodwill etc.
Question 11 Report
| # | |
Stock 1/1/09  |  
   2200 | 
Purchases  |  
   18000 | 
Sales  |  
   27000 | 
Salaries  |  
   1500 | 
Rejection in doubtful debts  |  
   500 | 
Office expenses  |  
   1100 | 
Other expenses  |  
   1300 | 
Stock 31/12/09  |  
   1000  |  
  
The net profit is
Answer Details
To calculate the net profit, we need to determine the Gross Profit first and then subtract the expenses from it. Follow these steps:
COGS = 2200 + 18000 - 1000 = #19,200
Gross Profit = 27000 - 19200 = #7,800
Total Expenses = 1500 + 500 + 1100 + 1300 = #4,400
Net Profit = #3,400
Therefore, the net profit is #3,400.
Question 12 Report
The following balances were extracted from the books of Adama Ltd on 31st August 2007
| # | |
Sales  |  
   200000 | 
Drawings  |  
   10000 | 
Land and building  |  
   70000 | 
Furniture  |  
   10000 | 
Debtors  |  
   50000 | 
Creditors  |  
   35000 | 
Capital  |  
   85000 | 
Bank  |  
   10000 | 
General expenses  |  
   10000 | 
Stock ( 31-08-2007)  |  
   10000 | 
Purchases  |  
   140000 | 
Stock (1-09- 2006)  |  
   20000 | 
Total fixed assets is
Answer Details
To determine the Total Fixed Assets, we need to focus on the accounts that represent fixed assets. In a company's balance sheet, fixed assets are long-term tangible property that a firm owns and uses in its operations to generate income. In this context, typical fixed assets include items like land, buildings, furniture, machinery, etc.
From the list provided:
Both "Land and Building" and "Furniture" are considered fixed assets. To calculate the Total Fixed Assets, you simply add these amounts together:
#70,000 (Land and Building) + #10,000 (Furniture) = #80,000
Therefore, the Total Fixed Assets for Adama Ltd as of 31st August 2007 is #80,000.
Question 13 Report
| # | |
Stock 1/1/09  | 
   2200 | 
Purchases  | 
   18000 | 
Sales  | 
   27000 | 
Salaries  | 
   1500 | 
Rejection in doubtful debts  | 
   500 | 
Office expenses  | 
   1100 | 
Other expenses  | 
   1300 | 
Stock 31/12/09  | 
   1000  | 
  
The total expenses is
Answer Details
Total Operating Expenses = #1,500 (Salaries) + #1,100 (Office Expenses) + #1,300 (Other Expenses) Total Operating Expenses = #3,900
Question 14 Report
Which of the following is not required in preparing a statement of affairs?
Answer Details
A statement of affairs is a financial statement that provides a snapshot of an organization's financial position at specific point in time. It typically includes information about assets, liabilities, and capital.
Question 15 Report
The opening stock at the beginning of an accounting period represents
Answer Details
In accounting, the opening stock at the beginning of an accounting period represents the value of the inventory that a company has on hand at the start of that period. This includes all the goods available for sale at the beginning. It is essentially the remaining stock from the previous accounting period.
To clarify further:
Thus, in summary, the opening stock truly encapsulates the goods available for sale at the start of the new accounting period.
Question 16 Report
A partner whose liability does not extend beyond the amount of capital contributed by him is known as
Answer Details
A partner whose liability does not extend beyond the amount of capital they contributed is known as a limited partner.
In a partnership, there are different types of partners, and each has different roles and responsibilities. A limited partner is an investor within the partnership who contributes capital but does not participate in the day-to-day management or decision-making of the business. The key feature of a limited partner is that their financial liability is restricted to the amount they have invested in the partnership. This means that if the business faces financial losses or legal liabilities, the limited partner risks only losing their investment amount. They are not required to contribute more money beyond what they initially invested.
On the other hand, a general partner, who typically manages the business, has unlimited liability and is personally responsible for all the debts and obligations of the partnership. In contrast, the limited partner enjoys protection against such personal liabilities.
This arrangement is beneficial for individuals who want to invest in a business without the risk of losing more than their original investment, while also not being involved in its operations.
Question 17 Report
The following extracts are made from the books of Agama Enterprises.
Motor van (cost)  | 
   120000 | 
Life span  | 
   4 years | 
rate of Depreciation  | 
   40% | 
Method of depreciation used is Diminishing Balance The depreciation charge for year two is
Answer Details
First, we calculate the depreciation for the first year: Depreciation for year one = Cost x Rate of Depreciation = 120,000 x 40%
= 48,000
Next, we calculate the remaining book value after the first year: Book value after year one = Cost - Depreciation for year one
= 120,000 - 48,000
= 72,000
To calculate the depreciation charge for year two, we apply the rate of depreciation to the remaining book value Depreciation for year two = Remaining book value x Rate of Depreciation
= 72,000 x 40%
= 28,800
Question 18 Report
Who among the following developed the idea of double entry book-keeping?
Answer Details
The person credited with developing the idea of double entry book-keeping is Francia Luca Pacioli. He was an Italian mathematician and Franciscan friar who lived during the Renaissance period. Pacioli is often referred to as the "Father of Accounting" because he published a comprehensive text on double-entry bookkeeping in 1494. This text was part of his larger work called Summa de arithmetica, geometria, proportioni et proportionalità, which aimed to educate merchants about keeping financial records.
Double entry bookkeeping is a method that involves recording each financial transaction twice: once as a debit in one account and once as a credit in another. This approach helps to ensure the accuracy and completeness of financial records by maintaining a balance between accounts.
Pacioli's contribution was significant because it provided a systematic way for businesses to track their financial transactions, fostering improved financial management and accountability. His work laid the foundation for modern accounting practices, making it a crucial advancement in the field of commerce and economics.
Question 19 Report
The following accounts have debit balances except
Answer Details
In accounting, a debit balance typically refers to an increase in asset or expense accounts. Here’s a breakdown of each account to determine which one does not usually have a debit balance:
Based on the above explanations, the account that does not have a debit balance is typically the Share Premium account.
Question 20 Report
Tolu purchased a machine for #6,000 on credit. The effect is to debit.. supplier
and credit the account of the
Answer Details
When Tolu purchases a machine on credit, the accounting entries reflect the following:
Debit: Machinery (#6,000)
Credit: Supplier (#6,000)
Here's why:
Debit: A debit increases an asset account. In this case, "Machinery" is an asset account that represents the new equipment Tolu acquired.
Credit: A credit increases a liability account. Since Tolu purchases the machine on credit, they now owe money
to the supplier. The "Supplier" account is a liability account that reflects this debt.
Question 21 Report
 
| # | |
Stock 1/1/09: Raw materials  |  
   20000 | 
Work-in-progress  |  
   5000 | 
Stock 31/12/09: Raw materials  |  
   500 | 
| Work in progress | 4000 | 
Raw materials purchased  |  
   18000 | 
Direct labour  |  
   7500 | 
| Direct expenses | 3000 | 
| Factory expenses | 10000 | 
The value of raw materials consumed is
Answer Details
To calculate the value of raw materials consumed, we need to follow these steps:
Step 1: Determine the Opening Stock of Raw Materials. This is the stock at the beginning of the period. According to the information provided, the opening stock of raw materials is #20,000.
Step 2: Add any Purchases made during the year. In this case, raw materials purchased during the year amount to #18,000.
Step 3: Calculate the Closing Stock of Raw Materials. This is the stock at the end of the period, which is #500.
Step 4: Use the formula for the value of raw materials consumed:
Raw Materials Consumed = Opening Stock + Purchases - Closing Stock
Substitute the values:
#20,000 (Opening Stock) + #18,000 (Purchases) - #500 (Closing Stock) = #37,500
Therefore, the value of raw materials consumed is #37,500.
Question 22 Report
A method that is beneficial for tax purposes in inflationary times is?
Answer Details
This method assumes the last items purchased are the first ones sold. It can result in a higher COGS during periods of inflation, potentially leading to lower reported profits. LIFO can be beneficial for tax purposes in inflationary times.
Question 23 Report
Where there is no partnership agreement, a partner who advances loan to the partnership is entitled to ____ Interest
Answer Details
In the absence of a partnership agreement specifying otherwise, a partner who advances a loan to the partnership is typically entitled to interest at the rate prescribed by the laws of the relevant jurisdiction. While this can vary depending on the jurisdiction, a common default rate is 5%
Question 24 Report
Ifedapo Local Council has the following details for 2008
| # | |
| Fines | 5000 | 
Allocation from state government  |  
   20000 | 
Tenement rates  |  
   10000 | 
Licences  |  
   12000 | 
Hospital beds  |  
   8000 | 
Ambulance  |  
   13000 | 
Salaries  |  
   15000 | 
Vehicles fueling  |  
   7000 | 
The Local Council's revenue for 2008 was
Answer Details
To determine the Local Council's revenue for 2008, we need to identify and sum up all the revenue-generating items. The revenue for the Ifedapo Local Council includes:
Add these amounts together to calculate the total revenue:
Total Revenue = Fines + Allocation from state government + Tenement rates + Licences
Total Revenue = #5,000 + #20,000 + #10,000 + #12,000
Total Revenue = #47,000
Note that amounts related to Hospital beds (#8,000), Ambulance (#13,000), Salaries (#15,000), and Vehicles fueling (#7,000) are not considered part of revenue as they represent expenses or services provided by the council.
Therefore, the Local Council's revenue for 2008 was #47,000.
Question 25 Report
Depriciation is?
Answer Details
Depreciation refers to the gradual decrease in the value of a fixed asset over time due to factors such as wear an tear, obsolescence, or passage of time. It represents a decrease in the asset's value rather than an increase. As assets are used or become outdated, their value diminishes, which is reflected as depreciation in the financial statements.
Question 26 Report
Which of the following is a characteristics of a limited liability company?
Answer Details
A limited liability company (LLC) is a business structure that offers the owners (referred to as members) limite liability protection. This means that the personal assets of the owners are separate from the liabilities and debts of the company. The owners' liability is limited to their investment in the company, and their personal assets an generally protected from company obligations.
This separation of the company's liabilities from the owners' personal assets is a key characteristic of an LLC. It provides a layer of protection for the owners in case the company faces financial difficulties or legal issues.
Question 27 Report
The amount paid by the buyer of a business which is sold as going concern is
Answer Details
When a business is sold as a "going concern," it means that the business is being sold with the expectation that it will continue to operate in the same manner as before the sale. The amount paid by the buyer for such a business is commonly referred to as the purchase consideration.
The purchase consideration includes the total value that the buyer agrees to pay to acquire all the assets, liabilities, and operational components of the business. This value can be in the form of cash, shares, debt arrangements, or a combination of these.
Let's clarify why the other terms are not the correct answer in this context:
In summary, the correct term for the amount paid by the buyer of a business sold as a going concern is purchase consideration.
Question 28 Report
In government accounting, money allocated to each head and sub-heads is referred to as
Answer Details
In government budgeting, funds are authorized for spending through a voting process. Each government department or agency submits a budget request, which is then debated and approved (or voted on) by the legislature. The approved amounts for each department's programs and activities become the official votes that they can spend from.
Question 29 Report
An equipment costing # 9,000 has an estimated residual value of #900, and is depreciated at 10% per annum. What is the depreciation charge for the three using diminishing balance method?
Answer Details
The diminishing balance method of depreciation, also known as the reducing balance method, calculates depreciation based on the book value (cost minus accumulated depreciation) at the beginning of each year. In this method, both the asset's residual value and the annual depreciation rate are used to determine the depreciation charge.
Let's break down the solution for the first three years to figure out the depreciation charge:
Year 1: 
The initial cost is #9,000.
Depreciation for Year 1 = Cost × Depreciation Rate = 9,000 × 10% = #900
Book Value at the end of Year 1 = Initial Cost - Depreciation = 9,000 - 900 = #8,100
Year 2: 
Book value at the beginning of Year 2 is #8,100.
Depreciation for Year 2 = Book Value × Depreciation Rate = 8,100 × 10% = #810
Book Value at the end of Year 2 = Book Value - Depreciation = 8,100 - 810 = #7,290
Year 3: 
Book value at the beginning of Year 3 is #7,290.
Depreciation for Year 3 = Book Value × Depreciation Rate = 7,290 × 10% = #729
The depreciation charge for the third year using the diminishing balance method is #729.
Question 30 Report
The reward given to debenture holder is
Answer Details
Debentures are long-term debt instruments issued by companies to raise funds. Debenture holders are the creditors of the company, and they receive regular interest payments as a reward for lending their money to the company.
Question 31 Report
Ifedapo Local Council has the following details for 2008
| # | |
| Fines | 5000 | 
Allocation from state government  | 
   20000 | 
Tenement rates  | 
   10000 | 
Licences  | 
   12000 | 
Hospital beds  | 
   8000 | 
Ambulance  | 
   13000 | 
Salaries  | 
   15000 | 
Vehicles fueling  | 
   7000 | 
The council's expenditure was
Answer Details
Capital expenditure = Hospital beds (8000) + Ambulance (13000) = #21,000
Note that the question is only asking for the value of capital expenditure
Question 32 Report
When shares are over-subscribed, directors may decide to scale down the number of shareholding by alloting shares at ___
Answer Details
When shares are over-subscribed, directors may decide to scale down the number of shareholding by allotting shares at pro rata. This means that the available shares are distributed among the applicants in proportion to the number of shares they have applied for.
For example, if a company issues 1,000 shares and the demand is for 1,500 shares, each applicant will receive a percentage of the shares they applied for based on the total available. This method ensures fairness as it maintains the same ratio of allocation relative to each investor's demand.
Allotting at pro rata ensures that all investors get an opportunity to receive a share, albeit a reduced amount than initially requested, in proportion to their original application. This approach helps to manage the allocation efficiently and maintains balance among potential shareholders.
Question 33 Report
The following balances was extracted from the books of Oluwalambe Ltd, manufacturer, on 31st December 2007
| Stock of raw materials 1 - 1 - 2007 | 8000 | 
Purchase of raw materials  | 
   450000 | 
Stock of raw materials 31 - 12 - 2007  | 
   95000 | 
Direct wages  | 
   65000 | 
Indirect wages  | 
   28000 | 
Depreciation on plants  | 
   32000 | 
Factory rent  | 
   3500 | 
Work in progress 1- 1- 2007  | 
   32500 | 
Work in progress 31 - 12- 2007  | 
   37500 | 
Cost of goods produced is
Answer Details
Cost of Goods Produced = Prime Cost + Factory Overhead Cost + Opening Work in Progress - Closing Work in Progress 
Prime Cost: #500,000 (from previous question) Factory Overhead Cost: #63,500 (from previous question) 
Cost of Goods Produced = #500,000 + #63,500 + #32,500 - #37,500 
Cost of Goods Produced = #558,500 
Question 34 Report
The following are causes of discrepancies between the cash book and the bank statement balances except
Answer Details
A bank deposit typically wouldn't cause a discrepancy; rather, it would lead to an increase in both the cash book and bank statement balances. Therefore, it is not a cause of discrepancies between the two balances.
Question 35 Report
A method of stock valuation is
Answer Details
The Simple Average Price (SAP) method is a stock valuation method where the average cost of all units of stock is calculated and used as the value for inventory. This method takes the total cost of goods available for sale and divides it by the total number of units to determine the average price. The average price is then multiplied by th number of units on hand to calculate the value of the inventory
Question 36 Report
 
| # | |
Stock 1/1/09: Raw materials  |  
   2000 | 
Work-in-progress  |  
   5000 | 
Stock 31/12/09: Raw materials  |  
   500 | 
Work-in-progress  |  
   4000 | 
Raw materials purchased  |  
   18000 | 
Direct labour  |  
   7500 | 
Direct expenses  |  
   3000 | 
Factory expenses  |  
   10000 | 
The raw materials available for production is ___
Answer Details
Raw materials available: Opening Stock + Raw materials purchased Raw materials available: #20,000+ #18,000 
Raw materials available: #38,000
Question 37 Report
The term "set off" in control account is also called
Answer Details
In bookkeeping and accounting, the term "set off" in control accounts is most commonly referred to as a contra entry.
To explain this in simple terms:
For example, if a business has an account that records both money received and money spent, a contra entry would allow the business to show that a certain amount received has effectively been set off by a corresponding expenditure.
It’s important because it provides a method to track the exact operations within a business’s accounts, ensuring transparency and accuracy in financial statements.
Question 38 Report
The following balances were extracted from the books of Adama Ltd on 31st August 2007
| # | |
Sales  |  
   200000 | 
Drawings  |  
   10000 | 
Land and building  |  
   70000 | 
Furniture  |  
   10000 | 
Debtors  |  
   50000 | 
Creditors  |  
   35000 | 
Capital  |  
   85000 | 
Bank  |  
   10000 | 
General expenses  |  
   10000 | 
Stock ( 31-08-2007)  |  
   10000 | 
Purchases  |  
   140000 | 
Stock (1-09- 2006)  |  
   20000 | 
Percentage of net profit to sale is
Answer Details
To find the percentage of net profit to sales, we need to calculate the net profit first.
Here's how you can find the net profit:
Step 1: Calculate Cost of Goods Sold (COGS)
COGS = Opening Stock + Purchases - Closing Stock
COGS = 20,000 + 140,000 - 10,000 = 150,000
Step 2: Calculate Gross Profit
Gross Profit = Sales - COGS
Gross Profit = 200,000 - 150,000 = 50,000
Step 3: Calculate Net Profit
Net Profit = Gross Profit - Expenses
In this case, the only expense given is General Expenses: 10,000
Net Profit = 50,000 - 10,000 = 40,000
Step 4: Calculate the Percentage of Net Profit to Sales
Percentage of Net Profit to Sales = (Net Profit / Sales) * 100%
Percentage of Net Profit to Sales = (40,000 / 200,000) * 100% = 20%
Therefore, the percentage of net profit to sales is 20%.
Question 39 Report
A public limited liability company can get additional fund through the issue of
Answer Details
A public limited liability company can get additional funds through the issue of debentures.
Let's break this down in simple terms:
Hence, debentures are a common and effective way for public companies to generate additional funds by attracting investments from the public without diluting ownership. The company gets the capital it needs, while investors earn interest on their investment.
Question 40 Report
The coming together of two sole trading businesses to form a partnership is
Answer Details
The coming together of two sole trading businesses to form a partnership is an amalgamation.
To understand why this is an amalgamation, let's delve into the concept:
Amalgamation refers to the merging or blending of two or more entities into one. In the context of business, it specifically means the combination of two or more organizations to form a single new entity that benefits from the pooled resources, combined expertise, and shared goals. In this case, when two sole traders decide to unite their efforts and resources to operate jointly as a partnership, they are undergoing an amalgamation. This process allows them to leverage each other's strengths, share risks, and potentially enjoy greater market influence and operational efficiency.
It's important to note that amalgamation is different from terms like acquisition, which involves one company taking over another, and association, which usually implies a less formal collaboration without forming a new structure or entity.
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