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Question 1 Report
(a) Explain with examples, the following components of cost in a Manufacturing Account:
i. Direct material cost;
ii. Direct labor cost
iii. Factory overhead
(b) Describe the three types of stocks in a manufacturing concern.
(a) Components of cost in a Manufacturing Account
(Direct material + direct labour + direct expenses = prime cost; prime cost + factory overhead = factory/production cost.)
(b) Three types of stock in a manufacturing concern
Answer Details
(a) Components of cost in a Manufacturing Account
(Direct material + direct labour + direct expenses = prime cost; prime cost + factory overhead = factory/production cost.)
(b) Three types of stock in a manufacturing concern
Question 2 Report
1) Differentiate between Public sector accounting and Private sector accounting
2) Sources of revenue for a local government
3) Items of expenditure of a local government
1. Public sector versus Private sector accounting
| Public sector accounting | Private sector accounting |
|---|---|
| Keeps accounts for government and its agencies. | Keeps accounts for individuals and privately owned businesses. |
| Main aim is to render services/welfare, not profit. | Main aim is to make and maximise profit. |
| Largely uses cash/fund accounting and budgets backed by law. | Largely uses accrual accounting to measure profit. |
| Revenue mainly from taxes, rates, levies, grants and allocations. | Revenue mainly from sales, capital and loans. |
| Governed by financial regulations and appropriation/enabling laws. | Governed by the Companies Act and accounting standards. |
2. Sources of revenue for a local government
3. Items of expenditure of a local government
Answer Details
1. Public sector versus Private sector accounting
| Public sector accounting | Private sector accounting |
|---|---|
| Keeps accounts for government and its agencies. | Keeps accounts for individuals and privately owned businesses. |
| Main aim is to render services/welfare, not profit. | Main aim is to make and maximise profit. |
| Largely uses cash/fund accounting and budgets backed by law. | Largely uses accrual accounting to measure profit. |
| Revenue mainly from taxes, rates, levies, grants and allocations. | Revenue mainly from sales, capital and loans. |
| Governed by financial regulations and appropriation/enabling laws. | Governed by the Companies Act and accounting standards. |
2. Sources of revenue for a local government
3. Items of expenditure of a local government
Question 3 Report
1. What is depreciation?
2. What factors determine depreciation charges?
3. Reasons for providing depreciation
1. What is depreciation?
Depreciation is the gradual and permanent reduction in the value of a fixed asset due to use (wear and tear), the passage of time, obsolescence, or depletion. It represents the part of the asset's cost that is charged as an expense over its useful life.
2. Factors that determine the depreciation charge
3. Reasons for providing depreciation
Answer Details
1. What is depreciation?
Depreciation is the gradual and permanent reduction in the value of a fixed asset due to use (wear and tear), the passage of time, obsolescence, or depletion. It represents the part of the asset's cost that is charged as an expense over its useful life.
2. Factors that determine the depreciation charge
3. Reasons for providing depreciation
Question 4 Report
(a) Which business organizations have the need to prepare departmental accounts?
(b) State two reasons for preparing departmental accounts.
(c) State how the following incomes and expenses are apportioned in departmental accounts:
i. discount allowed
ii. discount received
iii. rent and rates
iv. staff related costs
v depreciation
vi. canteen expenses
vii. electricity
viii. advertising
ix. bad debts
(a) Business organisations that need departmental accounts
Businesses that operate two or more departments or sections under one ownership and roof, such as departmental stores, supermarkets and large retail/trading firms that sell several different lines of goods.
(b) Two reasons for preparing departmental accounts
(Any two of the above.)
(c) Basis of apportionment
| Item | Basis of apportionment |
|---|---|
| i. Discount allowed | Ratio of departmental (credit) sales |
| ii. Discount received | Ratio of departmental purchases |
| iii. Rent and rates | Floor area / space occupied by each department |
| iv. Staff related costs | Number of employees (or time devoted) per department |
| v. Depreciation | Value/cost of fixed assets used by each department |
| vi. Canteen expenses | Number of employees per department |
| vii. Electricity | Number of light/power points or floor area |
| viii. Advertising | Ratio of departmental sales |
| ix. Bad debts | Ratio of departmental (credit) sales |
Answer Details
(a) Business organisations that need departmental accounts
Businesses that operate two or more departments or sections under one ownership and roof, such as departmental stores, supermarkets and large retail/trading firms that sell several different lines of goods.
(b) Two reasons for preparing departmental accounts
(Any two of the above.)
(c) Basis of apportionment
| Item | Basis of apportionment |
|---|---|
| i. Discount allowed | Ratio of departmental (credit) sales |
| ii. Discount received | Ratio of departmental purchases |
| iii. Rent and rates | Floor area / space occupied by each department |
| iv. Staff related costs | Number of employees (or time devoted) per department |
| v. Depreciation | Value/cost of fixed assets used by each department |
| vi. Canteen expenses | Number of employees per department |
| vii. Electricity | Number of light/power points or floor area |
| viii. Advertising | Ratio of departmental sales |
| ix. Bad debts | Ratio of departmental (credit) sales |
Question 5 Report
a) List six users of accounting information
(b) State the formula and the use of each of the following accounting ratios:
i. Quick ratio
ii. Net profit margin
iii. Total assets turnover
iv. Creditors payment period (in days)
(a) Six users of accounting information
(Others acceptable: potential investors, customers, the general public.)
(b) Formulae and uses of the ratios
| Ratio | Formula | Use |
|---|---|---|
| i. Quick (acid-test) ratio | \( \dfrac{\text{Current assets} - \text{Stock}}{\text{Current liabilities}} \) | Measures the ability to meet current liabilities from the most liquid assets, without relying on the sale of stock. |
| ii. Net profit margin | \( \dfrac{\text{Net profit}}{\text{Net sales}} \times 100 \) | Shows overall profitability after all expenses, per unit of sales. |
| iii. Total assets turnover | \( \dfrac{\text{Net sales}}{\text{Total assets}} \) | Measures how efficiently total assets are used to generate sales. |
| iv. Creditors payment period (days) | \( \dfrac{\text{Creditors}}{\text{Net credit purchases}} \times 365 \) | Shows the average number of days taken to pay suppliers/creditors. |
Answer Details
(a) Six users of accounting information
(Others acceptable: potential investors, customers, the general public.)
(b) Formulae and uses of the ratios
| Ratio | Formula | Use |
|---|---|---|
| i. Quick (acid-test) ratio | \( \dfrac{\text{Current assets} - \text{Stock}}{\text{Current liabilities}} \) | Measures the ability to meet current liabilities from the most liquid assets, without relying on the sale of stock. |
| ii. Net profit margin | \( \dfrac{\text{Net profit}}{\text{Net sales}} \times 100 \) | Shows overall profitability after all expenses, per unit of sales. |
| iii. Total assets turnover | \( \dfrac{\text{Net sales}}{\text{Total assets}} \) | Measures how efficiently total assets are used to generate sales. |
| iv. Creditors payment period (days) | \( \dfrac{\text{Creditors}}{\text{Net credit purchases}} \times 365 \) | Shows the average number of days taken to pay suppliers/creditors. |
Question 6 Report
On 31 December 2016, the bank column of the cash book of Aminata Enterprise showed a debit balance of D48,500. However, the bank statement showed a credit balance of D54,900 on the same date. A detailed comparison of entries revealed the following;
i. customer's cheques amounting to D8.450 had not been credited by the bank as at 31/12/2016.
ii. Cheques amounting to D8,850 had not been presented for payment as at 31/12/2016
iii. Bank charges of D1,000 and interest on investments of D2,500 collected by the banker appeared only in the bank statement.
iv. On 30/12/2016, there was a wrong credit of D3,000 in the bank statement.
v. Kesse Enterprise, a customer, had paid into the bank directly a sum of D3,000 on 29th December 2016. This had not been recorded in the cash book.
vi. A cheque for D2,000 received from Jallo Enterprises, a customer, which was deposited had been returned unpaid. This had not been entered in the cash book.
You are required to:
(a) Write up the adjusted cash book.
(b) Prepare a bank reconciliation statement as at 31/12/ 2016.
Question 7 Report
(a) Mention three disadvantages to a business that does not keep proper accounting records.
(b) Explain the following characteristics of accounting information
i. Relevance
ii. Comparability
iii. Consistency
iv. Reliability
(c) State two limitations in the use of accounting information for business decision making.
(a) Three disadvantages of not keeping proper accounting records
(Any three of the above.)
(b) Characteristics of accounting information
(c) Two limitations in using accounting information for decision-making
Answer Details
(a) Three disadvantages of not keeping proper accounting records
(Any three of the above.)
(b) Characteristics of accounting information
(c) Two limitations in using accounting information for decision-making
Question 8 Report
(a) Objectives of Financial Accounting
(b)Characteristics of good accounting information
(c) Users of accounting information and their interests
(a) Objectives of Financial Accounting
(b) Characteristics of good accounting information
(c) Users of accounting information and their interests
| User | Interest |
|---|---|
| Owners / shareholders | Profitability, return on and safety of their investment |
| Management | Planning, control and decision-making |
| Creditors / suppliers | Ability of the firm to pay for goods supplied on credit |
| Lenders / banks | Ability to repay loans and interest |
| Government / tax authorities | Assessment of taxes and regulation |
| Employees | Job security, wages and bonuses |
| Potential investors | Whether it is worth investing in the business |
| Customers | Continuity of supply |
Answer Details
(a) Objectives of Financial Accounting
(b) Characteristics of good accounting information
(c) Users of accounting information and their interests
| User | Interest |
|---|---|
| Owners / shareholders | Profitability, return on and safety of their investment |
| Management | Planning, control and decision-making |
| Creditors / suppliers | Ability of the firm to pay for goods supplied on credit |
| Lenders / banks | Ability to repay loans and interest |
| Government / tax authorities | Assessment of taxes and regulation |
| Employees | Job security, wages and bonuses |
| Potential investors | Whether it is worth investing in the business |
| Customers | Continuity of supply |
Question 9 Report
Baako Ltd purchased motor vehicle as follows:
| Date | Quantity | N |
| 01/01/13 | 1 | 800,000 |
| 01/07/13 | 1 | 400,000 |
| 01/04/15 | 1 | 600,000 |
The company adopts a straight-line method of depreciation at the rate of 10% per annum from the date of purchase. A separate account is prepared for provision for depreciation. On 30h June 2014, the motor vehicle which was purchased on 1st July 2013 was sold for N6 240,000
You are required to prepare:
(a) Motor Vehicle Account for the year, 2013, 2014, and 2015.
(b) Provision for Depreciation on Motor Vehicle Account for the years 2013, 2014, and 2015.
(c) Motor Vehicle Disposal Account.
Approach. Depreciation is straight-line at 10% per annum from the date of purchase, so part-year assets get a proportionate charge. A separate provision account accumulates depreciation, and on disposal the cost and its accumulated depreciation are transferred to a Disposal Account against the sale proceeds.
Depreciation workings (10% per annum)
(a) Motor Vehicle Account (at cost)
| Dr | N | Cr | N |
|---|---|---|---|
| 2013 Jan 1 Bank | 800,000 | ||
| 2013 Jul 1 Bank | 400,000 | 2013 Dec 31 Bal c/d | 1,200,000 |
| 1,200,000 | 1,200,000 | ||
| 2014 Jan 1 Bal b/d | 1,200,000 | 2014 Jun 30 Disposal | 400,000 |
| 2014 Dec 31 Bal c/d | 800,000 | ||
| 1,200,000 | 1,200,000 | ||
| 2015 Jan 1 Bal b/d | 800,000 | ||
| 2015 Apr 1 Bank | 600,000 | 2015 Dec 31 Bal c/d | 1,400,000 |
| 1,400,000 | 1,400,000 |
(b) Provision for Depreciation on Motor Vehicle Account
| Dr | N | Cr | N |
|---|---|---|---|
| 2013 Dec 31 Bal c/d | 100,000 | 2013 Dec 31 P&L (80,000 + 20,000) | 100,000 |
| 2014 Jun 30 Disposal | 40,000 | 2014 Jan 1 Bal b/d | 100,000 |
| 2014 Dec 31 Bal c/d | 160,000 | 2014 Dec 31 P&L (80,000 + 20,000) | 100,000 |
| 200,000 | 200,000 | ||
| 2015 Dec 31 Bal c/d | 285,000 | 2015 Jan 1 Bal b/d | 160,000 |
| 2015 Dec 31 P&L (80,000 + 45,000) | 125,000 | ||
| 285,000 | 285,000 |
(c) Motor Vehicle Disposal Account
| Dr | N | Cr | N |
|---|---|---|---|
| Motor Vehicle (cost) | 400,000 | Provision for depreciation | 40,000 |
| Bank (sale proceeds) | 240,000 | ||
| P&L (loss on disposal) | 120,000 | ||
| 400,000 | 400,000 |
Note. Net book value at sale = 400,000 - 40,000 = 360,000; sold for 240,000, giving a loss on disposal of N120,000. (The proceeds figure in the question, N6 240,000, is read as N240,000.)
Answer Details
Approach. Depreciation is straight-line at 10% per annum from the date of purchase, so part-year assets get a proportionate charge. A separate provision account accumulates depreciation, and on disposal the cost and its accumulated depreciation are transferred to a Disposal Account against the sale proceeds.
Depreciation workings (10% per annum)
(a) Motor Vehicle Account (at cost)
| Dr | N | Cr | N |
|---|---|---|---|
| 2013 Jan 1 Bank | 800,000 | ||
| 2013 Jul 1 Bank | 400,000 | 2013 Dec 31 Bal c/d | 1,200,000 |
| 1,200,000 | 1,200,000 | ||
| 2014 Jan 1 Bal b/d | 1,200,000 | 2014 Jun 30 Disposal | 400,000 |
| 2014 Dec 31 Bal c/d | 800,000 | ||
| 1,200,000 | 1,200,000 | ||
| 2015 Jan 1 Bal b/d | 800,000 | ||
| 2015 Apr 1 Bank | 600,000 | 2015 Dec 31 Bal c/d | 1,400,000 |
| 1,400,000 | 1,400,000 |
(b) Provision for Depreciation on Motor Vehicle Account
| Dr | N | Cr | N |
|---|---|---|---|
| 2013 Dec 31 Bal c/d | 100,000 | 2013 Dec 31 P&L (80,000 + 20,000) | 100,000 |
| 2014 Jun 30 Disposal | 40,000 | 2014 Jan 1 Bal b/d | 100,000 |
| 2014 Dec 31 Bal c/d | 160,000 | 2014 Dec 31 P&L (80,000 + 20,000) | 100,000 |
| 200,000 | 200,000 | ||
| 2015 Dec 31 Bal c/d | 285,000 | 2015 Jan 1 Bal b/d | 160,000 |
| 2015 Dec 31 P&L (80,000 + 45,000) | 125,000 | ||
| 285,000 | 285,000 |
(c) Motor Vehicle Disposal Account
| Dr | N | Cr | N |
|---|---|---|---|
| Motor Vehicle (cost) | 400,000 | Provision for depreciation | 40,000 |
| Bank (sale proceeds) | 240,000 | ||
| P&L (loss on disposal) | 120,000 | ||
| 400,000 | 400,000 |
Note. Net book value at sale = 400,000 - 40,000 = 360,000; sold for 240,000, giving a loss on disposal of N120,000. (The proceeds figure in the question, N6 240,000, is read as N240,000.)
Question 10 Report
a) What is Goodwill?
b) Conditions under which Goodwill is valued in a Partnership
c) Contents of a partnership agreement
(a) What is Goodwill?
Goodwill is the value of a business's good name, reputation, established customer connections and earning capacity over and above the value of its net tangible (identifiable) assets. It is an intangible asset that arises because a going business is worth more than the mere sum of its separable assets.
(b) Conditions under which goodwill is valued in a partnership
(c) Contents of a partnership agreement (deed)
Answer Details
(a) What is Goodwill?
Goodwill is the value of a business's good name, reputation, established customer connections and earning capacity over and above the value of its net tangible (identifiable) assets. It is an intangible asset that arises because a going business is worth more than the mere sum of its separable assets.
(b) Conditions under which goodwill is valued in a partnership
(c) Contents of a partnership agreement (deed)
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