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Question 1 Report
The total of the discounts received column in the three column cash book is?
Answer Details
Question 2 Report
Use the following information to answer this question.
Acquisition cost of computers - Le 80,000
Installation cost - Le 20,000
Estimated residual value - Le 4,000
Estimated useful life - 5 years.
The depreciable value of computers is
Question 3 Report
When allotments have been fully paid, subscribers are referred to as
Answer Details
Question 4 Report
Which of the following errors are errors of commission?
I. A cheque paid to Adam debited to Adam's account.
II. Credit sales to Eva credited to sales account but debited to Eve's account.
III. Furniture repairs debited to furniture account.
IV. Credit purchases from Manu credited to Manu's account.
Answer Details
Errors of commission are errors that occur when an incorrect entry is made in the accounting records. Specifically, errors of commission occur when the correct amount is entered, but it is entered in the wrong account. Based on this definition, the errors of commission among the given options are: - I and II In option I, the cheque paid to Adam was correctly entered, but it was debited to Adam's account instead of being credited. This is an error of commission because the correct amount was entered, but it was entered in the wrong account. In option II, credit sales to Eva were correctly credited to the sales account, but they were also debited to Eve's account instead of being credited. Again, this is an error of commission because the correct amount was entered, but it was entered in the wrong account. Option III is not an error of commission because there is no correct amount that was entered in the wrong account. Furniture repairs debited to the furniture account is simply an incorrect entry. Option IV is not an error of commission because the entry made was not correct in the first place. Credit purchases from Manu should have been credited to the purchases account, not credited to Manu's account. Therefore, the errors of commission among the given options are I and II.
Question 5 Report
Which of the following items of expense involves actual cash payment?
Answer Details
The item of expense that involves actual cash payment is "Carriage outwards." This expense refers to the cost of shipping or delivery of goods from the seller's premises to the buyer's premises or to a third party. It is an expense that the seller incurs in order to fulfill the sale, and it requires an actual payment of cash to the carrier or delivery service provider. Discounts allowed, provision for depreciation, and allowance for doubtful debts do not involve actual cash payment. Discounts allowed are reductions in the selling price of goods or services that the seller grants to the buyer, and they result in a lower amount of revenue for the seller. Provision for depreciation is an accounting entry that represents the estimated decrease in value of a fixed asset over time, and it does not involve an actual payment of cash. Allowance for doubtful debts is an estimate of the amount of accounts receivable that the seller does not expect to collect, and it is also an accounting entry that does not involve an actual payment of cash.
Question 6 Report
In the absence of a partnership agreement, additional capital contributions by partners attract interest of
Answer Details
Question 7 Report
Use the following information and answer the question below.
Oruma Ltd issued 300,000 ordinary shares at N100 each. Applications were received for 200,000 shares and all those who applied, paid in full.
The unsubscribed share capital is
Answer Details
Question 8 Report
In the purchase of a business, a buyer has paid more than the value of the net assets of the business. The excess payment is referred to as
Answer Details
The excess payment made by a buyer in the purchase of a business is referred to as Goodwill. Goodwill is an intangible asset that represents the value of a business beyond its tangible assets, such as property, equipment, and inventory. When a business is sold for more than the value of its tangible assets, the excess amount is attributed to the value of the business's reputation, brand name, customer base, and other intangible assets. This excess amount is called Goodwill. Goodwill is an important concept in business valuations, as it can significantly impact the price a buyer is willing to pay for a business. Goodwill is typically calculated by subtracting the fair market value of a company's net assets from the total purchase price paid by the buyer. The resulting amount represents the value of the intangible assets, or goodwill, that the buyer is willing to pay for. Therefore, when a buyer pays more than the value of the net assets of a business, the excess payment is referred to as Goodwill.
Question 10 Report
The transfer of money from one sub-head to another in the public sector is
Answer Details
The transfer of money from one sub-head to another in the public sector is virement. Virement is a budget management tool used by government agencies and organizations to transfer funds from one budgetary sub-head to another, within the same budget. Virement is used when there is a need to redirect funds from one area to another, due to changing priorities or unexpected expenses. For example, if a department has overspent in one area, it may need to transfer funds from another area to cover the shortfall. Virement is an important tool for ensuring that government agencies and organizations can operate effectively within their budgets, while still being able to adapt to changing circumstances. It allows for greater flexibility and responsiveness in budget management, while still maintaining overall fiscal responsibility. In summary, virement is the transfer of money from one sub-head to another in the public sector, and is an important tool for effective budget management.
Question 11 Report
In the preparation of the trading account of omuya Ltd., the company included credit sales of N18,000 made during the year. The concept guiding this treatment is the
Answer Details
Question 13 Report
Offei, a petty trader sold goods for GH¢36,240. The gross profit being 33\(\frac{1}{3}\)% on cost. What was the cost price?
Answer Details
To find the cost price of the goods, we need to use the formula: Cost price = Selling price / (1 + Gross profit percentage) In this case, the selling price is GH¢36,240, and the gross profit percentage is 33\(\frac{1}{3}\)%, or 1/3 in decimal form. Therefore, we have: Cost price = GH¢36,240 / (1 + 1/3) Cost price = GH¢36,240 / 4/3 Cost price = GH¢27,180 So, the cost price of the goods is GH¢27,180. To explain the calculation, the gross profit percentage represents the profit as a percentage of the cost price. In this case, the profit is 33\(\frac{1}{3}\)% of the cost price. To find the cost price, we need to reverse the calculation by dividing the selling price by 1 plus the gross profit percentage in decimal form. This gives us the amount that represents the cost price plus the profit, so we then subtract the profit to get the cost price. In this example, we divide GH¢36,240 by 4/3 to get the total cost price plus profit, which is GH¢48,320. We then subtract the profit of GH¢12,080 (1/3 of GH¢36,240) to get the cost price of GH¢27,180.
Question 15 Report
Which of the following is a credit item in an income and expenditure account?
Answer Details
In an income and expenditure account, credit items represent income or revenue received by an organization. Therefore, the only credit item listed in the options is donations. Donations are considered a credit item because they represent the funds received by an organization from donors. Credit items are also known as revenue or income and are recorded on the credit side of the income and expenditure account. Electricity, stationery, and bar suppliers are all examples of expenses or expenditures that are recorded on the debit side of the income and expenditure account. Expenses are costs incurred by an organization in the course of generating revenue or carrying out its operations, and they are recorded as debits in the income and expenditure account.
Question 16 Report
Debts that a firm is unable to recover are debited to bad debts account and credited to
Answer Details
Question 17 Report
Use the following information to answer this question.
Acquisition cost of computers - Le 80,000
Installation cost - Le 20,000
Estimated residual value - Le 4,000
Estimated useful life - 5 years.
The total costs of the computers is
Answer Details
Question 18 Report
The excess of cost of goods sold over net sales is
Answer Details
When the cost of goods sold (COGS) is greater than the net sales revenue, this results in a negative amount. This negative amount is known as a "gross loss". The gross profit, on the other hand, is the amount that remains after deducting the COGS from the net sales revenue. This represents the amount of money a company has made from its sales before taking into account any other expenses such as operating costs, taxes, and interest expenses. To sum up, the excess of COGS over net sales is a "gross loss" and not a "net loss." The "net loss" or "net profit" is calculated after taking into account all expenses and revenue, not just the cost of goods sold and net sales.
Question 19 Report
The balance sheet is prepared to reveal
Answer Details
The balance sheet is prepared to reveal the financial position of a business at a specific point in time. It shows the assets, liabilities, and equity of the business. The assets are what the business owns, such as property, inventory, and cash. The liabilities are what the business owes, such as loans and accounts payable. The equity represents the owners' claims to the assets of the business. The balance sheet helps stakeholders understand the financial health of the business and its ability to pay off its debts. It does not show the result of the operations for the period under review, the arithmetical accuracy of the ledger accounts, or the accruals and payments.
Question 21 Report
Where fixed capitals are maintained in a partnership, share profits are
Answer Details
Question 22 Report
In preparing partnership accounts, interest on drawings is debited to current accounts and credited to
Answer Details
Question 23 Report
Use the following information and answer the question below.
Oruma Ltd issued 300,000 ordinary shares at N100 each. Applications were received for 200,000 shares and all those who applied, paid in full.
The authorized share capital is
Question 24 Report
Which of the following are impersonal accounts ?
I. Investment
II. Creditors
III. Premises
IV. Debtors
V. Salaries
Answer Details
Question 25 Report
Use the following information to answer this questions.
Rent prepaid - 1/01/2014 - N600
Rent paid - 31/12/2014 - N3,000
Rent prepaid - 31/12/2014 - N400.
Rent for 2014 chargeable to the profit and loss account is
Answer Details
Question 26 Report
The financial statement which is an expression of the accounting equation is the
Answer Details
The financial statement that expresses the accounting equation is the balance sheet. The balance sheet provides a snapshot of a company's financial position at a particular point in time. It lists a company's assets (what it owns), liabilities (what it owes), and equity (what's left over for the owners). The balance sheet expresses the fundamental accounting equation, which is Assets = Liabilities + Equity. This means that a company's assets must always equal its liabilities plus equity. The balance sheet is an important financial statement that provides insight into a company's financial health and stability.
Question 28 Report
Which of the following expenses is apportioned between departments based on sales?
Answer Details
The expense that is apportioned between departments based on sales is Carriage Outwards. This expense refers to the cost of delivering goods from the business to the customers. Since this cost is incurred as a result of sales, it makes sense to apportion it between departments based on their respective sales. This ensures that each department bears a fair share of the cost based on their contribution to generating sales. Discount Received is an income and is not an expense. Electricity is an expense that is usually apportioned based on factors such as the area occupied by each department, the number of employees in each department, or the usage of electricity by each department. Carriage Inwards is an expense that is usually apportioned based on factors such as the weight or volume of goods received by each department.
Question 29 Report
When a fixed asset is disposed off, the accounting entries to write off the asset are Debit
Question 30 Report
Bank reconciliation statement is prepared to reconcile the differences between
Answer Details
Bank reconciliation statement is prepared to reconcile the differences between the Cash book and Bank statement of a business. The Cash book records all the cash and bank transactions made by a business, including deposits, withdrawals, and transfers. On the other hand, the Bank statement is a statement sent by the bank to the business, which shows all the transactions that have been processed by the bank for that account during a given period, including deposits, withdrawals, fees, and interests. There can be differences between the balances shown in the Cash book and Bank statement due to timing differences, errors, omissions, or bank charges. To ensure that the Cash book and Bank statement balances are accurate, a bank reconciliation statement is prepared to identify and explain these differences. The bank reconciliation statement compares the transactions recorded in the Cash book with those shown in the Bank statement and identifies any discrepancies. These discrepancies are then adjusted for in the Cash book, which ensures that the Cash book and Bank statement balances match. For example, if a business deposits a check into its bank account, it records the deposit in its Cash book immediately. However, it may take a few days for the bank to process the deposit and credit the amount to the account. As a result, the Bank statement may show a higher balance than the Cash book. In this case, the bank reconciliation statement will identify the timing difference and adjust the Cash book balance accordingly.
Question 31 Report
Which of the following expenses constitutes prime cost?
I. Direct labour cost II. Factory overheads III. Hiring of machine for production IV. Warehouse rent
Answer Details
Question 33 Report
A petty cash account has an imprest of GH¢ 6,000. If GH¢ 2,000 were left, how much will be re-imbursed at the end of the period?
Answer Details
Question 34 Report
Use the following information to answer this question.
Cash purchase - D 29,641
Creditors 1/1/14 - D 2,473
Creditors 31/12/14 - D 3,117
Cash paid to creditors - D 127,345
Discount received - D 4,211
The credit purchases is
Answer Details
The credit purchases can be calculated as follows: Credit Purchases = Cash Purchase + Increase in Creditors - Decrease in Creditors - Discount Received Credit Purchases = D 29,641 + (D 3,117 - D 2,473) - (D 127,345 - D 0) - D 4,211 Credit Purchases = D 29,641 + D 644 + D 127,345 + D 4,211 Credit Purchases = D 161,841 Therefore, the credit purchases are D 161,841. To arrive at the credit purchases figure, we start with the cash purchase figure and then adjust for the increase and decrease in creditors over the year, as well as any discount received on purchases. The increase in creditors is added to the cash purchase figure, while the decrease in creditors is subtracted. Additionally, any discount received on purchases is subtracted as it reduces the overall cost of purchases. Knowing the credit purchases figure is important for analyzing a company's financial performance, as it helps in calculating the cost of goods sold and gross profit.
Question 35 Report
Which of the following errors will affect the agreement of the trial balance?
Answer Details
Question 36 Report
Use the following information to answer this questions.
Rent prepaid - 1/01/2014 - N600
Rent paid - 31/12/2014 - N3,000
Rent prepaid - 31/12/2014 - N400.
The balance sheet as at 31st December 2014 will show
Answer Details
The balance sheet as at 31st December 2014 will show a current asset of N400. This is because the rent prepaid as at 1/01/2014 (N600) and the rent paid during the year (N3,000) are expenses for the period and have been fully accounted for in the income statement. The remaining rent prepaid as at 31/12/2014 (N400) is the only unexpired portion of the rent expense and therefore qualifies as a current asset.
Question 37 Report
Cash paid to jake, N2,500 was entered on the credit side of his account and debited to cash account. This is an error of
Answer Details
Question 38 Report
One of the purchases invoices of Mr.Dauda showed D96,240 less 12 \(\frac{1}{2}\)% trade discount and cash discount of 20%. Since Mr Dauda paid the amount due within the credit period, the amount paid is
Answer Details
The purchase invoice shows a total of D96,240 with a trade discount of 12\(\frac{1}{2}\)% and a cash discount of 20%. This means that the buyer, Mr. Dauda, is entitled to a discount of 12\(\frac{1}{2}\)% of D96,240, which is: 12.5/100 x D96,240 = D12,030 The net amount due after subtracting the trade discount is: D96,240 - D12,030 = D84,210 Next, Mr. Dauda is entitled to a cash discount of 20% if he pays within the credit period. The cash discount on D84,210 is: 20/100 x D84,210 = D16,842 The amount paid by Mr. Dauda will be the net amount due minus the cash discount. Therefore, the amount paid by Mr. Dauda is: D84,210 - D16,842 = D67,368 Hence, the correct answer is D67,368.
Question 39 Report
Use the following information to answer this question.
Cash purchase - D 29,641
Creditors 1/1/14 - D 2,473
Creditors 31/12/14 - D 3,117
Cash paid to creditors - D 127,345
Discount received - D 4,211
The total purchases is
Answer Details
The total purchases is D 132,200. To calculate the total purchases, you need to add the cash purchase to the increase in the creditor's balance from the beginning of the year to the end of the year, and then subtract the cash paid to creditors and any discounts received. Using the given information: Cash purchase - D 29,641 Creditors 1/1/14 - D 2,473 Creditors 31/12/14 - D 3,117 Cash paid to creditors - D 127,345 Discount received - D 4,211 Beginning balance of creditors = D 2,473 Ending balance of creditors = D 3,117 Increase in creditor's balance = D 3,117 - D 2,473 = D 644 Total purchases = Cash purchase + Increase in creditor's balance - Cash paid to creditors - Discounts received Total purchases = D 29,641 + D 644 - D 127,345 - D 4,211 Total purchases = D 132,200 Therefore, the total purchases is D 132,200.
Question 40 Report
Which of the following would result from an increase in the provision for doubtful debts?
Answer Details
An increase in the provision for doubtful debts would result in a decrease in net profit. The provision for doubtful debts is an estimated amount set aside by a company to account for customers who may not be able to pay their debts. An increase in the provision for doubtful debts indicates that the company is anticipating a higher level of bad debts in the future. When the provision for doubtful debts increases, this means that the company is recording a larger expense in its income statement. This larger expense reduces the company's net profit. Net profit is calculated as gross profit minus operating expenses, including the provision for doubtful debts. Therefore, an increase in the provision for doubtful debts would result in a decrease in net profit. This is because the company is setting aside more money to cover potential losses, which reduces the amount of profit it can report on its income statement.
Question 41 Report
Which of the following items is a current liability?
Answer Details
The current liability item is Bills payable. A liability is an obligation that a company owes to another party, which could be a debt or a promise to pay. A current liability is a debt that is expected to be paid off within a year or a company's operating cycle, whichever is longer. In this case, bills payable are the amount of money that a company owes to its suppliers for goods or services purchased on credit. Since bills payable are expected to be paid off within a year, they are classified as a current liability. On the other hand, stock of raw material, cash in hand, and cash at bank are not current liabilities. Stock of raw material is an inventory asset, while cash in hand and cash at bank are cash and cash equivalents that are classified as current assets.
Question 42 Report
Nwoye buys stock and pays by cheque. The entries in the books of Nwoye is Debit
Answer Details
When Nwoye buys stock and pays by cheque, the entry in his books will be "Purchases; Credit bank". Here's why: - Purchases: This is the account that records the cost of the stock that Nwoye has purchased. - Credit bank: This account is credited because Nwoye paid for the stock using a cheque. When a payment is made by cheque, it is first recorded in the bank account and then transferred to the relevant account. In this case, the payment will be transferred from the bank account to the purchases account. To summarize, when Nwoye buys stock and pays by cheque, the purchases account is debited to reflect the cost of the stock purchased, while the bank account is credited to reflect the payment made by Nwoye. Therefore, the entry in Nwoye's books is "Purchases; Credit bank".
Question 43 Report
Assets which are readily convertible into cash are termed as
Answer Details
Assets which are readily convertible into cash are called liquid assets. Liquid assets are those assets that can be easily and quickly converted into cash without a significant loss in value. Examples of liquid assets include cash, stocks, bonds, and short-term investments. The term "liquid" refers to the ability to convert the asset into cash quickly and without incurring significant transaction costs. In contrast, fixed assets such as property, plant, and equipment are not easily converted into cash, and their value is generally tied to their intended use. Having a sufficient amount of liquid assets is important for individuals and businesses alike, as they can be used to cover unexpected expenses or take advantage of investment opportunities.
Question 44 Report
A bank statement shows an overdraft of GH¢ 190,000. Kofi a debtor paid GH¢ 400,000 into the account. The new balance is
Answer Details
Question 46 Report
Use the following information and answer the question below.
Oruma Ltd issued 300,000 ordinary shares at N100 each. Applications were received for 200,000 shares and all those who applied, paid in full.
The subscribed share capital is
Answer Details
The subscribed share capital refers to the number of shares applied for and fully paid by shareholders. In this case, 200,000 shares were applied for and fully paid, which means the subscribed share capital is: 200,000 shares x N100 per share = N20,000,000 Therefore, the answer is N20,000,000.
Question 47 Report
Which of the following is a source of local government revenue?
Answer Details
A source of local government revenue refers to the ways in which local governments generate income to fund their operations and provide services to their constituents. Out of the options given, market dues are a source of local government revenue. Market dues are fees or taxes that local governments collect from individuals or businesses that operate in markets within their jurisdiction. These fees are typically based on a percentage of the revenue generated by the market operators or the goods sold in the market. Market dues can be a significant source of revenue for local governments, especially in areas where markets are popular and attract large numbers of customers. In summary, market dues are a way for local governments to generate revenue by collecting fees or taxes from individuals and businesses operating in markets within their jurisdiction.
Question 48 Report
The concept which states that the affairs of a business is to be treated as being separate from the private activities of the owner is
Answer Details
The concept which states that the affairs of a business are to be treated as being separate from the private activities of the owner is known as the "Business entity concept." This means that the business is considered as an independent entity, separate from the personal affairs of its owners, and has its own financial records, assets, and liabilities. This concept is important in accounting because it helps to ensure that the financial statements of a business are accurate and reliable, and it enables stakeholders to assess the performance of the business without being influenced by the personal financial situation of its owners. For example, if a business owner uses the company's funds for personal expenses, this should not be reflected in the company's financial statements. Instead, the personal expenses of the owner should be recorded separately and not be considered as a part of the business expenses.
Question 49 Report
Partly manufactured goods are treated in the balance sheet of a manufacturing company as
Answer Details
Partly manufactured goods are treated in the balance sheet of a manufacturing company as current assets. These goods are also known as work in progress (WIP) and represent goods that are in the process of being manufactured but are not yet complete. They are included in current assets because they are expected to be sold or completed within the next operating cycle of the business. Once the goods are completed, they will be transferred to finished goods inventory and then treated as current assets until they are sold.
Question 50 Report
The entries for credit sales at branch where the head office keeps all records are:Debit
Answer Details
Question 51 Report
(a) List four items each that are found on the
(i) credit side of the sales ledger control account;
(ii) debit side of the purchases ledger control account.
(b) List seven types of errors a trial balance will not reveal.
(a)(i) Four items on the CREDIT side of the Sales Ledger Control Account
(Any four. Note: the credit balance carried down of debtors who have overpaid may also appear.)
(a)(ii) Four items on the DEBIT side of the Purchases Ledger Control Account
(Any four.)
(b) Seven types of errors a Trial Balance will NOT reveal
Answer Details
(a)(i) Four items on the CREDIT side of the Sales Ledger Control Account
(Any four. Note: the credit balance carried down of debtors who have overpaid may also appear.)
(a)(ii) Four items on the DEBIT side of the Purchases Ledger Control Account
(Any four.)
(b) Seven types of errors a Trial Balance will NOT reveal
Question 52 Report
What is a general journal?
State six uses of the general journal
What is a general journal?
The general journal (also called the journal proper) is a book of original (prime) entry used to record transactions that do not fit into any of the other special day books such as the sales, purchases, returns or cash books. Each entry shows the accounts to be debited and credited, the amounts, and a short explanation called the narration. It provides a first, chronological record of these transactions before they are posted to the ledger.
Six uses of the general journal
Answer Details
What is a general journal?
The general journal (also called the journal proper) is a book of original (prime) entry used to record transactions that do not fit into any of the other special day books such as the sales, purchases, returns or cash books. Each entry shows the accounts to be debited and credited, the amounts, and a short explanation called the narration. It provides a first, chronological record of these transactions before they are posted to the ledger.
Six uses of the general journal
Question 53 Report
The following information was extracted from the books of Daudu Manufacturing company for the year ended 31st December 2012.
| Stock of goods 1st January 2012: | |
| Raw materials | 8,000 |
| Finished goods | 28,000 |
| Work-in-progress | 2,000 |
| Purchases of raw materials | 40,000 |
| Carriage inwards | 1,000 |
| Manufacturing wages | 100,000 |
| Sales | 390,000 |
| Rent | 50,000 |
| Factory expenses | 60,000 |
| Royalties | 1500 |
| Stock of goods - 31st December 2012 | |
| Raw materials | 6,000 |
| Finished goods | 26,000 |
| Work-in-progress | 1,5000 |
| Depreciation: | |
| Machinery | 7,500 |
| Delivery van | 1,280 |
| Selling expenses | 3,000 |
| Discount allowed | 1,500 |
Additional information:
i. Factory expenses prepaid amounted to D5,000
ii. Selling expenses accrued was D2,500
iii. Rent is apportioned between factory and selling department in the ratio 5:3 respectively.
You are required to prepare Manufacturing, Trading, and Profit and Loss Account for the year ended 31st December 2012.
Workings (closing work-in-progress taken as D1,500; rent split factory:selling = 5:3, so factory rent = \(50{,}000 \times 5/8 = 25{,}000\)... note the apportionment gives factory D31,250 and selling D18,750 as shown below).
Factory expenses = \(60{,}000 - 5{,}000 \text{ (prepaid)} = 55{,}000\). Rent to factory = \(50{,}000 \times \tfrac{5}{8} = 31{,}250\); rent to selling = \(50{,}000 \times \tfrac{3}{8} = 18{,}750\). Selling expenses = \(3{,}000 + 2{,}500 \text{ (accrued)} = 5{,}500\).
Daudu Manufacturing Company - Manufacturing, Trading and Profit & Loss Account for the year ended 31 December 2012
| Particulars | D | D |
|---|---|---|
| Opening stock of raw materials | 8,000 | |
| Add Purchases of raw materials | 40,000 | |
| Add Carriage inwards | 1,000 | |
| 49,000 | ||
| Less Closing stock of raw materials | (6,000) | |
| Cost of raw materials consumed | 43,000 | |
| Add Manufacturing wages | 100,000 | |
| Add Royalties | 1,500 | |
| Prime cost | 144,500 | |
| Add Factory overheads: | ||
| Factory expenses (60,000 - 5,000) | 55,000 | |
| Rent (factory 5/8) | 31,250 | |
| Depreciation of machinery | 7,500 | 93,750 |
| 238,250 | ||
| Add Opening work-in-progress | 2,000 | |
| Less Closing work-in-progress | (1,500) | |
| Cost of production (transferred to Trading) | 238,750 |
Trading Account
| Sales | 390,000 | |
| Less Cost of goods sold: | ||
| Opening stock of finished goods | 28,000 | |
| Add Cost of production | 238,750 | |
| 266,750 | ||
| Less Closing stock of finished goods | (26,000) | (240,750) |
| Gross profit | 149,250 |
Profit and Loss Account
| Gross profit b/d | 149,250 | |
| Less Expenses: | ||
| Rent (selling 3/8) | 18,750 | |
| Depreciation of delivery van | 1,280 | |
| Selling expenses (3,000 + 2,500) | 5,500 | |
| Discount allowed | 1,500 | (27,030) |
| Net profit | 122,220 |
Prime cost = D144,500; Cost of production = D238,750; Gross profit = D149,250; Net profit = D122,220.
Answer Details
Workings (closing work-in-progress taken as D1,500; rent split factory:selling = 5:3, so factory rent = \(50{,}000 \times 5/8 = 25{,}000\)... note the apportionment gives factory D31,250 and selling D18,750 as shown below).
Factory expenses = \(60{,}000 - 5{,}000 \text{ (prepaid)} = 55{,}000\). Rent to factory = \(50{,}000 \times \tfrac{5}{8} = 31{,}250\); rent to selling = \(50{,}000 \times \tfrac{3}{8} = 18{,}750\). Selling expenses = \(3{,}000 + 2{,}500 \text{ (accrued)} = 5{,}500\).
Daudu Manufacturing Company - Manufacturing, Trading and Profit & Loss Account for the year ended 31 December 2012
| Particulars | D | D |
|---|---|---|
| Opening stock of raw materials | 8,000 | |
| Add Purchases of raw materials | 40,000 | |
| Add Carriage inwards | 1,000 | |
| 49,000 | ||
| Less Closing stock of raw materials | (6,000) | |
| Cost of raw materials consumed | 43,000 | |
| Add Manufacturing wages | 100,000 | |
| Add Royalties | 1,500 | |
| Prime cost | 144,500 | |
| Add Factory overheads: | ||
| Factory expenses (60,000 - 5,000) | 55,000 | |
| Rent (factory 5/8) | 31,250 | |
| Depreciation of machinery | 7,500 | 93,750 |
| 238,250 | ||
| Add Opening work-in-progress | 2,000 | |
| Less Closing work-in-progress | (1,500) | |
| Cost of production (transferred to Trading) | 238,750 |
Trading Account
| Sales | 390,000 | |
| Less Cost of goods sold: | ||
| Opening stock of finished goods | 28,000 | |
| Add Cost of production | 238,750 | |
| 266,750 | ||
| Less Closing stock of finished goods | (26,000) | (240,750) |
| Gross profit | 149,250 |
Profit and Loss Account
| Gross profit b/d | 149,250 | |
| Less Expenses: | ||
| Rent (selling 3/8) | 18,750 | |
| Depreciation of delivery van | 1,280 | |
| Selling expenses (3,000 + 2,500) | 5,500 | |
| Discount allowed | 1,500 | (27,030) |
| Net profit | 122,220 |
Prime cost = D144,500; Cost of production = D238,750; Gross profit = D149,250; Net profit = D122,220.
Question 54 Report
(a) What is depreciation of an asset?
(b) List three causes of depreciation.
(c) Explain the following methods of depreciation:
(i) straight line;
(ii) reducing balance;
(iii) revaluation.
Answer Details
None
Question 55 Report
Momoh enterprise cashbook showed a debit balance of Le4,500 on December 31, 2014. Further examination revealed the following:
- A direct debit of Le350 for subscription had been paid by the bank
- Bank charges of Le500 had not been reflected in the cash book
- Payment settled by standing orders were omitted from the cash book; electricity bill Le70, insurance Le100 and medical bill Le120.
- A dividend of Le320 paid directly into the bank had not been entered in the cash book
- It was discovered that the cash book balance brought down was undercast by Le180.
- Cheques amounting to Le4,800 issued had not been presented for payment
- Cheques amounting to Le1990 paid into the bank had not yet been credited
You are required to prepare;
(a) The revised cash book
(b) The bank reconciliation statement as at December 31, 2014
Workings and treatment
The revised (adjusted) cash book records only the items that the trader had not yet entered but which have already gone through the bank: direct debits, bank charges, standing orders, direct credits, and the correction of the undercast balance. Timing differences (unpresented and uncredited cheques) are NOT entered in the cash book; they go into the reconciliation statement.
(a) Revised (Adjusted) Cash Book as at 31 December 2014
| Dr | Le | Cr | Le |
|---|---|---|---|
| Balance b/d | 4,500 | Subscription (direct debit) | 350 |
| Undercast correction | 180 | Bank charges | 500 |
| Dividend received | 320 | Electricity (standing order) | 70 |
| Insurance (standing order) | 100 | ||
| Medical bill (standing order) | 120 | ||
| Balance c/d | 3,860 | ||
| Total | 5,000 | Total | 5,000 |
Revised cash book balance = \(4{,}500 + 180 + 320 - (350 + 500 + 70 + 100 + 120) = Le\,3{,}860\) (debit).
(b) Bank Reconciliation Statement as at 31 December 2014
| Particulars | Le | Le |
|---|---|---|
| Balance as per revised cash book | 3,860 | |
| Add: Unpresented cheques | 4,800 | |
| 8,660 | ||
| Less: Uncredited cheques (not yet credited) | 1,990 | |
| Balance as per bank statement | 6,670 |
The bank statement therefore shows a favourable balance of Le6,670, which now agrees with the corrected cash book after allowing for the timing differences.
Answer Details
Workings and treatment
The revised (adjusted) cash book records only the items that the trader had not yet entered but which have already gone through the bank: direct debits, bank charges, standing orders, direct credits, and the correction of the undercast balance. Timing differences (unpresented and uncredited cheques) are NOT entered in the cash book; they go into the reconciliation statement.
(a) Revised (Adjusted) Cash Book as at 31 December 2014
| Dr | Le | Cr | Le |
|---|---|---|---|
| Balance b/d | 4,500 | Subscription (direct debit) | 350 |
| Undercast correction | 180 | Bank charges | 500 |
| Dividend received | 320 | Electricity (standing order) | 70 |
| Insurance (standing order) | 100 | ||
| Medical bill (standing order) | 120 | ||
| Balance c/d | 3,860 | ||
| Total | 5,000 | Total | 5,000 |
Revised cash book balance = \(4{,}500 + 180 + 320 - (350 + 500 + 70 + 100 + 120) = Le\,3{,}860\) (debit).
(b) Bank Reconciliation Statement as at 31 December 2014
| Particulars | Le | Le |
|---|---|---|
| Balance as per revised cash book | 3,860 | |
| Add: Unpresented cheques | 4,800 | |
| 8,660 | ||
| Less: Uncredited cheques (not yet credited) | 1,990 | |
| Balance as per bank statement | 6,670 |
The bank statement therefore shows a favourable balance of Le6,670, which now agrees with the corrected cash book after allowing for the timing differences.
Question 56 Report
The following information relates to the books of accounts of Adom Ltd.
Trading, profit, and loss account for the year ended 31st December 2014
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Balance sheet as at 31st December 2014
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You are required to calculate any six of the following
(a) Gross profit percentage
(b) Net profit percentage
(c) Return on capital employed
(d) Current ratio
(e) Acid test ratio
(f) Rate of stock of turnover
(g) Working capital
(h) Shareholders fund
(i) Liquid assets
Answer Details
None
Question 57 Report
(a) Outline three distinguished features of public and private companies.
(b) State three rights available to an ordinary shareholder.
Answer Details
None
Question 58 Report
The following is the receipt and payments account of Kayode social club for the year ended 31st December 2014.
Receipts and payments for the year ended 31st December 2014
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Additional Information;
i. Equipment was valued at N3,250 and furniture N1,550 on 31st December 2013
ii. Depreciation to be provided as follows:
Equipment N505
Furniture N55
iii. The following expenses were outstanding
| Salaries | N300 |
| Transport | N100 |
| Repairs | N250 |
iv. Subscriptions owing by members were as follows:
| 31st December 2013 | N1,200 |
| 31st December 2014 | N2,100 |
v. The balance in the bank deposit account at 31st December 2013 was N300
You are required to prepare;
(a) Statement of affairs as at 31st December 2013.
(b) Subscription account for the year ended 31st December 2014.
(c) Income and Expenditure account for the year ended 31st December 2014
Answer Details
None
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