The term 'accounting period' is used to refer to the
The accounting period is the time span, typically one year, covered by financial statements like the balance sheet or income statement, reflecting a business’s financial performance and position.
Assigning revenues to the accounting period in which goods were sold or services rendered and expenses incurred is known as
The matching concept ensures revenues are recognized when earned and expenses when incurred, aligning them with the period they relate to, regardless of cash flow timing.
The accounting convention which states that profit must not be recognized until realized while all losses should be adequately provided for is termed
The conservatism convention requires that profits be recognized only when realized, while potential losses are accounted for immediately to avoid overstating financial health.
Accounting information is used by investors and creditors of a company to predict
Investors and creditors analyze accounting information to forecast future cash flows, assessing the company’s ability to generate returns or meet debt obligations.
A business purchased a generator for N50,000. Which is the correct method of recording this transaction?
Purchasing a generator, a fixed asset, requires debiting the generator account to increase the asset and crediting the cash account to reflect the payment.
When a business incurs labour cost in installing a fixed asset, the cost is treated as
Labour costs for installing a fixed asset are capitalized as part of the asset’s cost, treated as an additional cost to the asset, increasing its recorded value.
What is the cardinal rule of the double-entry system?
The cardinal rule of double-entry bookkeeping is to debit the account that receives value and credit the account that gives value, ensuring balanced entries.
Makan Gunde bought a freezer for his shop costing N50,000. In recording, he debited office expenses account and credited the bank account. What bookkeeping error has he committed?
Debiting office expenses instead of the freezer (asset) account is an error of principle, as it incorrectly treats a capital expenditure as a revenue expense.
The use of the folio in the ledger is for
The folio number in the ledger facilitates referencing, linking ledger entries to their corresponding journal entries or source documents for tracking.
A cash account has an opening balance of N10,000 on 1/1. On 5/2, N3,000 cash is received, and on 15/10, N5,000 is received via bank. What is the closing balance of the cash account?
Closing balance = Opening balance (N10,000) + Cash received (N3,000) + Cash via bank (N5,000) = N18,000, assuming bank receipt is treated as cash.
The suspense account is used to correct bookkeeping errors where the
A suspense account temporarily holds unknown or unallocated amounts to balance the trial balance until the error is identified and corrected.
The discount column of a three-column cashbook is not balanced off but periodically transferred to the discount account because
Discounts (allowed or received) in the cashbook are not part of the double-entry system and are transferred to the discount account for separate accounting.
When is a petty cash account debited?
The petty cash account is debited when the fund is initially established and each time it is replenished or increased to maintain the float.
When preparing a bank reconciliation statement, which of the following is deducted from the balance per bank statement?
Returned (dishonored) cheques are deducted from the bank statement balance, as they reduce the available funds due to non-payment.
The financial position of an organization at a particular time can be ascertained from the
The balance sheet provides a snapshot of an organization’s financial position at a specific time, detailing assets, liabilities, and equity.
A business records the following: Purchases N20,000, Sales N40,000, Carriage inwards N5,000, Carriage outwards N5,000, Opening stock N10,000, Closing stock N5,000. What is the cost of goods sold?
Cost of goods sold = Opening stock (N10,000) + Purchases (N20,000) + Carriage inwards (N5,000) - Closing stock (N5,000) = N30,000.
A business records the following: Purchases N20,000, Sales N40,000, Carriage inwards N5,000, Carriage outwards N5,000, Opening stock N10,000, Closing stock N5,000. The net profit or loss for the year is determined in the
Net profit or loss is calculated in the profit and loss account by deducting cost of goods sold and other expenses (e.g., carriage outwards) from sales.
A business has the following inventory: Beginning inventory 100 units at N10, Purchase 1 of 200 units at N12, Purchase 2 of 150 units at N15, and Sales of 300 units. Using the FIFO method, determine the value of closing stock.
Total units = 100 + 200 + 150 = 450. Units sold = 300. Closing stock = 150 units. Using FIFO, 150 units from Purchase 2 at N15 = 150 × N15 = N2,250.
A business has the following inventory: Beginning inventory 100 units at N10, Purchase 1 of 200 units at N12, Purchase 2 of 150 units at N15, and Sales of 300 units at N20. Using the FIFO method, calculate the gross profit.
Sales = 300 × N20 = N6,000. Cost of goods sold (FIFO): 100 × N10 = N1,000, 200 × N12 = N2,400. Total COGS = N3,400. Gross profit = N6,000 - N3,400 = N2,600.
A trial balance shows provision for doubtful debts N190 and debtors N6,000. It is required to write off further N300 bad debts, and maintain the provision at 2½% of debtors. To do this, the profit and loss should show a
Debtors after bad debts = N6,000 - N300 = N5,700. New provision = 2.5% × N5,700 = N142.50. Existing provision = N190. Decrease in provision = N190 - N142.50 = N47.50 (rounded to N48). Profit and loss: Debit bad debts N300, debit provision decrease N48.
If a bad debt previously written off is subsequently repaid, the amount collected is recorded as an
A recovered bad debt is recorded as income in the profit and loss account, as it represents an unexpected financial gain.
A business has opening stock of N8,000, purchases of N36,000, sales of N46,000, and closing stock of N2,000. From which of the following sources is the closing stock of a trial most likely to be posted?
Closing stock is determined through physical inventory counts or valuation and is posted to the balance sheet as a current asset.
A business has opening stock of N8,000, purchases of N36,000, sales of N46,000, and closing stock of N2,000. Determine the net profit at 31st December 1993, assuming no other expenses.
Cost of goods sold = Opening stock (N8,000) + Purchases (N36,000) - Closing stock (N2,000) = N42,000. Gross profit = Sales (N46,000) - COGS (N42,000) = N4,000. Net profit (no expenses) = N4,000.
On 1st January 1993, a business has assets: Cash N20,000, Debtors N5,000, Stock N15,000, Furnishings N10,000, and liabilities: Creditors N8,000, Bank overdraft N2,000. Compute the capital at 1st January 1993.
Capital = Assets - Liabilities. Assets = N20,000 + N5,000 + N15,000 + N10,000 = N50,000. Liabilities = N8,000 + N2,000 = N10,000. Capital = N50,000 - N10,000 = N40,000.
On 1st January 1993, a business has an opening capital of N40,000, sales of N60,000, purchases of N30,000, expenses of N5,000, and closing stock of N10,000. Assuming opening stock is N15,000, determine the net profit at 31st December 1993.
Cost of goods sold = Opening stock (N15,000) + Purchases (N30,000) - Closing stock (N10,000) = N35,000. Gross profit = Sales (N60,000) - COGS (N35,000) = N25,000. Net profit = Gross profit - Expenses (N5,000) = N25,000.
Which of the following categories of labour cost will be classified as direct?
Direct labour costs are directly attributable to production, such as a factory worker’s salary, unlike administrative or managerial salaries.
A business has the following inventory: Beginning inventory 50 units at N20, Purchase 1 of 100 units at N25, Purchase 2 of 50 units at N30, and Sales of 150 units. Using the weighted average method, calculate the ending inventory cost.
Total units = 50 + 100 + 50 = 200. Total cost = (50 × N20) + (100 × N25) + (50 × N30) = N1,000 + N2,500 + N1,500 = N5,000. Weighted average cost = N5,000 / 200 = N25. Ending inventory = 50 units × N25 = N1,250.
A business has the following inventory: Beginning inventory 50 units at N20, Purchase 1 of 100 units at N25, Purchase 2 of 50 units at N30, and Sales of 150 units. Using the LIFO method of stock valuation, the ending inventory cost is
Ending inventory = 50 units. Using LIFO, the last units sold are from the most recent purchase, so the ending inventory is 50 units from the beginning inventory at N20 = 50 × N20 = N1,000.
The major difference between the receipt and payment account and the income and expenditure account is that while the former
The receipt and payment account records all cash transactions in the year, regardless of the period they relate to, while the income and expenditure account matches income and expenses to the relevant period.
A hockey club has subscription owing at the beginning of N10, subscription received in advance at the beginning of N45, and subscription received during the period of N2,560. The amount to be shown in the income and expenditure account is
Income for the period = Subscription received (N2,560) + Subscription owing at the beginning (N10) - Subscription received in advance (N45) = N2,570.
A hockey club has subscription owing at the beginning of N10, subscription received in advance at the beginning of N45, and subscription received during the period of N2,560. The net profit from the trading of a non-profit making organization is treated in the income and expenditure account as
Net profit from trading activities in a non-profit organization is recorded as an item of income in the income and expenditure account, contributing to the surplus.
Ada and Udo form a partnership, Ada & Co. Ada contributes cash of N12,000, furnishings worth N18,000, and a motor vehicle worth N70,000. Udo contributes cash of N15,000, a building valued N105,000, and a personal computer worth N15,000. What is the total capital of Ada & Co?
Ada’s capital = N12,000 + N18,000 + N70,000 = N100,000. Udo’s capital = N15,000 + N105,000 + N15,000 = N135,000. Total capital = N100,000 + N135,000 = N235,000.
Ada and Udo form a partnership, Ada & Co. Ada contributes cash of N12,000, furnishings worth N18,000, and a motor vehicle worth N70,000. Udo contributes cash of N15,000, a building valued N105,000, and a personal computer worth N15,000. What is the profit-sharing ratio if it is based on capital contributed by Ada and Udo?
Ada’s capital = N100,000, Udo’s capital = N135,000. Profit-sharing ratio = 100,000:135,000 = 20:27, simplified to 2:3.
The major distinguishing element between the final accounts of a partnership and a sole trader is the
The appropriation account, which distributes profits among partners, is unique to partnership accounts, unlike sole trader accounts where profits go directly to the owner.
Goodwill appears in the books of a business only if it has been
Goodwill is recorded in the books only when purchased, such as during a business acquisition, to reflect its monetary value.
Kayode, Akpan, and Kachalla have capital accounts of N40,000, N50,000, and N70,000, respectively. They admit Wano as a new partner with a one-fifth interest in the partnership capital for N50,000 cash. What is Wano’s capital contribution?
Wano’s capital contribution is the cash amount paid, N50,000, as stated in the question.
Kayode, Akpan, and Kachalla have capital accounts of N40,000, N50,000, and N70,000, respectively. They admit Wano as a new partner with a one-fifth interest in the partnership capital for N50,000 cash. Under which of the following conditions may a partnership be dissolved?
The admission of a new partner often dissolves the existing partnership legally, as it typically requires a new partnership agreement.
Shares issued are paid for and issued to shareholders when
When shares are issued and paid for, the entry debits the bank or cash account for the cash received and credits the shares account to record the issuance.
A limited liability company has an authorized capital of N50 million split into 100 million shares. 80 million shares were offered for subscription at 60k per share in full on application. These have been fully subscribed and issued. What is the nominal value of each share?
Nominal value = Authorized capital / Total shares = N50,000,000 / 100,000,000 = N0.50 per share.
A limited liability company has an authorized capital of N50 million split into 100 million shares. 80 million shares were offered for subscription at 60k per share in full on application. These have been fully subscribed and issued. What is the issued capital?
Issued capital = Number of shares issued × Nominal value = 80,000,000 × N0.50 = N40,000,000.
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