The monetary unit concept requires transactions to be recorded in
The monetary unit concept assumes all transactions are recorded in a stable, common currency, excluding inflation effects.
The business entity concept distinguishes between
The business entity concept treats the business as a separate entity from its owners for accounting records.
Under the realization concept, revenue is recognized when
Revenue is recognized when goods are delivered or services are rendered, not necessarily when cash is received.
The prudence concept emphasizes
The prudence concept requires anticipating potential losses but deferring gains until certain.
The double-entry system ensures that
Double-entry accounting records each transaction in at least two accounts, maintaining the accounting equation.
The periodicity concept mandates financial statements to be prepared
The periodicity concept requires reporting at regular intervals (e.g., quarterly, annually) for performance evaluation.
The matching principle requires that
The matching principle aligns expenses with the revenue they generate in the same accounting period.
The historical cost principle records assets at their
Assets are recorded at their original cost under the historical cost principle, not adjusted for market fluctuations.
The objectivity principle prioritizes
The objectivity principle relies on factual, verifiable evidence to ensure reliable accounting records.
The going concern principle assumes a business will
The going concern principle assumes ongoing operations without the need to liquidate assets.
Nominal accounts are used to record
Nominal accounts track temporary items like income (sales) and expenses (rent), closed at period-end.
The trial balance is used to
The trial balance checks that total debits equal total credits, ensuring ledger accuracy.
The consistency principle ensures
Consistency in accounting methods allows for comparability of financial statements across periods.
The materiality principle permits
The materiality principle allows cost-effective treatment of insignificant items, focusing on material transactions.
The dual aspect principle supports
The dual aspect principle ensures every transaction impacts two accounts, foundational to double-entry accounting.
The ledger’s primary function is to
The ledger organizes transactions by account, summarizing data for financial statement preparation.
The accrual principle records revenue and expenses when
The accrual principle recognizes revenue when earned and expenses when incurred, regardless of cash flow.
Real accounts typically include
Real accounts record tangible items like assets (e.g., buildings) and liabilities, carried forward across periods.
The substance over form principle prioritizes
This principle records transactions based on their economic substance rather than their legal form.
The journal is primarily used to record
The journal records non-routine entries like adjustments, corrections, or opening balances.
The balance sheet reflects
The balance sheet shows assets, liabilities, and capital at a specific date, indicating financial position.
Personal accounts are used for transactions with
Personal accounts track transactions with individuals or entities, such as debtors and creditors.
The accounting equation is
The accounting equation (Assets = Liabilities + Capital) balances resources and claims.
Source documents are used to
Source documents (e.g., receipts, invoices) provide verifiable evidence for recording transactions.
The profit and loss account determines
The profit and loss account calculates net profit after deducting expenses from revenue.
A company’s rent account shows ₦200,000, with ₦50,000 prepaid. The rent expense for the period is
Rent expense = Total rent - Prepaid rent = ₦200,000 - ₦50,000 = ₦150,000.
A partnership pays 5% interest on capital. Partner X’s capital is ₦600,000. What is X’s interest?
Interest = 5% of ₦600,000 = ₦30,000.
A machine costs ₦400,000, with a 5-year life and ₦40,000 scrap value. Using straight-line depreciation, the annual charge is
Depreciation = (Cost - Scrap value) / Life = (₦400,000 - ₦40,000) / 5 = ₦72,000.
A bank statement shows ₦150,000, with ₦30,000 unpresented cheques and ₦20,000 uncredited lodgments. The cash book balance is
Cash book balance = ₦150,000 + ₦20,000 - ₦30,000 = ₦140,000.
Cost of goods sold is ₦500,000, with a 25% gross profit margin. Sales are
0.25 = (Sales - ₦500,000) / Sales. Solving, Sales = ₦500,000 / 0.75 = ₦666,667.
In a not-for-profit organization, an excess of expenditure over income is a
A deficit occurs when expenditure exceeds income in a not-for-profit organization.
Current assets are ₦400,000, and current liabilities are ₦250,000. The current ratio is
Current ratio = ₦400,000 / ₦250,000 = 1.6:1.
A 5% provision for doubtful debts is made on ₦300,000 debtors. The provision is
Provision = 5% of ₦300,000 = ₦15,000.
Writing off ₦20,000 in bad debts affects
Bad debts reduce debtors (assets) and increase bad debt expense (expenses).
Working capital is calculated as
Working capital = Current assets - Current liabilities, indicating short-term liquidity.
A company’s sales are ₦800,000, cost of goods sold is ₦600,000, and expenses are ₦100,000. Net profit is
Net profit = Sales - Cost of goods sold - Expenses = ₦800,000 - ₦600,000 - ₦100,000 = ₦100,000.
The trading account shows
The trading account calculates gross profit by deducting cost of goods sold from sales.
A cash discount of ₦5,000 is received for prompt payment. This is recorded as
A cash discount received is treated as income, reducing the cost of purchases.
The purpose of a suspense account is to
A suspense account temporarily holds transactions with errors or unclear details until corrected.
A company’s stock turnover ratio is 4 times, with cost of goods sold at ₦400,000. Average stock is
Stock turnover = Cost of goods sold / Average stock. Thus, 4 = ₦400,000 / Average stock. Average stock = ₦100,000.
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