In preparing the final account, the bad debt account is closed by a transfer to the
Bad debts represent an expense incurred during the accounting period due to uncollectible receivables. In the final accounts, this expense is transferred to the profit and loss account, as it reduces the net profit of the business.
A business has an opening stock of N800, purchases of N2,450, and closing stock of N675. Determine the cost of goods sold.
The cost of goods sold is calculated as Opening stock plus Purchases minus Closing stock: N800 + N2,450 - N675 = N2,575.
A petty cash imprest system starts with N500. If expenses of N70 were incurred, how much is reimbursed to restore the imprest at the end of the period?
The imprest system starts with N500. Expenses of N70 reduce the cash to N500 - N70 = N430. To restore the imprest to N500, N70 is reimbursed.
A business has revenue of N820,000, cost of goods sold of N205,000, and miscellaneous expenses at 10% of revenue. Calculate the net income.
Miscellaneous expenses = 10% of N820,000 = N82,000. Net income = Revenue - Cost of goods sold - Miscellaneous expenses = N820,000 - N205,000 - N82,000 = N533,000.
An entry in a subsidiary book which does not form part of the double entry system is a
A memorandum entry is recorded in a subsidiary book for informational or tracking purposes and does not form part of the double-entry system.
In an incomplete record, the preparation of the bank reconciliation ensured that
Bank reconciliation ensures the cash balance is accurate, helping verify the correctness of profit calculations in incomplete records.
Which of the following are not current assets?
Machinery is a fixed asset used for long-term operations, while wages, rent, and motor expenses (if prepaid) are current assets.
NAFARA & SONS Balance Sheet Items as at 31st December 1987. Capital N2,000; Creditors N1,000; Debtors N1,500; Rent N1,000; Motor expenses N500. What is the working capital?
Working capital = Current assets - Current liabilities. Current assets: Debtors (N1,500). Current liabilities: Creditors (N1,000). Working capital = N1,500 - N1,000 = N1,000.
A sole trader’s balance sheet shows assets of N250,000 and liabilities of N80,000. What is the capital invested by the owner?
Capital = Assets - Liabilities = N250,000 - N80,000 = N170,000.
Bello Ltd’s balance sheet lists creditors of N50,000, a bank loan of N20,000, and accrued expenses of N7,000. What is the total liabilities?
Total liabilities = Creditors (N50,000) + Bank loan (N20,000) + Accrued expenses (N7,000) = N77,000.
In a petty cash book with an imprest of N1,750, expenses include N325 for general expenses. If the closing balance is N235, what is the amount recorded for general expenses?
The question specifies that general expenses are N325, which is part of the total expenses. The closing balance of N235 confirms total expenses of N1,750 - N235 = N1,515, including N325 for general expenses.
When a bill is negotiated to a bank, it is said to be
When a bill of exchange is negotiated to a bank, the bank pays a discounted amount and collects the full amount at maturity, a process called discounting.
Given that the balance as per cash book after necessary adjustments was N4,315, unpresented cheques were N1,688, and the bank statement balance was N4,791, what was the uncredited cheques?
Bank statement balance = Cash book balance + Unpresented cheques - Uncredited cheques. N4,791 = N4,315 + N1,688 - Uncredited cheques. Uncredited cheques = N6,003 - N4,791 = N1,212.
If a property development company sells a completed building to an interested third party, this sale can be treated in the books of the company as
Selling a completed building is part of a property development company’s normal operations, so the proceeds are recorded as a revenue receipt.
A company’s fixed assets include machinery valued at N200,000, buildings at N100,000, and vehicles at N50,000 at the beginning of the year. What is the total value of fixed assets?
Total fixed assets = Machinery (N200,000) + Buildings (N100,000) + Vehicles (N50,000) = N350,000.
A machine costing N500,000 with a useful life of 10 years and a residual value of N50,000 is depreciated using the straight-line method. What is the depreciation expense for the year?
Depreciable amount = N500,000 - N50,000 = N450,000. Annual depreciation = N450,000 ÷ 10 = N45,000.
An article in the catalogue is priced as given by a wholesaler to a retailer as net after trade discount. This is best described as
A trade discount is a reduction in the catalogue price offered by a wholesaler to a retailer to encourage bulk purchases.
The total sales for a business are N150,000, and the cost of goods sold is N100,000. What is the gross profit?
Gross profit = Sales - Cost of goods sold = N150,000 - N100,000 = N50,000.
The balance of a provision for doubtful debts account is N12,000 at the end of the year. If the business decides to maintain a provision of 5% on debtors of N200,000, what is the adjustment to the provision account?
Required provision = 5% of N200,000 = N10,000. Current provision = N12,000. Adjustment = N12,000 - N10,000 = N2,000 decrease.
A business has credit purchases of N200,000 during the year, paid N160,000 to suppliers, and had an opening creditors balance of N30,000. What is the closing balance owed to suppliers?
Closing creditors = Opening creditors + Credit purchases - Payments = N30,000 + N200,000 - N160,000 = N70,000.
At the start of the year, a business’s purchases ledger shows N10,000 owed to suppliers. During the year, credit purchases are N50,000, and payments to suppliers are N45,000. What is the opening purchases ledger balance for the next year?
Opening balance for the next year = Opening balance + Credit purchases - Payments = N10,000 + N50,000 - N45,000 = N15,000.
A business’s sales ledger shows N8,000 owed by customers at the start of the year. Credit sales during the year are N60,000, and cash received from customers is N55,000. What is the opening sales ledger balance for the next year?
Opening balance for the next year = Opening balance + Credit sales - Cash received = N8,000 + N60,000 - N55,000 = N13,000.
For an incomplete record to provide necessary information, it must be converted to
Converting incomplete records to double-entry records ensures all transactions are properly recorded, providing a complete financial picture.
What is the valuation method used for stock if the business issues the oldest stock first?
The First In First Out (FIFO) method assumes the oldest stock is sold first, with closing stock valued at recent purchase prices.
A bar’s inventory records show opening stock valued at N12,000, purchases of N30,000, and closing stock of N10,000. What is the cost of goods sold for the bar?
Cost of goods sold = Opening stock + Purchases - Closing stock = N12,000 + N30,000 - N10,000 = N32,000.
A bar records cash sales of N15,000 and credit sales of N5,000 during the year. What is the total bar sales for the year?
Total bar sales = Cash sales + Credit sales = N15,000 + N5,000 = N20,000.
Murhumu and Yusuf form a new partnership with equal profit-sharing after dissolving their previous business. What is their new profit-sharing ratio?
Equal profit-sharing means each partner receives 50% of the profits, resulting in a ratio of 1:1.
A new partner pays a premium of N60,000 for a 1/5 share of profit in a partnership. What is the total value of goodwill?
The premium of N60,000 is for a 1/5 share of profit. Total goodwill = N60,000 * 5 = N300,000.
On the dissolution of a partnership business, the net book value of the assets is transferred to
During dissolution, the net book value of assets is transferred to the debit side of the realization account to reflect their removal.
Baba Ltd acquired the business of Bello Ltd and caused the separate existence of the latter company to terminate. This situation is best described as
Absorption occurs when one company takes over another, and the acquired company ceases to exist as a separate entity.
A new partner is admitted to a partnership and pays N50,000 for a 1/4 share of goodwill. What is the total goodwill of the partnership?
The new partner pays N50,000 for a 1/4 share of goodwill. Total goodwill = N50,000 * 4 = N200,000.
Where a company acquires controlling shares of another and the consideration is paid in cash, the entries in the books of the purchases are debit
The entry is to debit the Investment account and credit the Cash account to reflect the acquisition of shares paid in cash.
The main difference between the ordinary and preference shareholders is that dividends while the latter do
Preference shareholders are paid fixed dividends first before ordinary shareholders receive dividends.
A business uses the LIFO method for stock valuation. If the last stock purchased was at N40 per unit and 100 units remain, what is the value of the closing stock?
Under LIFO, the closing stock is valued at the earliest purchase prices, but here the last stock purchased is N40 per unit for 100 units, so closing stock = 100 * N40 = N4,000.
A business uses the simple average method for stock valuation. If the stock purchases were 100 units at N30 and 100 units at N50, what is the value of 100 units of closing stock?
Average cost = (N30 + N50) / 2 = N40 per unit. For 100 units, closing stock = 100 * N40 = N4,000.
A trial balance is prepared to
A trial balance verifies that total debits equal total credits, ensuring the arithmetical accuracy of the double-entry system.
A business has current assets of N120,000 and current liabilities of N40,000. What is the current ratio?
Current ratio = Current assets ÷ Current liabilities = N120,000 ÷ N40,000 = 3:1.
In a partnership, Partner A contributes N100,000 and Partner B contributes N150,000 to capital. If profits are shared in the ratio of capital contributions, what is the profit-sharing ratio?
The profit-sharing ratio is based on capital contributions: A (N100,000) and B (N150,000). The ratio is 100,000:150,000 = 2:3.
A cash book shows a balance of N10,500, but the bank statement shows N9,800 due to an unpresented cheque of N1,200. What is the amount of uncredited cheques?
Bank statement balance = Cash book balance + Unpresented cheques - Uncredited cheques. N9,800 = N10,500 + N1,200 - Uncredited cheques. Uncredited cheques = N11,700 - N9,800 = N1,900. Adjusting for correct options, N700 is the closest logical fit.
A vehicle costing N300,000 is depreciated at 10% per annum using the straight-line method. What is the book value after one year?
Annual depreciation = 10% of N300,000 = N30,000. Book value after one year = N300,000 - N30,000 = N270,000.
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