The primary purpose of a trial balance is to
A trial balance checks arithmetic accuracy by ensuring debits equal credits.
An insurance account has a debit balance of ₦180,000, with ₦40,000 prepaid. The insurance expense is
Expense = ₦180,000 - ₦40,000 = ₦140,000.
The concept assuming a business will continue indefinitely is
Going concern assumes ongoing operations without liquidation.
Cost of raw materials consumed is calculated as
Consumed = Opening stock + Purchases - Closing stock.
Double-entry for an asset purchase is
Asset purchase debits the asset account and credits cash or creditor.
A partner’s 7% interest on ₦400,000 capital is
Interest = 7% of ₦400,000 = ₦28,000.
The accrual concept means
Accrual records revenue/expenses when earned/incurred, not when cash moves.
A sole trader’s closing capital, with opening capital ₦100,000, net profit ₦90,000, drawings ₦30,000, and additional capital ₦20,000, is
Closing capital = ₦100,000 + ₦90,000 + ₦20,000 - ₦30,000 = ₦180,000.
The accounting equation is
Assets equal the sum of liabilities and capital.
A machine costing ₦250,000, with a 5-year life and ₦25,000 scrap value, has an annual depreciation of
Depreciation = (₦250,000 - ₦25,000) / 5 = ₦45,000.
A suspense account is used to
Suspense accounts temporarily hold trial balance discrepancies.
Bank statement balance is ₦150,000, with ₦25,000 unpresented cheques and ₦15,000 uncredited lodgments. Cash book balance is
Cash book = ₦150,000 + ₦15,000 - ₦25,000 = ₦140,000.
The financial statement showing a business’s position at a date is
Balance sheet details assets, liabilities, and capital at a specific date.
With gross profit ₦400,000, net profit ₦150,000, and administrative expenses ₦100,000, selling expenses are
Selling expenses = ₦400,000 - ₦150,000 - ₦100,000 = ₦150,000.
The prudence concept requires
Prudence ensures provisions for potential losses and cautious income recognition.
A sales ledger balance of ₦500,000, after writing off ₦20,000 bad debts, is
New balance = ₦500,000 - ₦20,000 = ₦480,000.
The trading account differs from the profit and loss account in that it
Trading account calculates gross profit; profit and loss calculates net profit.
With a cost of goods sold ₦350,000 and 30% gross profit margin, sales are
0.30 = (Sales - ₦350,000) / Sales; Sales = ₦500,000.
A nominal account is
Nominal accounts record income/expenses, like rent.
A company issues 80,000 shares at ₦2.50 each with a 12% dividend. Total dividend is
Capital = 80,000 × ₦2.50 = ₦200,000; Dividend = 12% of ₦200,000 = ₦24,000.
The consistency concept ensures
Consistency maintains uniform accounting methods over time.
The profit and loss account determines
It calculates net profit/loss after expenses.
Department A sales ₦300,000, Department B ₦500,000. Total expenses ₦160,000 apportioned by sales. Department A’s share is
A’s share = (₦300,000 / ₦800,000) × ₦160,000 = ₦60,000.
A source document in accounting is
Sales invoices provide transaction evidence.
An undercast of ₦10,000 in the purchases day book affects the trial balance by
Undercast purchases understate the debit side.
The materiality concept implies
Materiality focuses on significant transactions for efficiency.
Break-even point in units is
Break-even = Fixed costs / Contribution per unit.
The cash book records
Cash book tracks cash and bank transactions.
Current assets ₦250,000, current liabilities ₦100,000. The current ratio is
Current ratio = ₦250,000 / ₦100,000 = 2.5:1.
A real account is
Real accounts track assets like machinery.
Provision for doubtful debts at 6% of ₦150,000 debtors is
Provision = 6% of ₦150,000 = ₦9,000.
The historical cost concept requires
Assets are recorded at their original cost.
Cash book debit balance ₦70,000, unpresented cheques ₦15,000. Bank statement balance is
Bank balance = ₦70,000 + ₦15,000 = ₦85,000.
A book of original entry is
Sales journal records credit sales first.
Profits shared 4:3, total profit ₦140,000. The larger share is
Larger share = (4/7) × ₦140,000 = ₦80,000.
The entity concept ensures
Business is a distinct entity from its owner.
A ₦400,000 machine, depreciated at 12% reducing balance. Second-year depreciation is
Year 1: ₦48,000; Year 2: 12% of ₦352,000 = ₦42,240.
A receipt and payment account in a not-for-profit organization
It records cash and bank transactions.
Working capital ₦200,000, current liabilities ₦90,000. Current assets are
Current assets = ₦200,000 + ₦90,000 = ₦290,000.
A company’s return on capital employed is 15%, with capital ₦500,000. Net profit is
ROCE = Net profit / Capital; 15% = Net profit / ₦500,000; Net profit = ₦75,000.
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