34 reviewed questions with answers and explanations.
Practice selection: full-paper coverage has not been confirmed.
The accounting principle that is applied to check arbitrary actions on the part of accountants is
C: Objectivity
Objectivity requires accounting judgments to rest on evidence and defensible criteria. It constrains arbitrary choices rather than allowing personal preference to determine the figures.
AI-reviewed · calculation checkedThe rule of accounting equation requires that account payable should be placed under
A: Liabilities
Accounts payable represent amounts owed to suppliers or other creditors. They are obligations of the business and therefore belong within liabilities in the accounting equation.
AI-reviewed · calculation checkedCash receipts: capital ₦6,600; sales ₦3,000; debtors ₦2,500. Payments: purchases ₦3,500; stationery ₦1,300; wages ₦2,700. Drawings are one-third of capital. Find drawings.
B: ₦2,200
The stipulated withdrawal is one-third of capital ₦6,600. Dividing ₦6,600 by three gives drawings of ₦2,200, a reduction in cash and owner’s interest.
AI-reviewed · calculation checkedCash receipts: capital ₦6,600; sales ₦3,000; debtors ₦2,500. Payments: purchases ₦3,500; stationery ₦1,300; wages ₦2,700. Drawings are one-third of capital. Find closing cash after drawings.
B: ₦2,400
Receipts total ₦12,100. Payments before drawings total ₦7,500, and drawings are ₦2,200. Closing cash is ₦12,100 − ₦7,500 − ₦2,200 = ₦2,400.
AI-reviewed · calculation checkedThe recipient whose name appears on cheque is called a
D: Payee
The payee is the person or organisation named to receive payment on a cheque. The drawer issues it, while the drawee is the bank directed to pay.
AI-reviewed · calculation checkedThe imprest account is subsidiary to the
C: Cash book
An imprest petty-cash record is a subsidiary cash record for small payments. It supports the main cash book, which records the funds supplied and replenished.
AI-reviewed · calculation checkedZakari starts with a shop costing ₦54,000 and stock ₦7,600. Annual profit is ₦22,100 and closing capital ₦73,800. Find personal drawings.
B: ₦9,900
Opening investment is ₦54,000 + ₦7,600 = ₦61,600. Add profit ₦22,100 and deduct closing capital ₦73,800: drawings equal ₦9,900.
AI-reviewed · calculation checkedThe balance on the provision for depreciation account is
B: deducted from fixed assets on the balance sheet
Accumulated depreciation is a contra-asset balance. It is deducted from the cost of the relevant fixed assets to present their remaining carrying amount on the balance sheet.
AI-reviewed · calculation checkedDuring the year rates paid are ₦2,250 at ₦125 per month. Electricity paid is ₦1,035 at ₦115 per month. Find prepaid rates.
B: ₦750
Twelve months of rates cost 12 × ₦125 = ₦1,500. Against payments of ₦2,250, the excess is ₦750 prepaid; electricity does not affect the rates calculation.
AI-reviewed · calculation checkedMay receipts: 2nd, 80 units at ₦3; 10th, 50 at ₦3.20; 31st, 20 at ₦2.90. Issues: 17th, 20 units; 25th, 60 units. Find the LIFO value of the 17 May issue.
D: ₦64
LIFO issues the most recently received units first. On 17 May the latest receipt is 50 units at ₦3.20; the 20 units issued therefore cost 20 × ₦3.20 = ₦64.
AI-reviewed · calculation checkedWhere closing stock is undervalued, the effect is
B: A decrease in gross profit
Closing stock is deducted when calculating cost of sales. Understating it overstates cost of sales, so gross profit is understated by the same amount.
AI-reviewed · calculation checkedPurchases ledger: opening creditors ₦10,640; credit purchases ₦26,912; returns inwards ₦492; returns outwards ₦810; discount received ₦1,348; discount allowed ₦1,560; supplier payments ₦20,808. Separate closing debit balances total ₦108. Find closing credit balances.
D: ₦14,694
Credit entries total ₦37,552. Payments, returns and discount total ₦22,966; net creditors are ₦14,586. Add the separate ₦108 debit balances to obtain gross closing credit balances of ₦14,694.
AI-reviewed · calculation checkedIn a sales ledger, contra entry is found on the
C: credit side of the debtors’ control account
A contra settlement offsets amounts owed by and to the same counterparty. Credit the debtors control account to reduce receivables and debit creditors control to reduce payables.
AI-reviewed · calculation checkedOpening receivables ₦20,000; closing receivables ₦30,000; customer collections ₦70,000. Find credit sales.
C: ₦80,000
Receivables increase by ₦10,000 during the period. Credit sales must therefore equal collections ₦70,000 plus that increase, giving ₦80,000.
AI-reviewed · calculation checkedGeneral expenses: paid by cheque ₦671; paid in cash ₦70; accrued brought forward ₦65; accrued carried forward ₦115. Find the charge to profit and loss.
C: ₦791
Cash and cheque payments total ₦741. Deduct opening accrual ₦65 relating to the previous period and add closing accrual ₦115: this period’s expense is ₦791.
AI-reviewed · calculation checkedIn converting single entry to final account, the balancing figures on the income and expenses accounts are transferred to the
D: Profit and loss account
Income and expense balances are transferred to profit and loss to determine the period’s net result. Appropriation accounts deal with distribution of that result after it has been calculated.
AI-reviewed · calculation checkedSales ₦12,800; closing inventory ₦4,800; wages ₦1,040; gross profit ₦5,900. Beginning inventory is estimated at 80% of sales. Find beginning inventory.
B: ₦10,240
Beginning inventory is explicitly estimated at 80% of sales. Multiplying the ₦12,800 sales by 0.8 gives ₦10,240; the other account balances are not needed for this estimate.
AI-reviewed · calculation checkedCost classification according to how costs change is determined in relation to the level of what?
C: Activity
Cost behaviour describes how costs change as the level of activity changes. Variable costs respond to activity, while fixed costs remain constant in total within the relevant range.
AI-reviewed · calculation checkedMaterials consumed ₦16,600; other direct cost ₦5,400; factory rent ₦2,300; factory lighting ₦1,200. Production is transferred at cost plus a 20% mark-up. Find manufacturing profit on transfer.
C: ₦5,100
Production cost totals ₦25,500. The manufacturing profit is the stated 20% mark-up on this cost, so ₦25,500 × 0.20 = ₦5,100.
AI-reviewed · calculation checkedMaterials consumed ₦16,600; other direct cost ₦5,400; factory rent ₦2,300; factory lighting ₦1,200. Production is transferred at cost plus a 20% mark-up. Find the value of goods produced at this transfer price.
B: ₦30,600
Add the 20% mark-up to production cost ₦25,500. The specified transfer value is ₦25,500 × 1.20 = ₦30,600, including manufacturing profit of ₦5,100.
AI-reviewed · calculation checkedOn 1 January 2000 a club has clubhouse ₦8,000, subscriptions in arrears ₦300, cash ₦1,000 and wages owed ₦100. There are 50 members paying ₦100 annually. Receipts during 2000 are ₦4,000, including ₦200 of 1999 arrears. Find the opening accumulated fund.
C: ₦9,200
Opening assets total clubhouse ₦8,000, subscriptions due ₦300 and cash ₦1,000 = ₦9,300. Deduct wages owed ₦100 to obtain the opening accumulated fund of ₦9,200.
AI-reviewed · calculation checkedOn 1 January 2000 a club has clubhouse ₦8,000, subscriptions in arrears ₦300, cash ₦1,000 and wages owed ₦100. There are 50 members paying ₦100 annually. Receipts during 2000 are ₦4,000, including ₦200 of 1999 arrears. Find total subscriptions in arrears in the closing balance sheet.
D: ₦1,300
Annual subscriptions due are 50 × ₦100 = ₦5,000. Total arrears at year-end equal opening arrears ₦300 plus current dues ₦5,000 less receipts ₦4,000 = ₦1,300.
AI-reviewed · calculation checkedIn a club’s balance sheet, members’ subscriptions received in advance are regarded as what?
B: Current liability
A club receiving members’ subscriptions before the related period has not yet earned that income. The advance is carried as a current liability until the membership period is provided.
AI-reviewed · calculation checkedDepartment S/T totals: gross profit ₦6,000/₦4,000; salaries and wages ₦1,800/₦1,200. Total electricity ₦2,000; total depreciation ₦1,000, of which S has ₦60. Combined net profit is ₦4,000 and T net profit is ₦1,600. Find S net profit.
C: ₦2,400
Combined departmental net profit is ₦4,000, of which T contributes ₦1,600. Subtracting T’s share gives ₦2,400 net profit for department S.
AI-reviewed · calculation checkedHow are credit sales by a department treated?
A: The same way as normal debtors’ transactions
A department’s sale on credit creates a receivable from its customer. Record it by debiting the customer and crediting sales, just as for ordinary trade-debtor transactions.
AI-reviewed · calculation checkedDiscounts granted to branch customers are treated as a debit to branch
D: Discount account and a credit to branch debtors’ account
Discount allowed is a cost of settling the customer’s account. Debit branch discount and credit branch debtors, reducing the amount still receivable without recording a bank payment.
AI-reviewed · calculation checkedJumoke and Kunle invest ₦25,000 and ₦15,000 respectively. Capital interest is 3%; salaries are ₦1,500 and ₦1,000 respectively. Residual profit is shared 3:2. Gross profit is ₦6,500 and miscellaneous expenses ₦2,500. Find the profit and loss account balance before appropriation.
A: ₦4,000
Profit and loss deducts business expenses from gross profit: ₦6,500 − ₦2,500 = ₦4,000. Partners’ salaries and capital interest are subsequent appropriations of that profit.
AI-reviewed · calculation checkedJumoke and Kunle invest ₦25,000 and ₦15,000 respectively. Capital interest is 3%; salaries are ₦1,500 and ₦1,000 respectively. Residual profit is shared 3:2. Gross profit is ₦6,500 and miscellaneous expenses ₦2,500. Find Kunle’s share of residual profit after appropriations.
D: ₦120
Net profit is ₦4,000. Deduct capital interest ₦1,200 and partners’ salaries ₦2,500, leaving ₦300 residual profit. Kunle receives 2/5 of ₦300, which is ₦120.
AI-reviewed · calculation checkedWhen admitting a new partner, which items are revalued to recognise changes in the business’s net assets?
D: assets and liabilities of the business
Admission of a new partner can require revaluation of assets and liabilities so that changes attributable to the old partnership are recognised before the new profit-sharing arrangement begins.
AI-reviewed · calculation checkedA new partner pays a cash premium for goodwill retained in the partnership. Which entry records it?
A: Debit cash and credit old partners’ capital
A cash premium compensates the existing partners for goodwill rights given up. Debit cash for the receipt and credit the old partners’ capital accounts in their sacrificing proportions.
AI-reviewed · calculation checkedDebentures can be redeemed out of
C: Proceeds from new issue of shares
A new share issue can generate cash used to repay debenture holders. A reserve is an equity balance rather than cash itself, while withholding tax is money owed to the tax authority.
AI-reviewed · calculation checkedShare limits: 600,000 preference shares at ₦0.50 and 600,000 ordinary shares at ₦1. Issued ordinary capital is ₦500,000; no preference shares issued. Capital reserves ₦250,000; revenue reserves ₦207,000; long-term liabilities ₦400,000. Find owners’ equity.
C: ₦957,000
Owners’ equity includes issued ordinary capital ₦500,000 plus capital reserves ₦250,000 and revenue reserves ₦207,000. The total is ₦957,000; long-term liabilities are excluded.
AI-reviewed · calculation checkedShare premium is an example of
B: capital reserves
Share premium arises from shareholders paying more than the nominal value of shares. It is contributed capital, so it is classified as a capital reserve rather than a reserve of trading profits.
AI-reviewed · calculation checkedThe statement of assets and liabilities in the public sector can be described as the
C: balance sheet of government
A balance sheet presents assets and liabilities at a reporting date, together with the residual interest. An income statement or funds-flow statement instead reports movements over a period.
AI-reviewed · calculation checked