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Question 1 Report
Suppliers accounts are found in the
Answer Details
Suppliers accounts are found in the purchase ledger. The purchase ledger is a part of a company's financial accounts where all transactions related to purchases from suppliers (or creditors) are recorded. This includes the amounts owed for goods or services received but not yet paid for. It helps businesses keep track of what they owe to each supplier and ensures that the financial statements accurately reflect these liabilities. Therefore, the purchase ledger is essential for managing accounts payable and maintaining good relationships with suppliers.
Question 2 Report
The basic accounting equation is
Answer Details
Assets + Liabilities = Owner's Equity. This equation is the foundation of double-entry bookkeeping and ensures that a company's financial statements are balanced. Let's break down the equation:
Assets: These are the resources a company owns, such as cash, inventory, property, and equipment. Liabilities: These are the company's debts or financial obligations that need to be repaid.
Owner's Equity (also called Shareholders' Equity): This represents the owners' claim on the company's assets after all liabilities are settled. It's essentially the difference between the company's assets and liabilities.
Question 3 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 4 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 5 Report
Shares issued free of charge to existing shareholders based on their previous holdings is __ issue
Answer Details
The shares given free of charge to existing shareholders based on their previous holdings are referred to as a bonus issue.
A bonus issue, also known as a scrip issue or capitalization issue, is when a company decides to reward its existing shareholders by issuing them additional shares. This is done in proportion to their current shareholding without any additional cost. For example, a company might issue one bonus share for every ten shares held.
The main reasons for a bonus issue include:
It is important to note that while a bonus issue increases the number of shares outstanding, it does not change the overall market capitalization of the company, as the value of each share is adjusted accordingly.
Question 6 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 7 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 8 Report
The document used in making lodgments into a current account is
Answer Details
The document used to make lodgments into a current account is the paying-in slip.
Here's why:
A paying-in slip is a small form provided by a bank that allows you to deposit money into your account. When you want to add funds to your current account, you fill out this slip with details such as the amount of money you are depositing, your account number, and your name. You then hand both the slip and the money to the bank teller who processes the transaction for you. Alternatively, it can be used in an automated bank machine that accepts deposits.
Other documents or instruments like a cheque book, pass book, and credit card serve different purposes:
In summary, when depositing money directly into a current account, the paying-in slip is the correct document used for that purpose.
Question 9 Report
A person who prepares, analyses and interprets financial statements is known as a/an
Answer Details
A person who prepares, analyses, and interprets financial statements is known as an accountant. An accountant is a professional who is highly trained in the field of accounting, which involves managing financial records, summarizing financial positions, and ensuring compliance with financial regulations.
Here is why the role of an accountant is important:
The role of a cashier is primarily to handle cash transactions. A bookkeeper assists in recording day-to-day financial transactions, and an analyst often focuses on analyzing various data sets and trends rather than specifically preparing financial statements. However, it is the accountant who brings together preparation, analysis, and interpretation of comprehensive financial data.
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
Goodwill is taken into account in partnership business when
Answer Details
When a new partner joins the existing partnership, they bring in capital or expertise. The existing goodwill of th business (positive reputation, customer base, etc.) might justify paying the existing partners a premium above the book value of their capital investment. This premium is recorded as goodwill.
Question 12 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 13 Report
The ledger containing the accounts of debtors and creditors is
Answer Details
The ledger that contains the accounts of debtors and creditors is called the personal ledger. This is an essential distinction in accounting because it helps categorize the accounts appropriately. Here is why:
Personal Accounts are accounts that relate specifically to individuals or entities with whom the business has direct dealings such as customers (debtors) and suppliers (creditors). These are entities that the business can identify by name, and they usually consist of accounts that show the amounts the business owes to others or the amounts others owe to the business.
The two primary classifications within personal accounts are:
In contrast:
Impersonal Accounts are divided into Real Accounts and Nominal Accounts.
In summary, any account representing a person or entity that can be identified by name, such as debtors or creditors, falls under personal accounts in the ledger.
Question 14 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 15 Report
The following balances was exgtracted 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 | 
The prime cost is
Answer Details
Prime Cost = Direct Materials Cost + Direct Labor Cost 
Direct Materials Cost (Cost of Raw Materials Consumed): We have already calculated this in the previous question and found it to be #435,000 
Prime Cost = #435,000 (Direct Materials) + #65,000 (Direct Labor) 
Prime Cost = #500,000 
Question 16 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 17 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 18 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 19 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 20 Report
The amount by which assets exceeds liabilities is
Answer Details
The amount by which assets exceed liabilities is known as capital. This is a crucial concept in finance and accounting. Here's a simple explanation:
Assets are things of value that an individual or a company owns. They can include items like cash, property, equipment, and investments. They represent what the entity owns or is owed.
Liabilities are the obligations or debts that an individual or a company owes to others. They can include loans, mortgages, and other forms of debts or financial responsibilities. They represent what the entity owes to others.
The capital, also known as equity, is the net value that remains after all liabilities have been subtracted from all assets. In a simplified equation, it can be expressed as:
Capital = Assets - Liabilities
Therefore, if a company has more assets than liabilities, the excess amount is positive, indicating a strong capital position. This is an important measure of financial health, showing the remaining value available to the owners or shareholders after all debts have been paid.
Question 21 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 22 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 23 Report
The return on debenture holding is
Answer Details
A debenture is a type of long-term debt instrument issued by a company to borrow money from investors. When you hold a debenture, you are effectively lending money to the company, and in return, you expect a regular return. The return received by debenture holders is in the form of interest.
Here's a simple explanation of why it's interest:
In contrast:
Therefore, the return on debenture holding is characterized by interest payments. These payments are made regardless of whether the company makes a profit, as long as it is solvent enough to meet its interest obligations.
Question 24 Report
| # | # | |
Debtors  | 
   2000 | 6000 | 
Stock  | 
   1000 | 1300 | 
Discount allowed  | 
   500 | |
Cash received from debtors  | 
   10000 | 
Sales for the year is
Answer Details
Sales for the year = 10,000 +60000 - 2000 = #14,000 
Note that: the question is not asking to prepare a sales ledger but rather, the figure of sales only. 
Question 25 Report
The short term solvency of a company is determined with ___ ratio
Answer Details
The acid-test ratio assesses a company's ability to meet its short-term obligations (due within a year) using its most liquid assets. It goes beyond the current ratio by excluding inventory from the calculation, as inventory might take longer to convert into cash to pay off debts.
Question 26 Report
The following balances were extracted from the books of Onuoha, a trader on 31st December 2005
| Audit fee | 12000 | 
| General expenses | 30000 | 
| Purchases | 70000 | 
| Commission paid | 30000 | 
| Stock (1 - 01 - 2005) | 10000 | 
| Stock ( 31 - 12 - 2005) | 15000 | 
| Sales | 120000 | 
The gross profit is
Answer Details
To determine the gross profit, we need to calculate the difference between the sales and the cost of goods sold (COGS). The formula for gross profit is:
Gross Profit = Sales - Cost of Goods Sold (COGS)
The Cost of Goods Sold (COGS) is calculated as follows:
COGS = Opening Stock + Purchases - Closing Stock
Calculating the COGS:
COGS = 10,000 + 70,000 - 15,000
COGS = 80,000 - 15,000
COGS = 65,000
Now, calculate the Gross Profit:
Gross Profit = Sales - COGS
Gross Profit = 120,000 - 65,000
Gross Profit = 55,000
Therefore, the gross profit is #55,000.
Question 27 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 for the year was
Answer Details
Expenditure:
#15,000 (Salaries) + #7,000 (Vehicles fueling)
= #22,000
Note that the question is only asking for expenditure and not capital or recurrent expenditure
Question 28 Report
The net worth of a business is the
Answer Details
The net worth of a business, also known as the owner's equity or shareholders' equity, is essentially the value left over for the owners after all liabilities have been subtracted from the assets. To put it simply, it represents the company's total assets minus its total liabilities.
Let's break this down:
The formula to calculate net worth is:
Net Worth = Assets - Liabilities
Understanding the net worth helps in assessing the company's financial health. If the assets exceed liabilities, it indicates a positive net worth, which is a good sign, showing that the business has enough assets to cover its obligations.
Let's examine the options given:
Thus, the net worth is fundamentally linked to assets and liabilities, and it is a crucial measure of what the owners have in the business once all liabilities are paid off. It is not directly descriptive of just a bank loan, capital, asset, or debenture, but rather a measure involving assets and liabilities.
Question 29 Report
The value of assets on dissolution of partnership is debited to realization account and credited to ___ account
Answer Details
The realization account is used to record the sale of assets and settlement of liabilities during the dissolution process.
When assets are sold, cash is received. This cash is credited to the cash account to reflect the increase in cash holdings.
Ultimately, the goal of dissolution is to convert all assets into cash, settle liabilities, and distribute any remainin cash among the partners according to their profit-sharing ratios
Question 30 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 31 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 32 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 33 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 34 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 35 Report
Goods bought on credit are first entered in the
Answer Details
When goods are bought on credit, they are first recorded in the purchases day book. The purchases day book is a special journal used to record all credit purchases of goods meant for resale. This is crucial because it keeps track of the amounts owed to suppliers and helps manage the accounts payable for a business.
Here's a simple breakdown of why it is the purchases day book:
Therefore, by recording the credit purchases in the purchases day book, a business keeps an accurate and organized record of its obligations, facilitating better financial management.
Question 36 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 37 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 cost of goods sold is
Answer Details
To calculate the Cost of Goods Sold (COGS), we need to use the formula:
COGS = Opening Stock + Purchases - Closing Stock
Let's break it down:
By plugging these values into the formula, we get:
COGS = 2,200 + 18,000 - 1,000
After calculating, we find:
COGS = 19,200
So, the Cost of Goods Sold is #19,200.
Question 38 Report
The following balances was exgtracted 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 | 
Factory overhead cost is
Answer Details
To calculate the Factory Overhead Cost, we need to consider the expenses that are not directly tied to the production process but are essential for running the factory smoothly. These include indirect costs like lighting, heating, depreciation of machinery, and indirect labor. From the data given, we will identify the elements that contribute to the Factory Overhead Cost:
Other elements in the data such as stock of raw materials, purchase of raw materials, direct wages, and work in progress are part of the cost of production but do not contribute to the Factory Overhead Cost.
Therefore, the total Factory Overhead Cost is calculated by summing up all the overhead costs:
Factory Overhead Cost = Indirect Wages + Depreciation on Plants + Factory Rent
= #28,000 + #32,000 + #3,500
= #63,500
Thus, the Factory Overhead Cost is #63,500.
Question 39 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 40 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%.
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