Answer: source dcuments



Question: What transaction involve a situation where payment is made in the future



Answer: Credit transaction



Question: Qualities of good accounting information ar except



Answer: durable



Question: Recording of accounting data in a computerised accounting system is done from prime books to the computer system through  and other devices



Answer: keyboard



Question: What type of accounting system refers to the keeping of accounting record through the use of electronic device of relevant posting in the books of accounting



Answer: Elecrical accounting system



Question: The need for accounting information is important because it does the following



Answer: it is useful for election peparation



Question: Which concept makes a distinction between the receipt of cash and the right to receive it and the payment of cash and the legal obligation to pay it



Answer: Accrual concept



Question: Which convention also known as the convention of prudence is often stated as anticipate no profit provide for all possible losses



Answer: Convention of Conservatism



Question: These are accounting concepts except



Answer: Materiality



Question: What can defined as tangible or intangible resource that is owned by the accounting entity which is expected to generate future economic benefit



Answer: Equity



Question: One of these is not accounting convention that must be applied in financial accounting preparation



Answer: Cost Convention



Question: Which of these is an example of an Asset



Answer: Goodwill



Question: What type of bookkeeping relies on a sided accounting entry to maintain financial information



Answer: Single Entry Bookkeeping



Question: Which of these is an example of an Liability



Answer: Credtors



Question: One of these is the correct accounting equation



Answer: Assets plus Liabilities equals Owners capital



Question: The purpose of the  is primarily to inform the buyer how much is owed for the goods supplied by the seller



Answer: C invoice



Question: The books where transactions are first recorded called books of prime entry before transfering to a ledger is also known as 



Answer: C books of original entry



Question: The main documents involved in a credit transaction are as follows except



Answer: D ledger



Question: This is used to record the credit notes received from suppliers relating to goods returned or where there has been overcharge on an invoice



Answer: B Purchases Returns day book



Question: What type of accounting has to do with providing useful information in the financial statements to extenal users to enable them to make economic decisions



Answer: A Financial accounting



Question: The law requires the seller to give the buyer a  for goods or services that have been paid for in cash



Answer: A receipt



Question: One of these is not a book of prime entry



Answer: D Cash book



Question: Recording transactions in the books of an entity is known as 



Answer: B bookkeeping



Question: What is used to record a variety of things most of which consist of accounting adjustments such as the correction of errors rather than transactions



Answer: A Journal



Question: A  is sent by the seller if the buyer has been undercharged on the invoice It has basically the same layout and information as the invoice except that instead of details of the goods it shows details of the undercharge



Answer: B debit note







      Question

      N50,000 taken from cash till and banked is recorded in the cash book as foollows:



      Answer

      Dr Bank column and Cr Cash column









      Question

      Purchases in accounting means.



      Answer

      Goods bought for resale









      Question

      Which of the following is correct



      Answer

      Profit increases capital









      Question

      Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit and having a variable cost per unit of N500, with a fixed

      cost of N500,000.



      Answer

      1000









      Question

      The level at which the contribution is equal to fixed cost is called.



      Answer

      Break even point









      Question







      ….........is an internal accounting system



      Answer

      Cost accounting









      Question

      The sumation of direct materials, direct labour and direct expenses is….........



      Answer

      Prime cost









      Question

      An item, process or activity for which a separate measurement of cost is required is called…...



      Answer

      Cost object







      Question

      The type of accounting that deals with the gathering of cost information, cost attachment, budgeting and standard costing is…...



      Answer

      Cost accounting









      Question

      Which type of error is committed when machinery bought for use in the business is mistakenly debited to the purchases account.

      Answer

      Error of principle









      Question

      Under the entity concept …...... … is different from its owner



      Answer

      0







      Question

      The concept which states that in measurement of profit, costs incurred in generating revenue should be reported together in the period they

      arise is ….....



      Answer

      0









      Question

      The purpose of Accounting is to ….....

      Answer

      0









      Question

      The Sales Day Book records goods sold ….........



      Answer

      0







      Question

      Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January 2016.What is the double entry postings for this transaction?



      Answer





      Question

      What is the net profit figure for the year ended from the following information: Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) -

      N5,864,000; Drawings during the year - N1,040,000; Additional Capital introduced during the year - N 400,000 ?



      Answer

      1588000









      Question

      What is the net asset figure based on the following information: Fixtures N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan

      - N 600,000; Payables - N800,000; Bank N1,636,000?



      Answer

      4916000













      Question

      Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of N52,329,000. What was the gross profit amount?



      Answer

      33062000









      Question

      The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and N7,840,000 respectively. If the total payment to creditors

      from bank equals N24,310,000 What is the amount of credit purchases?



      Answer

      25394000









      Question

      Compute sales turnover if the gross profit is N33,062,000 and cost of sales is N56,539,000.



      Answer

      22477000









      Question

      N50,000 taken from cash till and banked is recorded in the cash book as foollows:



      Answer

      Dr Bank column and Cr Cash column









      Question

      Purchases in accounting means.



      Answer

      Goods bought for resale









      Question

      Which of the following is correct



      Answer







      Profit increases capital









      Question

      Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit and having a variable cost per unit of N500, with a fixed

      cost of N500,000.



      Answer

      1000









      Question

      The level at which the contribution is equal to fixed cost is called.



      Answer

      Break even point









      Question

      ….........is an internal accounting system



      Answer

      Cost accounting









      Question

      The sumation of direct materials, direct labour and direct expenses is….........



      Answer

      Prime cost









      Question

      An item, process or activity for which a separate measurement of cost is required is called…...



      Answer

      Cost object







      Question

      The type of accounting that deals with the gathering of cost information, cost attachment, budgeting and standard costing is…...









      Answer

      Cost accounting









      Question

      Which type of error is committed when machinery bought for use in the business is mistakenly debited to the purchases account.



      Answer

      Error of principle







      Question

      N50,000 taken from cash till and banked is recorded in the cash book as foollows:



      Answer

      Dr Bank column and Cr Cash column









      Question

      Purchases in accounting means.



      Answer

      Goods bought for resale









      Question

      Which of the following is correct



      Answer

      Profit increases capital









      Question

      Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit and having a variable cost per unit of N500, with a fixed

      cost of N500,000.



      Answer

      1000







      Question

      The level at which the contribution is equal to fixed cost is called.



      Answer

      Break even point









      Question

      ….........is an internal accounting system



      Answer

      Cost accounting









      Question

      The sumation of direct materials, direct labour and direct expenses is….........



      Answer

      Prime cost









      Question

      An item, process or activity for which a separate measurement of cost is required is called…...



      Answer

      Cost object









      Question

      The type of accounting that deals with the gathering of cost information, cost attachment, budgeting and standard costing is…...



      Answer

      Cost accounting









      Question

      Which type of error is committed when machinery bought for use in the business is mistakenly debited to the purchases account.



      Answer

      Error of principle










Elements of Book-keeping I (ACC101_232)

The concept that separates the business from the owners is called

Business entity concept

Convention of conservatism is also referred to as Convention of prudence

Neither wrong nor correct statement

Assets are valued at one of the following prices in the books of account

Cost Price

Kolo enterprises sold goods worth N300,000 to Gaiya Global Venture. Kolo allowed 8% trade discount to Gaiya Ventures. Which amount should be posted to Sales Day Book of Kolo enterpises?

N276,000

An efficiently managed book keeping system helps in determining all of the following EXCEPT

Tax regulations

Given trade discount of 10% on cosmetics bought for #600,000; determine the amount entered in the purchase day book.

N540,000

Two main methods of book keeping are............

Single entry and double entr

________ is an instrument issued by a seller if the seller has overcharged the buyer on the invoice?

Credit note

________ is a percentage reduction of amount a seller charges for goods bought by a buyer.

Trade discount

Separate transactions and financial records should be kept for the business and the owners. This idea has been reinforced by ............ concept

Business entity

Elements of Book-keeping I (ACC101_232)

Maintenance of financial records is observed through one of the following

Book keeping

Cash transaction is a situation where payment is made or received _______ delivery.

during

The right hand side of the ledger account is usually referred to as .............

Credit side

________ cannot be cashed over the counter?

Cross cheque

Mrs Mekiluwa sold electrical wires on credit #140,000; electrical bulbs #200,000; and electrical wires for cash #120,000; determine the balance of the sales day book.

#340,000

It is important to write the amount and purpose of payment on the cheque _________ which is useful in writing up the books of account.

Stub

Given trade discount of 10% on beverages bought for #550,000; determine the amount entered in the purchase day book.

#495,000

It is important to write the amount and purpose of payment on the cheque _________ in order to write up the books of account.

Stub

_________ best describes a reduction in the amount that a buyer has to pay within a stipulated period of time?

Cash discount

Given trade discount of 15% on stationeries bought for #500,000; determine the amount entered in the purchase day book.

#425,000Elements of Book-keeping I (ACC101_232)

Recording of expenses made and payments received is within the exclusive limit of one of the following

Bookkeeping

Accounting equation is based on which of the following?

Double-entry concept

________ states that a business is not expected to be liquidated in the foreseeable future.

Going concern concept

The reduction of the cost of an asset during its life span can be referred to as

Depreciation

Equity in business can also be referred to as _________

Ownership interest

Back up of information is done to accomplish one of the following goals

To avoid unexpected technical faults

______ is another word for Equity in business.

Ownership interest

Losses are reported not necessarily only when cash is received or paid can best be explained by ______?

Accrual concept

Given assets as #2,500,000 and liabilities as #760,000; determine the owner\'s capital.

#1,740,000

Maintaining of proper records both electronic and otherwise is an important step in book keeping and it is called

Documentation

November 19, 2025 12:40 PM

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Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle




9/10

The seller is expected to issue which of the following instrument if the seller has overcharged the buyer on the invoice?

Credit note

The taxation of transportation and telecommunication businesses will arise on ______ basis

Name and Address of the seller

Providing useful information in the financial statements to users to enable them make economic decisions can best describe?

Accounting

Special businesses in Nigeria constitute the following except:

Actual

Given owners equity as #357,000 and liabilities as #79,000,000; determine the assets of the business.

#436,000

Equity in business refeIcui4cu@859rs to which of the following?

Ownership interest

Mr Sani bought corporate clothes at #200,000 in March and sold some on credit for #250,000 and others for cash at #70,000; what is the amount recorded in the sales day book?

#250,000

Which of the following instruments is a legal requirement for goods or services paid in cash.

Receipt

A business is not expected to be liquidated in the foreseeable future can best define which of the following?

Going concern concept

Which of the following is relevant in determining the amount to be entered in the sales day book?



A business is a legal entity which its operations and financial transactions are...... in nature from one year to another.

Continuous

The framework of cost build-up is.......

Prime cost + overheads = Total costs

Which of the following expenditure is not a revenue expenditure?

a new delivery van

Which book of accounts is recorded receipts or vouchers where employees are reimbursed?

Petty cash book

The Sales Day Book records goods sold.........

on credit

...... is the assumption that an entity will continue in operational existence for the foreseeable future.

The going concern concept

An accounting concept which separated the owner of the business and the business is known as:

entity concept

Invoice is a document sent by the seller to the buyer showing the transactions between them. To the seller it is ......

Purchases invoice

A document sent by the seller to the buyer if he has been undercharged in the invoice is called......

debit note

The following are Current Assets except




Answer: B N150000



Question: The amount entered in the sales day book is after deducting 



Answer: A Trade discount



Question: The Law requires the seller to give one of the following instruments to the buyer for goods or services paid for in cash



Answer: D Receipt



Question: The amount recorded in the sales day book is before deducting 



Answer: B Cash discount



Question: Given N52000 for four bags of rice sold at 5 trade discount N40000 for two bags of beans and N120000 at 5 trade discount for eight bags of wheat determine the balance of the sales day book



Answer: A N203400



Question: It is crucial to write the amount and purpose of payment on the cheque  in order to write up the books of account



Answer: D Stub



Question: Where a customer has been overcharged on an invoice which of the following books is used to record the credit notes sent



Answer: B Sales returns day book



Question: Given trade discount of 10 on beverages bought for 350000 determine the amount entered in the purchase day book



Answer: C N315000



Question: Which of the following is about providing useful information in the financial statements to users to enable them make economic decisions



Answer: A Accounting



Question: In February 2014 Micheal Enterprise sold electrical wires on credit N54000 electrical bulbs N20000 and electrical wires for cash N120000 determine the balance of the sales day book



Answer: C N74000







      Course Code

      acc101





      Question

      Hajo starts business with N20,000 in cash. This transaction can only be recorded in one of the following ways



      Answer

      Debit cash account and credit capital account with 20,000









      Question

      Under two column cashbook there are two significant columns called



      Answer

      Cash and bank columns









      Question

      Gimba sold goods worth N70,000 on credit to Iliya and allowed 10% trade discount. The amount to be captured in Gimba's sales day book is



      Answer

      62,000









      Question

      A typical ledger is split into two parts namely



      Answer

      Debit and Credit









      Question

      All of the following informations are contained in the invoice EXCEPT



      Answer

      Time of delivery







      Question

      In Accounting equation, Assets minus liabilities is equal to…..









      Answer

      Owners capital









      Question

      Assets consist all of the following EXCEPT



      Answer

      Bills payable







      Question

      "Anticipate no profit, provide for all possible losses". This assertion is given by………………..



      Answer

      Conservatism convention









      Question

      Every business entity is treated as an entity completely different from the owners. Which of the following concepts implies this statement?



      Answer

      Business entity concept









      Question

      Book keeping involves all of the following EXCEPT



      Answer

      Preparation of auditors' report









      Question

      Hajo starts business with N20,000 in cash. This transaction can only be recorded in one of the following ways



      Answer

      Debit cash account and credit capital account with 20,000









      Question







      Under two column cashbook there are two significant columns called



      Answer

      Cash and bank columns









      Question

      Gimba sold goods worth N70,000 on credit to Iliya and allowed 10% trade discount. The amount to be captured in Gimba's sales day book is



      Answer

      62,000









      Question

      A typical ledger is split into two parts namely



      Answer

      Debit and Credit







      Question

      All of the following informations are contained in the invoice EXCEPT



      Answer

      Time of delivery









      Question

      In Accounting equation, Assets minus liabilities is equal to…..

      Answer

      Owners capital









      Question

      Assets consist all of the following EXCEPT



      Answer

      Bills payable







      Question

      "Anticipate no profit, provide for all possible losses". This assertion is given by………………..



      Answer

      Conservatism convention









      Question

      Every business entity is treated as an entity completely different from the owners. Which of the following concepts implies this statement?



      Answer

      Business entity concept









      Question

      Book keeping involves all of the following EXCEPT



      Answer

      Preparation of auditors' report





1:_ is a percentage reduction of the amount a seller charges for goods bought by a buyer.

a.Credit discount

b.Trade discount. ANS

c.Discount

d.Cash discount



 2: ___ cannot be cashed over the counter?

a.Cross cheque. Ans

b.Open cheque

c.Payee\'s endorsed cross cheque

d.Payee\'s endorsed open cheque         



 3:   Given equity as #380,000 and liabilities as #120,000; determine the assets of the business.

a.#380,000

b.#260,000

c.#500,000. ANS

d.#120,000



4:   Which of the following is not a reason for the seller to send the credit note?

a.Returned goods not ordered

b.Undercharged on goods supplied.   ANS

c.Wrong type of goods

d.Goods not in right quantity    



5: The seller is expected to issue which of the following instruments if the seller has overcharged the buyer on the invoice 

A credit note. ANS

B receipt 

C Debit note

D delivery note

            

6: Cash transaction is a situation where payment is made or received ___ delivery.

a.while concluding

b.before

c.during. ANS

d.after            



7:   __ best describes a reduction in the amount that a buyer has to pay within a stipulated period of time?

a.Trade discount

b.Discount

c.Credit discount

d.Cash discount. ANS        



8:The structure and content of the debit note is the same as invoice except it shows the details of ___

a.Goods

b.Date

c.Undercharge. ANS

d.Name       



 9:If the buyer is undercharged on the invoice, the seller sends ___

a.Receipt

b.Order note

c.Debit note. ANS

d.Credit note        



10:  Values transfer in business activity is referred to as ____

a.Activities

b.Transactions. ANS

c.Businesses

d.Flowcharts




Answer:     A Trial balance will always balance when the postings on the debit collumn equal the  postings on the credit collumn



Question: Accounting entries for the repayment of a loan received from Mortgage bank is



Answer:     Debit Cash account and credit  Loan account



Question: On 1st January 2012 Paul borrowed N60000 from his friend Peter agreeing to re pay the amount in five years with five equal installments Ignore interest How will the amount owed to Peter be reported in Pauls Statement of financial position as at 31st December 2013 if Paul has made only two installments



Answer: N36000 as non current liability



Question: A non current asset has a written down value of N150000 but is reported in the Statement of financial position as N950 although being an item specially manufactured for the business its realisable value is expected to be only N95000 Which accounting concept is followed  



Answer:     Prudence



Question: Accounting entries for recording a loan given to Lukas the manager of the company is



Answer:     Debit Lukas Loan account and Credit Cash account



Question: Which of the following accounts will have a debit balance



Answer:     Sales account



Question:  Ganiyat contributed N500000 cheque  as capital to the shop what would be the entries recorded 



Answer: Dr Bank Account Cr Capital account



Question: The periodic totals of the Returns Outward Day Book are



Answer: Debited to the Trade payables Control account



Question: One of these statements is not true about current liability 



Answer:     it intends to pay immediately after the reporting period



Question: Which of the following errors will a trial balance fail to reveal



Answer:     Payment of N2000 for Wages being posted to Stationery account



Question: If an accrual as at year end of N5000 was treated as a prepayment the net profit for the year would be



Answer:     overstated by N10000



Question: The financial statement that shows the performance of an entity over a period is



Answer: income statement



Question: The financial statement that shows the performance of an entity over a period is



Answer: income statement



Question: Unpresented cheques are also referred to as



Answer: Outstanding cheques



Question:  Provision for depreciation account appears on the 



Answer:  Liability side



Question: Which of the following can be clasified as a current asset



Answer: inventory and cash



Question: Which of these can be found in the income statement



Answer: carriage inward and carriage outwards



Question: Which of the following transactions has no effect on current assets



Answer: A business purchased shop furniture for N6000 on credit



Question: Bank reconciliation statement is the comparison of a bank statement sent by bank with the  prepared by the business



Answer:  Cash book



Question: Which of the following is not true



Answer: Changes in equity is reported in the income statement



Question: An unexpired six month insurance premium at the end of a financial year requires a debit to which account



Answer: prepaid insurance



Question: To credit an account means



Answer: to enter an amount on the right side of the account



Question: What type of accounting error has occurred when the cost of redecorating office premises has been posted to the property plant and equipment account



Answer:     Error of principle



Question: What is an accounting period



Answer:     Any regular period usually of twelve months duration selected by a business for reporting accounting information



Question: Debit entries means



Answer: increase assets and expenses and decrease liabilities revenue and equity



Question: Which of the following pairs of accounts will never appear together in the same trial balance



Answer:     Opening Inventory account and Closing Inventory account



Question: Which of the following is not a noinal account



Answer: equipment



Question: Which of the following  transactions would decrease both the assets and the liabilities



Answer:     A loan of N25000 was repaid



Question: An agreement to spend N200 a month for advertisement on Radio Lagos beginning next month requires



Answer: no entry



Question: The concept of double entry book keepting states that



Answer: for every debit entry there must be a corresponding credit entry



Question: A non current asset has a written down value of N150000 but is reported in the Statement of financial position as N95000 although being an item specially manufactured for the business its realisable value is expected to be only N95000 Which accounting concept is followed  



Answer: A:     Prudence



Question: An agreement to spend N20000 a month for advertisement on Radio Lagos beginning next month requires



Answer: D: no entry



Question: What type of accounting information explains that source of information must be verifiable and a source must corroborate the other



Answer: Relevance



Question: What type of accounting system refers to the keeping of accounting record by hand written of relevant posting in the books of accounting



Answer: Manual accounting system



Question: One of these is NOT an advantage of computerised accounting system



Answer: it helps in duplication of same records



Question: Which book is recorded cash received and cash paid This is written up rom receipts or vouchers where employees are reimbursed



Answer: Petty cash book



Question: Recording of accounting data in a computerised accounting system is done from  to the computer system

November 19, 2025 12:40 PM

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 Liability
 Asset
2. An item, process or activity for which a separate measurement of cost is
required is called…...
 Cost centre
--->> Cost object
 Cost unit
 Costing
3. Accounting equation that shows the net worth of a business is……
 Capital PLUS Liabilities EQUAL Asset
--->> Capital EQUAL Asset MINUS Liabilities
 Assets MINUS Capital EQUAL Liabilities
 Capital MINUS liabilities EQUAL Asset
4. The opening and closing balances of Trade Payables for year 2018 was N6,756,000
and N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
 6756000
 24310000
--->> 25394000
 7840000
5. Which of the following is both a ledger and a subsidiary book?
 Recievable accounts
 Sales day book
 Journal
--->> Cash book
6. Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses
of N52,329,000. What was the gross profit amount?
--->> 33062000
 52329000
 71586000
 19267000
7. Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
--->> 22477000
 32062000
 89601000
 56539000
8. The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is…...
 Cost management
 Strategic management
--->> Cost accounting
 Financial accounting
9. Payment of liabilty will result in .......
 Increase in both assets and liabilities
 Increase in assets and decrease in liabilties
 Decrease in assets and increase in liabilities
--->> Decrease in both assets and liablities
10. Which type of error is committed when machinery bought for use in the business
is mistakenly debited to the purchases account.
 Error of original entry
--->> Error of principle
 Error of omission
 Error of commission
======
ACC102
======
1. Accounting equation that shows the net worth of a business is……
 Capital PLUS Liabilities EQUAL Asset
--->> Capital EQUAL Asset MINUS Liabilities
 Assets MINUS Capital EQUAL Liabilities
 Capital MINUS liabilities EQUAL Asset
2. The opening and closing balances of Trade Payables for year 2018 was N6,756,000
and N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
 6756000
 24310000
--->> 25394000
 7840000
3. Payment of liabilty will result in .......
 Increase in both assets and liabilities
 Increase in assets and decrease in liabilties
 Decrease in assets and increase in liabilities
--->> Decrease in both assets and liablities
4. Which type of error is committed when machinery bought for use in the business
is mistakenly debited to the purchases account.
 Error of original entry
--->> Error of principle
 Error of omission
 Error of commission
5. The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is…...
 Cost management
 Strategic management
--->> Cost accounting
 Financial accounting
6. Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
--->> 22477000
 32062000
 89601000
 56539000
7. The owner's equity in a business is called
 Drawings
--->> Capital
 Liability
 Asset
8. Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses
of N52,329,000. What was the gross profit amount?
--->> 33062000
 52329000
 71586000
 19267000
9. An item, process or activity for which a separate measurement of cost is
required is called…...
 Cost centre
--->> Cost object
 Cost unit
 Costing
10. Which of the following is both a ledger and a subsidiary book?
 Recievable accounts
 Sales day book
 Journal
--->> Cash book
======
ACC102
======
1. The opening and closing balances of Trade Payables for year 2018 was N6,756,000
and N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
 6756000
 24310000
--->> 25394000
 7840000
2. Payment of liabilty will result in .......
 Increase in both assets and liabilities
 Increase in assets and decrease in liabilties
 Decrease in assets and increase in liabilities
--->> Decrease in both assets and liablities
3. Which type of error is committed when machinery bought for use in the business
is mistakenly debited to the purchases account.
 Error of original entry
--->> Error of principle
 Error of omission
 Error of commission
4. Which of the following is both a ledger and a subsidiary book?
 Recievable accounts
 Sales day book
 Journal
--->> Cash book
5. The owner's equity in a business is called
 Drawings
--->> Capital
 Liability
 Asset
6. Accounting equation that shows the net worth of a business is……
 Capital PLUS Liabilities EQUAL Asset
--->> Capital EQUAL Asset MINUS Liabilities
 Assets MINUS Capital EQUAL Liabilities
 Capital MINUS liabilities EQUAL Asset
7. Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses
of N52,329,000. What was the gross profit amount?
--->> 33062000
 52329000
 71586000
 19267000
8. Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
--->> 22477000
 32062000
 89601000
 56539000
9. An item, process or activity for which a separate measurement of cost is
required is called…...
 Cost centre
--->> Cost object
 Cost unit
 Costing
10. The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is…...
 Cost management
 Strategic management
--->> Cost accounting
 Financial accounting
1 ACC102 Compute sales turnover if the gross profit is N33,062,000 and
cost of sales is N56,539,000. 22,477,000 A TMA1
2 ACC102 The opening and closing balances of Trade Payables for year 2018
was N6,756,000 and N7,840,000 respectively. If the total payment to creditors from
bank equals N24,310,000 What is the amount of credit
purchases? 25,394,000 C TMA1
3 ACC102 Aderoju and Sons made a net loss of N 19,267,000 after an
accumulated expenses of N52,329,000. What was the gross profit amount?
33,062,000 A TMA1
4 ACC102 "What is the net asset figure based on the following information:
Fixtures N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N
600,000; Payables - N800,000;
Bank N1,636,000?
" 4,916,000 A TMA1
5 ACC102 What is the net profit figure for the year ended from the
following information: Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017)
- N5,864,000; Drawings during the year - N1,040,000; Additional Capital introduced
during the year - N 400,000 ? 1,588,000 D TMA1
6 ACC102 Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on
15th of January 2016.What is the double entry postings for this transaction?
DR Cash Acct and CR Sales Acct B TMA1
7 ACC102 The Sales Day Book records goods sold ….........
On Credit C TMA1
8 ACC102 The purpose of Accounting is to …..... Provide financial
information B TMA1
9 ACC102 The concept which states that in measurement of profit, costs
incurred in generating revenue should be reported together in the period they arise
is …..... Matching D TMA1
10 ACC102 Under the entity concept …...... … is different from its owner
Any business organisation
acc102 List of Questions
Latex formatted questions may not properly render
Q1 The following transactions relating to debtors were extracted from the books of
a company for the month of January 2014: Balance as at 1st January 2014 N725,000
Cash collected during the month N375,000 Bad Debts written off N25,000 Balance as
at 31st January 2014 N650,000 Total credit sales during the month of January, 2014
were:
N325,000
Q2 Valuing inventory at lower of cost or Net Realizable Value (NRV) is an
application of the accounting concept of:
 Prudence
Q3 Which one of the following is a qualitative characteristic of financial
statements?
 Relevance
Q4 Unpaid expenses relating to an accounting period are treated as:
Accrued expenses
Q5 Marina purchased goods on a credit basis from Jamoh for N100,000 and returned
half of the goods to Jamoh subsequently. Which one of the following documents is
issued by Jamoh to record the return of goods?
Credit note
Q6 The IASB ??s Framework identifies reliability as one of the four qualitative ?
characteristics of financial information. Which one of the following is not an
element of reliability?
Information should be timely
Q7 The International Accounting Standards Board ??s (IASB) Framework for the ?
Preparation and Presentation of Financial Statements (Framework) is the IASB ??s ?
conceptual framework. Which one of the following does the Framework not cover?
The format of financial statements
Q8 Where, in a company ??s financial statements complying with International ?
accounting standards, should you find dividends paid? 1. Income statement 2.
Balance sheet 3. Cash flow statement 4. Statement of changes in equity.
3 and 4
Q9 Which of the following statements about bank reconciliations are correct? 1. In
preparing a bank reconciliation, unpresented cheques must be deducted from a
balance of cash at bank shown 2.A cheque from a customer paid into the bank but
dishonoured must be corrected by making a debit entry in the cash book. 3. An error
by the bank must be corrected by an entry in the cash book. 4. An overdraft is a
debit balance in the bank statement.
1 and 4
Q10 Which of the following statements are correct? 1. A company ??s authorised ?
share capital must be included in its published balance sheet as part of
shareholders ?? funds. 2.If a company makes a bonus issue of ordinary shares, the ?
total shareholders ?? interest (share capital plus reserves) remains unchanged 3. A ?
company ??s statement of changes in equity must include the proceeds of any share ?
issue during the period. 4. A company must disclose its significant accounting
policies by note to its financial statements.
3 and 4 only
Q11 Consumer price index (CPI) or ? ? ? . Is on very important means determine ? ?? ?? ?
the degree of change in price level (inflation)
retail price index
Q12 An accounting concept which separated the owner of the business and the
business is known as: entity concept
Q13 ? ? ? ? ? .occurs when certain amount of money that used to buy certain ? ?? ?? ?? ?? ?
quantity of goods previously, can now only purchase fewer quantity of the same
goods
inflation
Q14 all these are ,means of generating income of the building societies except
motor vehicle instruction
Q15 the primary aim of establishing a liability society is ? ? ? ?? ?
to received fund from its member and advance part of the fund to member of the
society
Q16 ? ? ? ? ? .. are formed registration with the chief register of friend ? ?? ?? ?? ?? ?
societies
building societies
Q17 shareholders funds compose of all except
bill discounted
Q18 Example of federal government bill purchase on the open market treasury bill
Q19 all the following are charge to appropriation account excepts
taxation
Q20 All the following are income except depreciation
Q21 ? ? ? ? ? .. are business entitle whose main area of operation are to ? ?? ?? ?? ?? ?
accept cash deposit from the public and other perform other prominent function
banks
Q22 Normal gross profit percentage is calculate as ? ? . normal profit + insured ? ?? ?
charges/ turnover
Q23 which of the following is not necessary for the purpose of compiling average
clause
gross profit
Q24 which of these is not a terminology used in insurance claims accounting
consequential loss
Q25 ? ? ? ? ? ? . Is a period of dislocation for which the insurance was ? ?? ?? ?? ?? ?? ?
effected and is normally fixed in the policy
period of indemnity
Q26 which of the two main classes of lease is a non cancellable lease? finance
lease
Q27 which of the following is a finance lease arrangement
opening lease
Q28 periodic payments made by the lesser to the lessor are called
lease payment
Q29 straight line is calculated as follows ? ? ?
finance charge /duration of lease
Q30 all these are treatment of finance charges except
reducing balance method
Q31 ? ? ? ? ? ? . Is a contractual agreement between an owner, the lessor and ? ?? ?? ?? ?? ?? ?
another party the lessee which express the right to use the leased asset for an
agreed period of time in return for a consideration
a lease
Q32 According to SAS II, treatment and disclosure of lease transaction in the book
of both
leasor and lessee
Q33 Valuation of livestock and manorial right are carried out by ? ? ? ? . an ? ?? ?? ?? ?
farm experts
Q34 Large farms take insurance cover for loss of livestock due to
infection or loss of cattle as a result of straying
Q35 one major problem with the determination of a plantation is
plantation does not usually start to produce until after a long gestation period
Q36 In using appraised value method which of the following factor should be
considered? current market value mutuality factors and the marketability of
livestock
Q37 Cost method means ? . ? ?
aggregate all cost to date on each class of livestock
Q38 Which of the method can be used to value Arable stock? it should be valued at
cost or net realizable value
Q39 What is one approach to valuation of stock of live stock? cost approach, net
realizable value
Q40 Which of the following expenses is not exclusive to farm accounting?
vehicle repair and maintenance expenses
Q41 Which of the following account are prepared by farmer ??s ?
trading, profit and loss account and balance sheet
Q42 What is the formula for eliminating realized profit from goods sent to branch
at cost plus 25%
25/125x value of unsold stock
Q43 What did you understand by semi autonomous branch in the context of branch
accounting
it operate almost as a separate entity independent of ite head office
Q44 When is the temporal method applicable for translation of the financial
statement of foreign branches?
it is usually applicable when foreign branch is non autonomous
Q45 State how revenue and expense are translated under the closing rate method
revenue and expenses are translated at average rate for the period
Q46 Some of the reasons why branch current account may not agree with head office
current account are:
cash in transit and stock in transit
Q47 Transaction between the head office and independent branches are received in ??
?? ?? .
current account
Q48 Head office branch account is a mirror of which account?
branch current account
Q49 One difference between an independent and dependent branch is
accounting records and books are kept by the independent out branches
Q50 Sales of goods at involved price between head office and branch will give rise
to one of the following if the items are not sold to an external party, at the end
of the period.
unrealized profit
Q51 Which of the following method of translation would you recommend for an
independent foreign branch
 closing rate method
Q52 The liquidator ??s of Adebayo limited has settle all creditor of the company ?
except three owed N150,000. At the commencement of the liquidation, the company ??s ?
share capital was as follows: 1,000,000 10% preference share of N1 each 85 kobo
paid=850. 6,000,000 ordinary share of 50 kobo each, 30 kobo paid=1800. * Calculate
the amount of call on refund due to the preference shareholders
150,000 refund
Q53 The liquidator ??s of Adebayo limited has settle all creditor of the company ?
except three owed N150,000. At the commencement of the liquidation, the company ??s ?
share capital was as follows:
1,000,000 10% preference share of N1 each 85 kobo paid=850. 6,000,000 ordinary
share of 50 kobo each, 30 kobo paid=1800. *Assume that the preference share rank
prior to the ordinary share. Calculate the call per ordinary shares
5 kobo
Q54 The liquidator ??s of Adebayo limited has settle all creditor of the company ?
except three owed N150,000. At the commencement of the liquidation, the company ??s ?
share capital was as follows: 1,000,000 10% preference share of N1 each 85 kobo
paid=850. 6,000,000 ordinary share of 50 kobo each, 30 kobo paid=1800. *If the
preference share rank prior to the ordinary shares, calculate the amount of call to
be made by the liquidator
N1,000,000
Q55 The effect of bankruptcy on the private estate of the bankrupt is ? ? ? ? ?? ?? ?
the private estate will be to pay the bankrupt ??s debt to the extent the business ?
asset are inadequate to settle the settle it
Q56 A company is winding up if it is ? ? ? ? ?? ?? ?
 unable to pay up his debt
Q57 The word ??liquidation ? means ? ? . winding up ? ? ? ? ?? ?
Q58 When a partnership asset has been pledged for the personal debt of a partner,
the creditor would claim as ? ? ? . and creditor in the ? ? ? ? estate ? ?? ?? ? ? ?? ?? ?? ?
secured creditor and joint estate
Q59 Which of the following would contribute to deficiency in liquidation of a
company (i) discount on accrued liabilities (ii) liquidation fees (iii) preference
divided waved by investors (iv) formation expense
 II & IV
Q60 Which of the following is a feature of the statement of affairs prepared when a
company is being liquidated?
preferential creditors are paid before debenture with floating securities
Q61 One use of fire year financial summary is ? ? . it may be added to forecast ? ?? ?
future performance
Q62 All the following are excepted to be found in published financial statement of
a publicity quoted company except
 value added statement
Q63 Which of the following item is found in the company ??s profit and loss account ?
is described as exceptional item
substantial loss sustain as a result of robbery attack
Q64 Directors report in the financial statement need not disclose forecast future
profitability
Q65 Which of the following should not be classified on a current liability in a
financial statement? provision for staff gratuity
Q66 The generally accepted accounting principle, which should be stated in a
company ??s accounting polices as it related to inventory, is that stock should be ?
valve at ? ? ? ? ?? ?? ?
lower of cost and net realizable valve
Q67 In accordance with section 334 of CAMA, cap c20, LFN 2004 the financial
statement of a private company need not includes ? ? . ? ?? ?
audit committee report
Q68 Which of these method of depreciation is used by company that make use of
loosing tools
revaluation method
Q69 According to IAS 16, depreciation means ? ? . systematic allocation of cost ? ?? ?
over the estimated useful life
Q70 Even, when the bad debts has been eliminated the accounts.. do not represent
the true & fair views of the debtor
Q71 Bad debts are ? ? . unrecoverable debts ? ?? ?
Q72 A balance sheet of a company is prepared as follows ? ? ? . ? ?? ?? ?
Balance sheet as at 31st Dec 2014
Q73 Published profit and loss account is usually prepared ? ? ? . as ? ?? ?? ?
for the year ended December 2014
Q74 On what basis is interest on loan recognized by banks in their P&L account
it is recognized on accrual basis but interest due for more than 90 days are
suspended and recognized on cash basis
Q75 Exceptional item ? ? ? ? ? ?? ?? ?? ?
falls within the ordinary activities
Q76 An extraordinary item falls
outside the ordinary activities and are treated after profit on ordinary activities
Q77 Under the prudential guideline, facilities classified as doubtful refer to
loans that have remained unpaid
for 180 ?? 360 days after their due dates ?
Q78 Which of the following is a Non-bank financial institution?
mortgage bank
Q79 The asset in the balance sheet of a bank are arranged in the order of liquidity
Q80 The format in which the final account of a limited liability company should be
published in Nigeria is prescribed by
company and allied matters act. C20 LFN 2004
Q81 One use of fire year financial summary is ? ? . it may be added to forecast ? ?? ?
future performance
Q82 All the following are excepted to be found in published financial statement of
a publicity quoted company except
 value added statement
Q83 Which of the following item is found in the company ??s profit and loss account ?
is described as exceptional item
substantial loss sustain as a result of robbery attack
Q84 Directors report in the financial statement need not disclose forecast future
profitability
Q85 Which of the following should not be classified on a current liability in a
financial statement? provision for staff gratuity
Q86 The generally accepted accounting principle, which should be stated in a
company ??s accounting polices as it related to inventory, is that stock should be ?
valve at ? ? ? ? ?? ?? ?
lower of cost and net realizable valve
Q87 In accordance with section 334 of CAMA, cap c20, LFN 2004 the financial
statement of a private company need not includes ? ? . ? ?? ?
audit committee report
Q88 Which of these method of depreciation is used by company that make use of
loosing tools
revaluation method
Q89 According to IAS 16, depreciation means ? ? . systematic allocation of cost ? ?? ?
over the estimated useful life
Q90 Even, when the bad debts has been eliminated the accounts.. do not represent
the true & fair views of the debtor
Q91 Bad debts are ? ? . ? ?? ?
 unrecoverable debts
Q92 A balance sheet of a company is prepared as follows ? ? ? . ? ?? ?? ?
Balance sheet as at 31st Dec 2014
Q93 Published profit and loss account is usually prepared ? ? ? . as ? ?? ?? ?
for the year ended December 2014
Q94 On what basis is interest on loan recognized by banks in their P&L account
it is recognized on accrual basis but interest due for more than 90 days are
suspended and recognized on cash basis
Q95 Exceptional item ? ? ? ? ? ?? ?? ?? ?
falls within the ordinary activities
Q96 An extraordinary item falls
outside the ordinary activities and are treated after profit on ordinary activities
Q97 Under the prudential guideline, facilities classified as doubtful refer to
loans that have remained unpaid
for 180 ?? 360 days after their due dates ?
Q98 Which of the following is a Non-bank financial institution?
mortgage bank
Q99 The asset in the balance sheet of a bank are arranged in the order of
liquidity
Q100 The format in which the final account of a limited liability company should be
published in Nigeria is prescribed by
company and allied matters act. C20 LFN 2004
Q101 One use of fire year financial summary is ? ? . it may be added to forecast ? ?? ?
future performance
Q102 All the following are excepted to be found in published financial statement of
a publicity quoted company except
 value added statement
Q103 Which of the following item is found in the company ??s profit and loss ?
account is described as exceptional item
substantial loss sustain as a result of robbery attack
Q104 Directors report in the financial statement need not disclose forecast future
profitability
Q105 Which of the following should not be classified on a current liability in a
financial statement? provision for staff gratuity
Q106 The generally accepted accounting principle, which should be stated in a
company ??s accounting polices as it related to inventory, is that stock should be ?
valve at ? ? ? ? ?? ?? ?
lower of cost and net realizable valve
Q107 In accordance with section 334 of CAMA, cap c20, LFN 2004 the financial
statement of a private company need not includes ? ? . ? ?? ?
audit committee report
Q108 Which of these method of depreciation is used by company that make use of
loosing tools
revaluation method
Q109 According to IAS 16, depreciation means ? ? . systematic allocation of cost ? ?? ?
over the estimated useful life
Q110 Even, when the bad debts has been eliminated the accounts.. do not represent
the true & fair views of the debtor
Q111 Bad debts are ? ? . unrecoverable debts ? ?? ?
Q112 A balance sheet of a company is prepared as follows ? ? ? . ? ?? ?? ?
Balance sheet as at 31st Dec 2014
Q113 Published profit and loss account is usually prepared ? ? ? . as ? ?? ?? ?
for the year ended December 2014
Q114 On what basis is interest on loan recognized by banks in their P&L account
it is recognized on accrual basis but interest due for more than 90 days are
suspended and recognized on cash basis
Q115 Exceptional item ? ? ? ? ? ?? ?? ?? ?
falls within the ordinary activities
Q116 An extraordinary item falls
outside the ordinary activities and are treated after profit on ordinary activities
Q117 Under the prudential guideline, facilities classified as doubtful refer to
loans that have remained unpaid
for 180 ?? 360 days after their due dates ?
Q118 Which of the following is a Non-bank financial institution?
mortgage bank
Q119 The asset in the balance sheet of a bank are arranged in the order of
liquidity
Q120 The format in which the final account of a limited liability company should be
published in Nigeria is prescribed by
company and allied matters act. C20 LFN 2004

What is the classification and recording of business transactions in the books of
account?
*BookKeeping*
Rudimentary form of accounting started with bookkeeping by _________
*Luca Pacioli*
An ________ in his book titled “Summa de Arithmetical, Geometrica, proportioni et
proportionalita,” published in 1494 on Arithmetic, Geometry and Proportion, he
devoted a chapter to expound the principles of the double entry system.
*Italian monk*
The starting point in the study of accounting is ________; others are cost
accounting, management accounting, auditing, government accounting, and tax
management.
*financial accounting*
__________ is the procedure for accumulating data to provide information for
managerial action.
*Cost accounting*
__________ is the process of recognizing and reflecting in the appropriate books of
accounts and records government generated revenue and disbursed expenditure in such
a way as to extract with ease relevant financial information vital for appropriate
decision making from time to time, and in compliance with the laws regulating
government finances.
*Government accounting*
The ________ system refers to the keeping of accounting record by hand written of
relevant posting in the books of accounts. It means that electronic device such as
computer is not used in posting.
*manual accounting*
A set of numbers and codes that define each account head and also differentiate
between classes of accounts is known as _________
*chart of accounts*
____ can be defined as broad basic assumptions that underlie the periodic financial
statements of business enterprises.
*Accounting concepts*
Going by the International Financial Reporting Standards (IFRS) that is now in
operation globally, the current name for Balance sheet is _______
*Statement of Financial Position*
Going by the International Financial Reporting Standards (IFRS) that is now in
operation globally, the current name for Profit and Loss Account is _______
*Statement of Comprehensive Income*
In a business, the ownership interest or claims are called _____________
*Owner's equity*
______ can be defined as a tangible or intangible resource that is owned or
controlled by an accounting entity, and which is expected to generate future
economic benefits
*Asset*
_______ are amounts provided to allow for liabilities that are anticipated but not
yet quantified precisely, or for reductions in asset values.
*Provisions*
Which is the most common form of payment in business because of its convenience and
safety?
*Cheque*
The law requires the seller to give the buyer a receipt for goods or services that
have been paid for in cash. However, there is no legal requirement to do so in the
case of payments by _______.
*Cheque*
The main book of account in which all transactions are recorded is called _______.
*Ledger*
The __________ in which is recorded cash received and cash paid. It is written up
from receipts or petty cash vouchers where employees are reimbursed expenses.
*petty cash book*
The _____________ in which are recorded cheques received (and cash paid into the
bank) and payments made by cheque (and cash withdrawn from the bank). This is
written up from the bank paying-in book stub and cheque book stubs
*Cash book*
The _______ in which is recorded the goods purchased on credit that are returned to
suppliers. It is written up from the credit notes received from suppliers.
*purchases returns day book*
The accounting entries required to post the motor van on credit and the sale of
fixtures and fittings are first recorded in the __________ before they enter the
general ledger.
*Journal*
_______ are generally referred to as the unsold portion of goods held for resale.
*Inventories*
When a trial balance does not balance and there is no time or it is inconvenient to
immediately locate and correct the errors because the final accounts are urgently
required, the Trial balance can be made to balance by inserting the balance figure
and describing it as _________.
*Suspense account*
________ are goods previously sold to customers but were later returned either in
whole or in part probably as a result of: i. Wrong specification, model, colour
etc. ii. Deficiency iii. Disagreement between the buyer and seller that can be
traced to either pricing, discount, payment terms etc. iv. Shortage in quantity,
weight and other measuring discrepancies. v. Government policy.
*Return Inwards*
____ represents the cost of transporting goods meant for resale into the
organisation.
*Carriage inward*
The _______ represent the value of stock of goods that are meant for sale which a
business has at the end of the accounting year or a stated period or date.
*closing stocks*
__________ is the profit derived after all expenses and cost of sales have been
deducted from the net income including sales of goods and other income.
*Net profit*
What type of error in accounting involves wrong addition of figures?
*Casting error*
What type of error involves a situation in which errors cancel each other out?
*Compensating Errors*
What type of error is made whereby a transaction is posted to the wrong class of
accounts?
*Error of Principle*
What type of error occurs when a transaction is recorded with the wrong amount at
the beginning of the recording process i.e. errors that are made when the source
document is being raised or when the source document is being posted to the
appropriate subsidiary book?
*Error of Original Entry*
The _________ helps to ascertain the arithmetical accuracy of all the postings
made.
*trial balance*
Which method inventory valuation uses a predetermined rate set by the entity’s
management for the purpose of calculating the cost of sales and inventory?
*Standard cost*
The assumption is that the last batches of goods are considered to be sold first
prior to earlier purchases. This means that later batches are assumed to be sold
before earlier ones. This method is known as _________
*Last In First Out*
What method of valuing inventory has the underlying assumption that earlier
purchases of goods for resale are considered sold prior to subsequent purchases?
*FIFO*
Break-Even point (B. E. P.) is determined as the point where total income from
sales is equal to total expenses (both fixed and variable).
Strongly Agree
One of these does not support C-V-P Analysis Assumptions
All costs cannot be resolved into fixed and variable elements
What type of accounting system of any organization is the foundation of the
internal financial information system?
cost
Which unit of organisation needs a variety of information to plan, to control and
to make decisions?
Management unit
What may be defined as “Gathering of cost information and its attachment to cost
objects, the establishment of budgets, standard costs and actual costs of
operations, processes, activities or products; and the analysis of variances,
profitability or the social use of funds”?
Cost Accounting
What decisions are complex and many interacting factors need to be considered
including: the type of market in which the firm operates, the degree of
competition, demand and the elasticity of demand, the cost structure of the product
and firm, the state of the economy and numerous other factors?
Pricing decisions
Costs may be classified in numerous ways, but a fundamental and important method of
classification is into ________ and _______ costs.
direct and indirect
The three elements of indirect costs: indirect materials, indirect labour and
indirect expenses are collectively known as ____________
overheads
It follows therefore that direct costs do not have to be spread between various
categories because the whole cost can be attributed directly to a production unit
or saleable service. The total of direct costs is known as _______
Prime costs
The sum of directs and indirect costs is equal to _____.
Total costs
_____ is the process of making the balance on the bank column of a cash book to
agree with the balance on the bank statement received from the bank.
Bank reconciliation
These are cheques deposited into the bank, but which have not been credited to the
customer’s account by the bank as at the date of preparing the bank statement.
Uncredited lodgements
These are payments made directly by the bank as a result of previous instructions
given by the customer to the bank. They include an order to pay annual insurance
premium, professional membership subscription etc.
Standing Orders
What type of accounting provides information to management of a business to help
them take better decision and to improve upon the efficiency and effectiveness of
existing operations?
Management accounting
Only complete and reliable financial statements can be of any use to the creditors,
investors, government agents and other interested parties. To guarantee these, the
accounts must be ____ by an independent person.
audited
Some of these are advantages of manual system over the computerised accounting
system are except:
The security of the manual system is threatening because it is prone to destruction
by flood and fire deface without any back-up.
What is a set of numbers and codes that define each account head and also
differentiate between classes of accounts?
Chart of Account
The main statutory document for the regulation of business in Nigeria is the
Companies and Allied Matters Act 1990 (as amended in _____ )
2004
What involves an accounting process that starts with bookkeeping and ends with the
preparation and interpretation of financial statements?
Financial accounting
Accounting information should possess the following qualities before users can rely
on it.
Incomparability
Expenditure incurred to cover a long period of time as a result of which some
portions are capitalised or deferred pending the time it is written off against the
profit (in statement of profit or loss) for subsequent years e.g. preliminary
expenses, research and development expenses, discount on shares etc.
Fictitious assets
What represents the value of money, properties and other resources brought in by
the owner to start the business and other additions after the commencement of the
business?
Owner’s equity
What are the services and goods that have been consumed or enjoyed during the year
but which payment has not been made either in full on in part at the end of that
financial year?
Accrual
What are goods and services that have been paid for, but the benefit is yet to be
enjoyed or consumed either in full or in part known as? A good example is payment
of rent in advance
Prepayment
These are amounts set aside out of profit earned by a company and constitute part
of shareholders fund.
Reserves
Another name for control accounts is _________.
Suppliers accounts
The bank reconciliation becomes necessary as a result of differences between the
_________ prepared by an account holder and the bank statement prepared by the
bank.
Cash book
These are cheques which have been issued for payment by a bank account holder but
have not been presented for payment at the bank as at the date the bank prepared
the bank statement.
Unpresented cheques
A cheque may be dishonoured for the following reasons:
If the cheque is dated correctly.
A __________ is any item, process or activity for which a separate measurement of
cost is required.
Cost object
The Break-even analysis, or more descriptively, ________ studies the relationship
between costs, volume, sales and profit.
cost-volume-profit analysis
What is a summary of customers or suppliers ledger in total?
Control account
This type of reserve is distributed to the shareholder and other capital providers
in form of debenture interest, retained profit etc.
Revenue Reserves
They are non-distributable reserves that are retained to comply with certain laws
or for accounting requirement. e.g. capital redemption reserve fund, share premium,
revaluation reserve etc.
Capital Reserves
They are reserves not set aside for a specific purpose
General Reserves
What is the classification and recording of business transactions in the books of
account?
BookKeeping
Rudimentary form of accounting started with bookkeeping by ___
Luca Pacioli
An ____ in his book titled Summa de Arithmetical, Geometrica, proportioni et ?
proportionalita, published in 1494 on Arithmetic, Geometry and Proportion, he ?
devoted a chapter to expound the principles of the double entry system.
Italian monk
The starting point in the study of accounting is ____; others are cost accounting,
management accounting, auditing, government accounting, and tax management.
financial accounting
____ is the procedure for accumulating data to provide information for managerial
action.
Cost accounting
____ is the process of recognizing and reflecting in the appropriate books of
accounts and records government generated revenue and disbursed expenditure in such
a way as to extract with ease relevant financial information vital for appropriate
decision making from time to time, and in compliance with the laws regulating
government finances.
Government accounting
The ____ system refers to the keeping of accounting record by hand written of
relevant posting in the books of accounts. It means that electronic device such as
computer is not used in posting.
manual accounting
A set of numbers and codes that define each account head and also differentiate
between classes of accounts is known as ___
chart of accounts
__ can be defined as broad basic assumptions that underlie the periodic financial
statements of business enterprises.
Accounting concepts
Going by the International Financial Reporting Standards (IFRS) that is now in
operation globally, the current name for Balance sheet is ___
Statement of Financial Position
Going by the International Financial Reporting Standards (IFRS) that is now in
operation globally, the current name for Profit and Loss Account is ___
Statement of Comprehensive Income
In a business, the ownership interest or claims are called _____
Owner's equity
__ can be defined as a tangible or intangible resource that is owned or controlled
by an accounting entity, and which is expected to generate future economic benefits
Asset
___ are amounts provided to allow for liabilities that are anticipated but not yet
quantified precisely, or for reductions in asset values.
Provisions
Which is the most common form of payment in business because of its convenience and
safety?
Cheque
The law requires the seller to give the buyer a receipt for goods or services that
have been paid for in cash. However, there is no legal requirement to do so in the
case of payments by ___.
Cheque
The main book of account in which all transactions are recorded is called ___.
Ledger
The ____ in which is recorded cash received and cash paid. It is written up from
receipts or petty cash vouchers where employees are reimbursed expenses.
petty cash book
The _____ in which are recorded cheques received (and cash paid into the bank) and
payments made by cheque (and cash withdrawn from the bank). This is written up from
the bank paying-in book stub and cheque book stubs
Cash book
The ___ in which is recorded the goods purchased on credit that are returned to
suppliers. It is written up from the credit notes received from suppliers.
purchases returns day book
The accounting entries required to post the motor van on credit and the sale of
fixtures and fittings are first recorded in the ____ before they enter the general
ledger.
Journal
___ are generally referred to as the unsold portion of goods held for resale.
Inventories
When a trial balance does not balance and there is no time or it is inconvenient to
immediately locate and correct the errors because the final accounts are urgently
required, the Trial balance can be made to balance by inserting the balance figure
and describing it as ___.
Suspense account
____ are goods previously sold to customers but were later returned either in whole
or in part probably as a result of: i. Wrong specification, model, colour etc. ii.
Deficiency iii. Disagreement between the buyer and seller that can be traced to
either pricing, discount, payment terms etc. iv. Shortage in quantity, weight and
other measuring discrepancies. v. Government policy.
Return Inwards
__ represents the cost of transporting goods meant for resale into the
organisation.
Carriage inward
The ___ represent the value of stock of goods that are meant for sale which a
business has at the end of the accounting year or a stated period or date.
closing stocks
____ is the profit derived after all expenses and cost of sales have been deducted
from the net income including sales of goods and other income.
Net profit
What type of error in accounting involves wrong addition of figures?
Casting error
What type of error involves a situation in which errors cancel each other out?
Compensating Errors
What type of error is made whereby a transaction is posted to the wrong class of
accounts?
Error of Principle
What type of error occurs when a transaction is recorded with the wrong amount at
the beginning of the recording process i.e. errors that are made when the source
document is being raised or when the source document is being posted to the
appropriate subsidiary book?
Error of Original Entry
The ___ helps to ascertain the arithmetical accuracy of all the postings made.
trial balance
Which method inventory valuation uses a predetermined rate set by the entity s ?
management for the purpose of calculating the cost of sales and inventory?
Standard cost
The assumption is that the last batches of goods are considered to be sold first
prior to earlier purchases. This means that later batches are assumed to be sold
before earlier ones. This method is known as ___
Last In First Out
What method of valuing inventory has the underlying assumption that earlier
purchases of goods for resale are considered sold prior to subsequent purchases?
FIFO
Break-Even point (B. E. P.) is determined as the point where total income from
sales is equal to total expenses (both fixed and variable).
Strongly Agree
One of these does not support C-V-P Analysis Assumptions
All costs cannot be resolved into fixed and variable elements
What type of accounting system of any organization is the foundation of the
internal financial information system?
cost
Which unit of organisation needs a variety of information to plan, to control and
to make decisions?
Management unit
What may be defined as Gathering of cost information and its attachment to cost ?
objects, the establishment of budgets, standard costs and actual costs of
operations, processes, activities or products; and the analysis of variances,
profitability or the social use of funds ??
Cost Accounting
What decisions are complex and many interacting factors need to be considered
including: the type of market in which the firm operates, the degree of
competition, demand and the elasticity of demand, the cost structure of the product
and firm, the state of the economy and numerous other factors?
Pricing decisions
Costs may be classified in numerous ways, but a fundamental and important method of
classification is into ___ and ____ costs.
direct and indirect
The three elements of indirect costs: indirect materials, indirect labour and
indirect expenses are collectively known as ____
overheads
It follows therefore that direct costs do not have to be spread between various
categories because the whole cost can be attributed directly to a production unit
or saleable service. The total of direct costs is known as ___
Prime costs
The sum of directs and indirect costs is equal to ___.
Total costs
___ is the process of making the balance on the bank column of a cash book to agree
with the balance on the bank statement received from the bank.
Bank reconciliation
These are cheques deposited into the bank, but which have not been credited to the
customer s account by the bank as at the date of preparing the bank statement. ?
Uncredited lodgements
These are payments made directly by the bank as a result of previous instructions
given by the customer to the bank. They include an order to pay annual insurance
premium, professional membership subscription etc.
Standing Orders
What type of accounting provides information to management of a business to help
them take better decision and to improve upon the efficiency and effectiveness of
existing operations?
Management accounting
Only complete and reliable financial statements can be of any use to the creditors,
investors, government agents and other interested parties. To guarantee these, the
accounts must be __ by an independent person.
audited
Some of these are advantages of manual system over the computerised accounting
system are except:
The security of the manual system is threatening because it is prone to destruction
by flood and fire deface without any back-up.
What is a set of numbers and codes that define each account head and also
differentiate between classes of accounts?
Chart of Account
The main statutory document for the regulation of business in Nigeria is the
Companies and Allied Matters Act 1990 (as amended in ___ )
2004
What involves an accounting process that starts with bookkeeping and ends with the
preparation and interpretation of financial statements?
Financial accounting
Accounting information should possess the following qualities before users can rely
on it.
Incomparability
Expenditure incurred to cover a long period of time as a result of which some
portions are capitalised or deferred pending the time it is written off against the
profit (in statement of profit or loss) for subsequent years e.g. preliminary
expenses, research and development expenses, discount on shares etc.
Fictitious assets
What represents the value of money, properties and other resources brought in by
the owner to start the business and other additions after the commencement of the
business?
Owner s equity ?
What are the services and goods that have been consumed or enjoyed during the year
but which payment has not been made either in full on in part at the end of that
financial year?
Accrual
What are goods and services that have been paid for, but the benefit is yet to be
enjoyed or consumed either in full or in part known as? A good example is payment
of rent in advance
Prepayment
These are amounts set aside out of profit earned by a company and constitute part
of shareholders fund.
Reserves
Another name for control accounts is ___.
Suppliers accounts
The bank reconciliation becomes necessary as a result of differences between the
___ prepared by an account holder and the bank statement prepared by the bank.
Cash book
These are cheques which have been issued for payment by a bank account holder but
have not been presented for payment at the bank as at the date the bank prepared
the bank statement.
Unpresented cheques
A cheque may be dishonoured for the following reasons:
If the cheque is dated correctly.
A ____ is any item, process or activity for which a separate measurement of cost is
required.
Cost object
The Break-even analysis, or more descriptively, ____ studies the relationship
between costs, volume, sales and profit.
cost-volume-profit analysis
What is a summary of customers or suppliers ledger in total?
Control account
This type of reserve is distributed to the shareholder and other capital providers
in form of debenture interest, retained profit etc.
Revenue Reserves
They are non-distributable reserves that are retained to comply with certain laws
or for accounting requirement. e.g. capital redemption reserve fund, share premium,
revaluation reserve etc.
Capital Reserves
They are reserves not set aside for a specific purpose
General Reservesa
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
0
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
0
Question
The purpose of Accounting is to ..... ?
Answer
0
Question
The Sales Day Book records goods sold ......... ?
Answer
0
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer

November 19, 2025 12:40 PM

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The accounting system that uses electronic device in the posting and preparation of
accounting records is known as:
A and B
Which of the transantions will appear in the accounting system of the reporting
entity?
Cash payment for shop rent
The accounting treatment of Bad Debts is to
Debit bad debt account and credit debtors account
The method adopted by an entiry for valuing its inventory depends on________
It\'s accounting policy
Under the simple Average method of inventory valuation, average cost is determined
as--------------
Total unit price : Number of batches
The initial investment of the business owner in the company is reffered to as
-----------
A and B above
The value derived by adding the purchases to opening stock then deducting the
closing stock (in absence of any other information) is known as
Cost of goods sold
Which of the following will appear on the credit side of the purchases ledger
control account?
Credit purchases
After the initial development of accounting following Lucia Pacioli\'s publication
in 1494 other changes witnessed in accounting were informed by:
All of the above
In the financial statements of an organisation accruals are treated as----------
Current liabilities
A business entity that applies the same methods, policies and estimation techniques
in preparing its financial statements from year to year is observing which
accounting concept?
Consistency concept
The sales returns day book records------------
Goods sold on credit that are returned by customers
The qualitative characteristic of accounting information that discourages changes
in the basis for preparation of accounting information from period to period is
Comparability
An entity values its closing inventory on the basis of lower of cost and net
realisable. If cost of inventory is N600,000 and net realizable value of inventory
is N615,000, what is closing inventory?
N600,000
Which of the following errors affect the trial balance?
Costing error
The type of accounting that deals with gathering of cost information, cost
attachment, budgeting and standard lost.
Cost accounting
Accounting equation that shows the net worth of a business is...
Capital EQUAL Asset MINUS Liabilities
Payment of liability will result in ..
Decrease in both assets and liablities
An item, process or activity for which a separate measurement of cost...
Cost object
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to purchase account.....
Error of principle
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
33,062,000
The opening and closing balance of trade payables for year 2018 was #6,756,000 and
#7,840,000 respectively,if the total payment to creditors from bank equal
#24,310,000 what is the credit purchase
25,394,000
Which of the following is both a ledger and a subsidiary book.
Cash book
Compute sales turnover if the gross profit is #33,062,000 and cost sales is
#56,539,000
???89,601,000
???56539000
The owner entity in a business is called
Capital
1. Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
--->> 22477000
 32062000
 89601000
 56539000
2. An item, process or activity for which a separate measurement of cost is
required is called…...
 Cost centre
--->> Cost object
 Cost unit
 Costing
3. Accounting equation that shows the net worth of a business is……
 Capital PLUS Liabilities EQUAL Asset
--->> Capital EQUAL Asset MINUS Liabilities
 Assets MINUS Capital EQUAL Liabilities
 Capital MINUS liabilities EQUAL Asset
4. The owner's equity in a business is called
 Drawings
--->> Capital
 Liability
 Asset
5. Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses
of N52,329,000. What was the gross profit amount?
--->> 33062000
 52329000
 71586000
 19267000
6. Which type of error is committed when machinery bought for use in the business
is mistakenly debited to the purchases account.
 Error of original entry
--->> Error of principle
 Error of omission
 Error of commission
7. Payment of liabilty will result in .......
 Increase in both assets and liabilities
 Increase in assets and decrease in liabilties
 Decrease in assets and increase in liabilities
--->> Decrease in both assets and liablities
8. Which of the following is both a ledger and a subsidiary book?
 Recievable accounts
 Sales day book
 Journal
--->> Cash book
9. The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is…...
 Cost management
 Strategic management
--->> Cost accounting
 Financial accounting
10. The opening and closing balances of Trade Payables for year 2018 was N6,756,000
and N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
 6756000
 24310000
--->> 25394000
 7840000
1. One of these is not basic type of inventories.
 raw materials
 work-inprogress
 finished goods
--->> prime entry
2. All of these are common methods of valuing inventory, except... , , and
standard
 Last In First Out (LIFO)
 First In First Out (FIFO)
 Average (simple and weighted)
--->> Arithmetic method
3. Which of the following expenditure is a capital expenditure?
 rates charge for the year
 rent for the building
--->> a new fence surrounding the yard
 stationery
4. An item which is expected to generate future economic benefits is called…
--->> An asset
 Provision
 ownership interest
 liability
5. …...is primarily used to record the purchase and sale of non-current assets on
credit.
 Purchases Journal
 Sales Journal
 Sales returns Journal
--->> Journal Proper
6. A discount given by one trader to another is called……
 Cash discount
--->> Trade discount
 10% cash discount
 prime entry
7. Which of the following expenditure is not a revenue expenditure?
--->> a new delivery van
 telephone bills for the year
 wages
 electricity bills
8. The main book of account in which all transactions are recorded is called ……
 Prime books
--->> the ledger
 The Journal
 the nominal ledger
9. A legal obligation to transfer assets or provide services to another entity that
arises from some past transactions is....
 Provisions
 Prepayments
--->> A liability
 An asset
10. The purpose of ... is to inform the buyer how much is owed for the goods
supplied.
 receipt
 debit note
--->> The Invoice
 Credit note
1. The need for accounting Information does not include one of the following
 It provides information useful for making economic decisions
 It is used to judge the ability of management to utilize the entity’s
resources effectively
 It provides information to government for determining the tax payable
on the profit
--->> The source of information must be verifiable
2. A manual system of accounting is cheaper to install in terms of ….
 Revenue
 coding
--->> cost
 Source documents
3. One of these is not a quality of good accounting information
 Reliability
 Comparability
--->> Promptiness
 Timeliness
4. The practice of dividing the life of an entity into discrete periods for the
purpose of preparing financial statements is….
 Historical Cost Concept/
--->> Periodicity Concept
 Matching Concept
 The accruals concept
5. …. is the assumption that an entity will continue in operational existence for
the foreseeable future.
--->> Going Concern Concept
 Matching Concept
 Accruals Concept
 Entity Concept
6. ……….emphasizes the properties of being separate and discrete.
--->> Entity concept
 Time period concept
 separate determination concept
 the cost concept
7. The use of electronic device in the posting and preparation of accounting
records is called
 Computer input accounting system
 Manual accounting system
--->> Mechanical Accounting System
 Software System
8. The grouping of accounts in reports and financial statements is called……
 Chart of Account
--->> Account Types
 Account code
 typical chart of account
9. The concept that assumes that the preparer should look at the economic
substance of a transaction is…
 Consistency Concept
 Prudence Concept
--->> Substance Over Form Concept
 Separate Determination Concept
10. The manual accounting system refers to the keeping of accounting record by
…..
 Typewritten
--->> Handwritten
 Video recording
 Printing
1. Which of the following is both a ledger and a subsidiary book?
ans- Cash book
2.The owner's equity in a business is called
ans-Capital
3.The opening and closing balances of Trade Payables for year 2018 was N6,756,000
and N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
25394000
4.Accounting equation that shows the net worth of a business is……
ans- Asset - Liabilities
5. The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is…...
 Cost accounting
6. turnover question
25555578
7.Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
ans-Error of principle
8.An item, process or activity for which a separate measurement of cost is required
is called…...
ans- Cost object
9. Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses
of N52,329,000. What was the gross profit amount?
ans- 33062000
10. Payment of liabilty will result in .......
ans-Decrease in both assets and liablities
FBQ1: The underlying purpose of accounting isto provide financial information about
an economic --------
Answer: Entity
FBQ2: The main statutory document for the regulation of business in Nigeria is the
--------
Answer: Companies andAllied Matters Act 1990 (as amended in 2004).
FBQ3: ----------- is the classification and recording of business transactions in
the books of account.
Answer: Book keeping
FBQ4: ----------- is an accounting process that starts with bookkeeping and ends
with the preparation and interpretation of financial statements.
Answer: Financial Accounting
FBQ5: ------------ is the collection of cost data in some organized ways by means
of an accounting system.
Answer: Cost accumulation
FBQ6: ---------- refers to the keeping of accounting record by hand written of
relevant posting in the books of accounts.
Answer: Manual accounting system
FBQ7: --------- is a set of numbers and codes that define each account head and
also differentiate between classes of accounts.
Answer: Chart of account
FBQ8: ---------- enable some companies to use different accounting software for the
financial records, but some organisation still prefer the manual system for one
reason or the other.
Answer: Computerized information systems
FBQ9: A --------- is cheaper to install in terms of cost when compared with a
computerized system of maintaining financial records.
Answer: Manual system
FBQ10: --------- is the assumption that an entity will continue in operational
existence for the foreseeable future.
Answer: Going Concern Concept
FBQ11: ------- refers to the assumption that in the measurement of profit,
costsshould be set against the revenue that they generate at the time when they
arise.
Answer: matching concept
FBQ12: -------- concept allows a user to assume that all the transactions in an
entity’s financial statements reflect the actual cost price billed, or revenue
charged, for items.
Answer: Historical cost
FBQ13: --------- assumes that when accounting for transactions the preparer should
look at the economic substance of a transaction, not its legal form.
Answer: Substance Over Form Concept
FBQ14: -------- can be defined as a tangible or intangible resource that is owned
or controlled by an accounting entity, and which is expected to generate future
economic benefits.
Answer: An asset
FBQ15: ------- can be defined as a legal obligation to transfer assets or provide
services to another entity that arises from some past transaction or event
Answer: A liability
FBQ16: ------- are amounts provided to allow for liabilities that are anticipated
but not yet quantified precisely, or for reductions in asset values.
Answer: Provisions
FBQ17: _______expenditure will have no value at the end of the period to which it
relates.
Answer: Revenue
FBQ18: ___________typically includes the cost of purchasing a non-current asset and
the cost of improvements to a non- current asset that lead to increased revenue, or
sustained revenue.
Answer: Capital expenditure
FBQ19: . _____________ is a reduction in the amount that the customer has to pay,
provided payment is made within a given period stipulated by the seller at the time
of sale.
Answer: Cash discount
FBQ20: -------- is sent by the seller if the buyer has been undercharged on the
invoice. It has basically the same layout and information as the invoice except
that instead of details of the goods, it shows details of the undercharge.
Answer: Debit note
FBQ21: ---------- is used to record the purchase on credit of goods for resale.
Answer: Purchase Day Book
FBQ22: -------- are generally referred to as the unsold portion of goods held for
resale.
Answer: Inventories
FBQ23: The assumption that the last batches of goods are considered to be sold
first prior to earlier purchases is known as
Answer: LIFO
FBQ24: ----------- uses a predetermined rate set by the entity’s management for the
purpose of calculating the cost of sales and inventory.
Answer: Standard Cost
FBQ25: --------- is a list of ledger account balances within a ledger, at a
particular instance.
Answer: Trial balance
FBQ26: Error of ----------- occurs when a transaction is recorded with the wrong
amount at the beginning of the recording process.
Answer: Error of original entry
FBQ27: ---------- are ownership interests a company has in another organisation.
Answer: Investments
FBQ28: ------- are financial obligations against the company that are not due for
repayment within one year.
Answer: Treasury bills
FBQ29: ---------- are non-distributable reserves that are retained to comply with
certain laws or for accounting requirement.
Answer: Capital Reserves
FBQ30: --------- is a summary of customers or suppliers ledger in total.
Answer: Control account
FBQ31: ---------- are payments made directly by the bank as a result of previous
instructions given by the customer to the bank.
Answer: Standing orders
FBQ32: --------- becomes necessary as a result of differences between the cash book
prepared by an account holder and the bank statement prepared by the bank.
Answer: Reconciliation
FBQ33: ---------- is any item, process or activity for which a separate measurement
of cost is required.
Answer: Cost object
FBQ34: --------- is to be used in any given situation is that which is most
relevant to the purpose of the cost ascertainment exercise.
Answer: Cost Unit
FBQ35: Sugar PLC produces bottles of sugar with a Selling price of N1,000 and a
variable cost of N600. Fixed cost is N6,000,000 per annum. Calculate the sales at
break-even point.
Answer: N15,000,000
MCQ1: Book-keeping by Lucia Pacioli, an Italian monk was published in____
Answer: 1494
MCQ2: The main statutory document for the regulation of business in Nigeria is the
Answer: Companies and Allied Matters Act 1990 (as amended in 2004).
MCQ3: Book-keeping is the ______of accounting
Answer: recording phase
MCQ4: The accounting process that starts with bookkeeping and ends with the
preparation and interpretation of financial statements is called……..
Answer: Financial Accounting
MCQ5: Accounting information should possess the following qualities before users
can rely on it, except
Answer: Predicting
MCQ6: _______can be defined as broad basic assumptions that underlie the periodic
financial statements of business enterprises.
Answer: Accounting concepts
MCQ7: An accounting concept in which assets will always equal liabilities plus
owners’ capital is called_________
Answer: Duality Concept
MCQ8: The ________is the assumption that an entity will continue in operational
existence for the foreseeable future.
Answer: going concern concept
MCQ9: ________can be defined as a tangible or intangible resource that is owned or
controlled by an accounting entity, and which is expected to generate future
economic benefits.
Answer: An asset
MCQ10: Motor tax on the truck and lorry can be classified as__________
Answer: Revenue expenditure
MCQ11: ________is sent by the seller if the buyer has been undercharged on the
invoice.
Answer: A debit note
MCQ12: A form of payment that is convenient and safe is __________
Answer: The Cheque System
MCQ13: One of these is not a common method of valuing inventory.
Answer: stock-taking
MCQ14: The method of valuing inventory that uses a predetermined rate set by the
entity’s management for the purpose of calculating the cost of sales and inventory
is
Answer: Standard cost
MCQ15: Credit transactions not relating to goods for resale (or services) are
recorded in _________________
Answer: the journal
MCQ16: What is the process of making the balance on the bank column of a cash book
to agree with the balance on the bank statement received from the bank?
Answer: Bank Reconciliation
MCQ17: The cost accounting system of any organization is the foundation of the
-------------------- financial information system.
Answer: internal
MCQ18: In an organisation, who needs a variety of information to plan, to control
and to make decisions?
Answer: Management
MCQ19: What may be defined as “Gathering of cost information and its attachment to
cost objects, the establishment of budgets, standard costs and actual costs of
operations, processes, activities or products; and the analysis of variances,
profitability or the social use of funds”.
Answer: Cost Accounting
MCQ20: Costs may be classified in numerous ways, but a fundamental and important
method of classification is into:
Answer: direct and indirect costs
MCQ21: Prime cost and Overheads is equal to ---------------------------
Answer: Total cost
MCQ22: The total of direct costs is known as ___________.
Answer: Prime Cost
MCQ23: What is determined as the point where total income from sales is equal to
total expenses (both fixed and variable)?
Answer: Break-Even point
MCQ24: Which of these is not an example of fixed costs?
Answer: Commission
MCQ25: Which of these is not an example of variable costs?
Answer: Factory cost
MCQ26: Which of the following is used to test the arithmetical accuracy of
postings?
Answer: Trial balance
MCQ27: Which of the following errors affect the trial balance?
Answer: Error of partial reversal of entry
MCQ28: Which of the following does not affect the trial balance?
Answer: Error of omission
MCQ29: The purpose of the statement of profit or loss is to determine one of the
following
Answer: Net profit
MCQ30: Given sales #34,000; return inward #1,000; opening stock #3,000; purchases
#6,000: determine the gross profit.
Answer: #24,000
MCQ31: Given a gross profit of #50,000; discount received #1,000; transport #5,000;
salaries #10,000: determine the net profit.
Answer: #36,000
MCQ32: Given opening stock as #15,000; purchases #10,000; carriage inward #5,000;
closing stock #11,000: what is the cost of goods sold?
Answer: #19,000
MCQ33: Assets that add value to the organization but cannot be seen are known as
Answer: Intangible assets
MCQ34: Given furniture #50,000; fittings #20,000; building #200,000; stock #60,000;
debtors #40,000: determine the non-current assets.
Answer: #270,000
MCQ35: Which of the following are non-distributable reserves?
Answer: Capital reserves
======
ACC102
======
1. The need for accounting Information does not include one of the following
 It provides information useful for making economic decisions
 It is used to judge the ability of management to utilize the entity’s
resources effectively
 It provides information to government for determining the tax payable
on the profit
--->> The source of information must be verifiable
2. The practice of dividing the life of an entity into discrete periods for the
purpose of preparing financial statements is….
 Historical Cost Concept/
--->> Periodicity Concept
 Matching Concept
 The accruals concept
3. The manual accounting system refers to the keeping of accounting record by …..
 Typewritten
--->> Handwritten
 Video recording
 Printing
4. ……….emphasizes the properties of being separate and discrete.
--->> Entity concept
 Time period concept
 separate determination concept
 the cost concept
5. One of these is not a quality of good accounting information
 Reliability
 Comparability
--->> Promptiness
 Timeliness
6. The concept that assumes that the preparer should look at the economic
substance of a transaction is…
 Consistency Concept
 Prudence Concept
--->> Substance Over Form Concept
 Separate Determination Concept
7. A manual system of accounting is cheaper to install in terms of ….
 Revenue
 coding
--->> cost
 Source documents
8. …. is the assumption that an entity will continue in operational existence for
the foreseeable future.
--->> Going Concern Concept
 Matching Concept
 Accruals Concept
 Entity Concept
9. The grouping of accounts in reports and financial statements is called……
 Chart of Account
--->> Account Types
 Account code
 typical chart of account
10. The use of electronic device in the posting and preparation of accounting
records is called
 Computer input accounting system
 Manual accounting system
--->> Mechanical Accounting System
 Software System
======
ACC102
======
1. A legal obligation to transfer assets or provide services to another entity that
arises from some past transactions is....
 Provisions
 Prepayments
--->> A liability
 An asset
2. The purpose of ... is to inform the buyer how much is owed for the goods
supplied.
 receipt
 debit note
--->> The Invoice
 Credit note
3. …...is primarily used to record the purchase and sale of non-current assets on
credit.
 Purchases Journal
 Sales Journal
 Sales returns Journal
--->> Journal Proper
4. Which of the following expenditure is a capital expenditure?
 rates charge for the year
 rent for the building
--->> a new fence surrounding the yard
 stationery
5. One of these is not basic type of inventories.
 raw materials
 work-inprogress
 finished goods
--->> prime entry
6. A discount given by one trader to another is called……
 Cash discount
--->> Trade discount
 10% cash discount
 prime entry
7. The main book of account in which all transactions are recorded is called ……
 Prime books
--->> the ledger
 The Journal
 the nominal ledger
8. Which of the following expenditure is not a revenue expenditure?
--->> a new delivery van
 telephone bills for the year
 wages
 electricity bills
9. All of these are common methods of valuing inventory, except... , , and
standard
 Last In First Out (LIFO)
 First In First Out (FIFO)
 Average (simple and weighted)
--->> Arithmetic method
10. An item which is expected to generate future economic benefits is called…
--->> An asset
 Provision
 ownership interest
 liability
FBQ1: The underlying purpose of accounting isto provide financial information about
an economic --------
Answer: Entity
FBQ2: The main statutory document for the regulation of business in Nigeria is the
--------
Answer: Companies andAllied Matters Act 1990 (as amended in 2004).
FBQ3: ----------- is the classification and recording of business transactions in
the books of account.
Answer: Book keeping
FBQ4: ----------- is an accounting process that starts with bookkeeping and ends
with the preparation and interpretation of financial statements.
Answer: Financial Accounting
FBQ5: ------------ is the collection of cost data in some organized ways by means
of an accounting system.
Answer: Cost accumulation
FBQ6: ---------- refers to the keeping of accounting record by hand written of
relevant posting in the books of accounts.
Answer: Manual accounting system
FBQ7: --------- is a set of numbers and codes that define each account head and
also differentiate between classes of accounts.
Answer: Chart of account
FBQ8: ---------- enable some companies to use different accounting software for the
financial records, but some organisation still prefer the manual system for one
reason or the other.
Answer: Computerized information systems
FBQ9: A --------- is cheaper to install in terms of cost when compared with a
computerized system of maintaining financial records.
Answer: Manual system
FBQ10: --------- is the assumption that an entity will continue in operational
existence for the foreseeable future.
Answer: Going Concern Concept
FBQ11: ------- refers to the assumption that in the measurement of profit,
costsshould be set against the revenue that they generate at the time when they
arise.
Answer: matching concept
FBQ12: -------- concept allows a user to assume that all the transactions in an
entity’s financial statements reflect the actual cost price billed, or revenue
charged, for items.
Answer: Historical cost
FBQ13: --------- assumes that when accounting for transactions the preparer should
look at the economic substance of a transaction, not its legal form.
Answer: Substance Over Form Concept
FBQ14: -------- can be defined as a tangible or intangible resource that is owned
or controlled by an accounting entity, and which is expected to generate future
economic benefits.
Answer: An asset
FBQ15: ------- can be defined as a legal obligation to transfer assets or provide
services to another entity that arises from some past transaction or event
Answer: A liability
FBQ16: ------- are amounts provided to allow for liabilities that are anticipated
but not yet quantified precisely, or for reductions in asset values.
Answer: Provisions
FBQ17: _______expenditure will have no value at the end of the period to which it
relates.
Answer: Revenue
FBQ18: ___________typically includes the cost of purchasing a non-current asset and
the cost of improvements to a non- current asset that lead to increased revenue, or
sustained revenue.
Answer: Capital expenditure
FBQ19: . _____________ is a reduction in the amount that the customer has to pay,
provided payment is made within a given period stipulated by the seller at the time
of sale.
Answer: Cash discount
FBQ20: -------- is sent by the seller if the buyer has been undercharged on the
invoice. It has basically the same layout and information as the invoice except
that instead of details of the goods, it shows details of the undercharge.
Answer: Debit note
FBQ21: ---------- is used to record the purchase on credit of goods for resale.
Answer: Purchase Day Book
FBQ22: -------- are generally referred to as the unsold portion of goods held for
resale.
Answer: Inventories
FBQ23: The assumption that the last batches of goods are considered to be sold
first prior to earlier purchases is known as
Answer: LIFO
FBQ24: ----------- uses a predetermined rate set by the entity’s management for the
purpose of calculating the cost of sales and inventory.
Answer: Standard Cost
FBQ25: --------- is a list of ledger account balances within a ledger, at a
particular instance.
Answer: Trial balance
FBQ26: Error of ----------- occurs when a transaction is recorded with the wrong
amount at the beginning of the recording process.
Answer: Error of original entry
FBQ27: ---------- are ownership interests a company has in another organisation.
Answer: Investments
FBQ28: ------- are financial obligations against the company that are not due for
repayment within one year.
Answer: Treasury bills
FBQ29: ---------- are non-distributable reserves that are retained to comply with
certain laws or for accounting requirement.
Answer: Capital Reserves
FBQ30: --------- is a summary of customers or suppliers ledger in total.
Answer: Control account
FBQ31: ---------- are payments made directly by the bank as a result of previous
instructions given by the customer to the bank.
Answer: Standing orders
FBQ32: --------- becomes necessary as a result of differences between the cash book
prepared by an account holder and the bank statement prepared by the bank.
Answer: Reconciliation
FBQ33: ---------- is any item, process or activity for which a separate measurement
of cost is required.
Answer: Cost object
FBQ34: --------- is to be used in any given situation is that which is most
relevant to the purpose of the cost ascertainment exercise.
Answer: Cost Unit
FBQ35: Sugar PLC produces bottles of sugar with a Selling price of N1,000 and a
variable cost of N600. Fixed cost is N6,000,000 per annum. Calculate the sales at
break-even point.
Answer: N15,000,000
MCQ1: Book-keeping by Lucia Pacioli, an Italian monk was published in____
Answer: 1494
MCQ2: The main statutory document for the regulation of business in Nigeria is the
Answer: Companies and Allied Matters Act 1990 (as amended in 2004).
MCQ3: Book-keeping is the ______of accounting
Answer: recording phase
MCQ4: The accounting process that starts with bookkeeping and ends with the
preparation and interpretation of financial statements is called……..
Answer: Financial Accounting
MCQ5: Accounting information should possess the following qualities before users
can rely on it, except
Answer: Predicting
MCQ6: _______can be defined as broad basic assumptions that underlie the periodic
financial statements of business enterprises.
Answer: Accounting concepts
MCQ7: An accounting concept in which assets will always equal liabilities plus
owners’ capital is called_________
Answer: Duality Concept
MCQ8: The ________is the assumption that an entity will continue in operational
existence for the foreseeable future.
Answer: going concern concept
MCQ9: ________can be defined as a tangible or intangible resource that is owned or
controlled by an accounting entity, and which is expected to generate future
economic benefits.
Answer: An asset
MCQ10: Motor tax on the truck and lorry can be classified as__________
Answer: Revenue expenditure
MCQ11: ________is sent by the seller if the buyer has been undercharged on the
invoice.
Answer: A debit note
MCQ12: A form of payment that is convenient and safe is __________
Answer: The Cheque System
MCQ13: One of these is not a common method of valuing inventory.
Answer: stock-taking
MCQ14: The method of valuing inventory that uses a predetermined rate set by the
entity’s management for the purpose of calculating the cost of sales and inventory
is
Answer: Standard cost
MCQ15: Credit transactions not relating to goods for resale (or services) are
recorded in _________________
Answer: the journal
MCQ16: What is the process of making the balance on the bank column of a cash book
to agree with the balance on the bank statement received from the bank?
Answer: Bank Reconciliation
MCQ17: The cost accounting system of any organization is the foundation of the
-------------------- financial information system.
Answer: internal
MCQ18: In an organisation, who needs a variety of information to plan, to control
and to make decisions?
Answer: Management
MCQ19: What may be defined as “Gathering of cost information and its attachment to
cost objects, the establishment of budgets, standard costs and actual costs of
operations, processes, activities or products; and the analysis of variances,
profitability or the social use of funds”.
Answer: Cost Accounting
MCQ20: Costs may be classified in numerous ways, but a fundamental and important
method of classification is into:
Answer: direct and indirect costs
MCQ21: Prime cost and Overheads is equal to ---------------------------
Answer: Total cost
MCQ22: The total of direct costs is known as ___________.
Answer: Prime Cost
MCQ23: What is determined as the point where total income from sales is equal to
total expenses (both fixed and variable)?
Answer: Break-Even point
MCQ24: Which of these is not an example of fixed costs?
Answer: Commission
MCQ25: Which of these is not an example of variable costs?
Answer: Factory cost
MCQ26: Which of the following is used to test the arithmetical accuracy of
postings?
Answer: Trial balance
MCQ27: Which of the following errors affect the trial balance?
Answer: Error of partial reversal of entry
MCQ28: Which of the following does not affect the trial balance?
Answer: Error of omission
MCQ29: The purpose of the statement of profit or loss is to determine one of the
following
Answer: Net profit
MCQ30: Given sales #34,000; return inward #1,000; opening stock #3,000; purchases
#6,000: determine the gross profit.
Answer: #24,000
MCQ31: Given a gross profit of #50,000; discount received #1,000; transport #5,000;
salaries #10,000: determine the net profit.
Answer: #36,000
MCQ32: Given opening stock as #15,000; purchases #10,000; carriage inward #5,000;
closing stock #11,000: what is the cost of goods sold?
Answer: #19,000
MCQ33: Assets that add value to the organization but cannot be seen are known as
Answer: Intangible assets
MCQ34: Given furniture #50,000; fittings #20,000; building #200,000; stock #60,000;
debtors #40,000: determine the non-current assets.
Answer: #270,000
MCQ35: Which of the following are non-distributable reserves?
Answer: Capital reserves
Course Code
acc102
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
0
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
0
Question
The purpose of Accounting is to ..... ?
Answer
0
Question
The Sales Day Book records goods sold ......... ?
Answer
0
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer
Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
 Try Another Search
ACC102
What type of accounting information explains that source of information must be
verifiable and a source must corroborate the other? ()
Qualities of good accounting information ar except (Durable)
Which book is recorded cash received and cash paid. This is written up rom receipts
or vouchers where employees are reimbursed. (Petty cash Book)
Recording of accounting data in a computerised accounting system is done from _____
to the computer system. (source document)
One of these is NOT an advantage of computerised accounting system. (it help in
duplication of )
What type of accounting system refers to the keeping of accounting record by hand
written of relevant posting in the books of accounting? (Manual accounting System)
The need for accounting information is important because it does the following. (It
Form The basis for reporti
What type of accounting system refers to the keeping of accounting record through
the use of electronic device of relevant posting in the books of accounting?
(Mechanical Accounting System)
What transaction involve a situation where payment is made in the future? (Cash
Discount)
======
ACC102
======
1. Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
--->> 22477000
 32062000
 89601000
 56539000
2. An item, process or activity for which a separate measurement of cost is
required is called…...
 Cost centre
--->> Cost object
 Cost unit
 Costing
3. Accounting equation that shows the net worth of a business is……
 Capital PLUS Liabilities EQUAL Asset
--->> Capital EQUAL Asset MINUS Liabilities
 Assets MINUS Capital EQUAL Liabilities
 Capital MINUS liabilities EQUAL Asset
4. The owner's equity in a business is called
 Drawings
--->> Capital
 Liability
 Asset
5. Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses
of N52,329,000. What was the gross profit amount?
--->> 33062000
 52329000
 71586000
 19267000
6. Which type of error is committed when machinery bought for use in the business
is mistakenly debited to the purchases account.
 Error of original entry
--->> Error of principle
 Error of omission
 Error of commission
7. Payment of liabilty will result in .......
 Increase in both assets and liabilities
 Increase in assets and decrease in liabilties
 Decrease in assets and increase in liabilities
--->> Decrease in both assets and liablities
8. Which of the following is both a ledger and a subsidiary book?
 Recievable accounts
 Sales day book
 Journal
--->> Cash book
9. The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is…...
 Cost management
 Strategic management
--->> Cost accounting
 Financial accounting
10. The opening and closing balances of Trade Payables for year 2018 was N6,756,000
and N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
 6756000
 24310000
--->> 25394000
 7840000
======
ACC102
======
1. The owner's equity in a business is called
 Drawings
--->> Capital

November 19, 2025 12:40 PM

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One of the following is object of book-keeping.

To establish the result of business transactions


All Journals do not form part of the double-entry system except .
Question 5Answer

a.
Bank Account

Why is Accounting Information needed?

All of the above



All the following are Non-current assets except

Prepayments


Another name for Journal Proper is ......

General Journal


The underlying purpose of accounting is to provide ......information about an economic entity.

financial


In the Purchases Book, the personal accounts of the suppliers are credited in the ledger and the Purchases Account is ......

Debited

Two column cashbook contains the following columns EXCEPT

amount

Purchases in accounting means.

Goods bought for resale

A good accounting information should be ......

Subjective

The cost accounting system of any organization is the foundation of the ...... financial information system.

internal


Keren PLC produces bottles of honey with a Selling price of N1,000 and a variable cost of N600. Fixed cost is N6,000,000 per annum. Calculate: sales at break-even

N15,000,000


Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
0
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
0
Question
The purpose of Accounting is to ..... ?
Answer
0
Question
The Sales Day Book records goods sold ......... ?
Answer
0
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer
Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
Any business organisation
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
Matching
Question
The purpose of Accounting is to ..... ?
Answer
Provide financial information
Question
The Sales Day Book records goods sold ......... ?
Answer
On Credit
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer
DR Cash Acct and CR Sales Acct
Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
Any business organisation
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
Matching
Question
The purpose of Accounting is to ..... ?
Answer
Provide financial information
Question
The Sales Day Book records goods sold ......... ?
Answer
On Credit
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer
DR Cash Acct and CR Sales Acct
Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
Any business organisation
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
Matching
Question
The purpose of Accounting is to ..... ?
Answer
Provide financial information
Question
The Sales Day Book records goods sold ......... ?
Answer
On Credit
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer
DR Cash Acct and CR Sales Acct
Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
Question
Under the entity concept ...... is different from its owner ? ?
Answer
Any business organisation
Question
The concept which states that in measurement of profit, costs incurred in
generating revenue should be reported together in the period they arise is ..... ?
Answer
Matching
Question
The purpose of Accounting is to ..... ?
Answer
Provide financial information
Question
The Sales Day Book records goods sold ......... ?
Answer
On Credit
Question
Mr. Mosirunmuro sold cosmetics and receive cash of N90, 000 on 15th of January
2016.What is the double entry postings for this transaction?
Answer
DR Cash Acct and CR Sales Acct
Question
What is the net profit figure for the year ended from the following information:
Capital (at 1/1/2017) - N4,916,000; Capital (at 31/12/2017) - N5,864,000; Drawings
during the year - N1,040,000; Additional Capital introduced during the year - N
400,000 ?
Answer
1588000
Question
What is the net asset figure based on the following information: Fixtures
N1,800,000; Trade Receivables - N480,000; Inventory- N2,400,000; Loan - N 600,000;
Payables - N800,000; Bank N1,636,000?
Answer
4916000
Question
Aderoju and Sons made a net loss of N 19,267,000 after an accumulated expenses of
N52,329,000. What was the gross profit amount?
Answer
33062000
Question
The opening and closing balances of Trade Payables for year 2018 was N6,756,000 and
N7,840,000 respectively. If the total payment to creditors from bank equals
N24,310,000 What is the amount of credit purchases?
Answer
25394000
Question
Compute sales turnover if the gross profit is N33,062,000 and cost of sales is
N56,539,000.
Answer
22477000
Question
Suppliers's personal accounts are found in the ledger
Answer
Purchases ledger
Question
When there is a difference in the trial balance and it cannot be resolved before
the preparation of the final accounts it is taken to ......... ?
Answer
Suspence acct
Question
All the following are asets except
Answer
Acrued Expenses
Question
?......... Is a book of original entry
Answer
Journal proper
Question
All the following are Non-current asets except
Answer
Prepayments
Question
Which of the following is not true about Trial Balance?
Answer
It contains elaborate entries in all accounts in the ledger
Question
Accounting equation that shows the net worth of a business is_
Answer
Capital = Asset - Liabilities
Question
Payment of liabilty will result in .......
Answer
Decrease in both assets and liablities
Question
The owner's equity in a business is called
Answer
Capital
Question
Which of the following is both a ledger and a subsidiary book?
Answer
Cash book
Question
N50,000 taken from cash till and banked is recorded in the cash book as foollows:
Answer
Dr Bank column and Cr Cash column
Question
Purchases in accounting means.
Answer
Goods bought for resale
Question
Which of the following is correct
Answer
Profit increases capital
Question
Calculate the break -even point if Owiya ltd sells its product for N1,000 per unit
and having a variable cost per unit of N500, with a fixed cost of N500,000.
Answer
1000
Question
The level at which the contribution is equal to fixed cost is called.
Answer
Break even point
Question
?.........is an internal accounting system
Answer
Cost accounting
Question
The sumation of direct materials, direct labour and direct expenses is ......... ?
Answer
Prime cost
Question
An item, process or activity for which a separate measurement of cost is required
is called ... ?
Answer
Cost object
Question
The type of accounting that deals with the gathering of cost information, cost
attachment, budgeting and standard costing is ... ?
Answer
Cost accounting
Question
Which type of error is committed when machinery bought for use in the business is
mistakenly debited to the purchases account.
Answer
Error of principle
A good accounting information should not be..
Subjective
The processes involved in bookkeeping are as follows:
the interpretation of accounts
The profits generated in the financial statements provide the basis for determining
the .. of a company.
taxable profits
The components of financial statements are
the statement of financial accounting
The starting point in the study of accounting is ....
financial accounting
....records generated revenue and disbursed expenditure in such a way as to extract
with ease relevant financial information
Government accounting
The main statutory document for the regulation of business in Nigeria is
the Companies and Allied Matters Act 1990 (as amended in 2004).
An accounting process that starts with bookkeeping and ends with the preparation
and interpretation of financial statements is
Financial accounting
......provides information to management of a business to help them take better
decision
Management accounting
Bookkeeping is the .... phase of accounting
recording
The primary purpose of an invoice is ----------
To inform the buyer how much is owed for goods supplied
When in the opinion of management certain debts may not be fully recovered, such
debts will be described as-------
Doubtful debts
A company\'s taxable profits differ from its accounting profits because________
Certain expenses and income are allowable for accounting purpose but disallowed for
tax purpose
Contribution per unit is derived as :
Unit selling price - Unit cost
Which of the following is not component of the statement of financial position
Discount Expenses
Which concept of accounting provides that only significant items should be
disclosed in financial statements?
Materiality concept
An inventory valuation method based on a predetermined rate set by an entity\'s
management is known as --------
Standard cost method
The following are causes of Returns Inwards except--------
None of the above
A statement containing the list of assets and liabilities with owner\'s capital at
the end of a particular period is known as------
Statement of financial position
The credit balances in the trial balance represent the following except------
Assets
An entity values its closing inventory on the basis of lower of cost and net
realisable. If cost of inventory is N600,000 and net realizable value of inventory
is N615,000, what is closing inventory?
N600,000
Which of the following errors affect the trial balance?
Costing error
When a correct figure is recorded in the correct side of a wrong persons account
the bookkeeping error involved is ------
Error of Commission
The foundation of the internal financial system of an organization
is-------------------------
Cost accounting
________ is derived afetr all expenses and cost of sales have been deducted from
the net income including sales of goods and other income
Net profit
International Accounting standards (IAS) and international financial Reporting
Standards (IFRS) are issued by:
International Accounting Standards Board (IASB)

November 19, 2025 12:40 PM

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19			27	Purchases			13,250
		840					
31		22,135					
					
		27,625			27,625
			1	Bal. b/d	22,135


SELF ASSESSMENT EXERCISE

1.	On January 1, 2011 the Sales Ledger balance of Ola was N2,400 debit while the bought Ledger balance was N970 credit. The following transactions took place in the month of January 2011.
N
Credit sales	35,180
Bad debts	845
Dishonoured cheques	1,250
Credit purchases	18,060
Returns inwards	1,570
Bills receivable	4,500
Cash received from debtors	15,600
Cash paid to creditors	11,400
Discount allowed	450
Discount received	945
Cheques from debtors	7,500
Bills payable	2,150
Debit balance in bought ledger transferred to
sales ledger	
260
Discount allowed but subsequently disallowed	150
Discount received but subsequently withdrawn	145
Prepare:
a. Total Debtors Account	
 
b. Total Creditors Account

2.	The net total balances extracted from Tipper’s purchase ledger on 31st March 2007 amounted to N12,560, which did not agree with the balance on the purchase ledger control account. The audit revealed the following errors and, when the appropriate adjustments had been made for these, the books balanced.
1.	A debit balance of N40 in the purchase ledger had been listed as a credit balance.
2.	Hector had been debited for goods returned to him, £90, and no other entry had been made.
3.	The purchase day book had been overcast by N100
4.	Credit balances on the purchase ledger amounting to N480 and debit balances amounting to N24 had been omitted from the list of balances.
5.	A payment of N8 to Tiger for a cash purchase of goods had been recorded inthepetty cash book and posted to his account in the purchase ledger, no other entry having been made.
6.	The transfer of N120 from Harrow’s account in the sales ledger to the credit of his account in the purchase ledger had not been entered in the control account.

You are required to prepare:
(a)	A statement reconciling the original net balances extracted from the purchase ledger with the corrected balance on purchase ledger control account, and
(b)	The purchase ledger control account showing the balance before the correction of the errors and the necessary adjustments thereon.

3.	The following balances have been extracted from the books of Jola Ade a sole trader for
the year ended 31st December, 2011.	
		N
Sales ledger balance, 1/1/11		4,936
Purchases ledger balance, 1/1/11		3,676
Sales	49,916	
Returns inwards	1,139	
Cheques and Cash received from customers		46,490
Bad debts written off		99
Purchases	42,257	
Returns outwards	1,098	
Cheques paid to suppliers	38,765	
Discount received		887
Cash paid twice in error to a supplier now refunded		188
Interest charged to a customer in respect of an		
overdue account		50
 
You are required to prepare the Sales Ledger and Purchases Ledger Control Accounts for the year ended 31st December, 2011.

4.	From the following particulars which
Ledger Control Account:	relate to the month of January 1998, prepare a Sales
	N
Sales	1,200,000
Returns Inward	12,500
Cash received from customers	1,152,000
Discount allowed	25,000
Bad debt written off	50,000
Interest charged on overdue accounts	2,000
Balance 1st January	514,100

(b) The balance in this control account does not agree with the schedule of debtors extracted from the personal ledgers which amounted to N407,400.00 An investigation revealed the following:
i.	The sales day book had been overcast by N10,000.00 on one occasion and N5,000.00 on another.
ii.	Discount of N1,000.00 shown in the sales ledger has been omitted from the Cash Book
iii.	Balance totalling N8,800.00 have been left off the list of debtors as at 31st January
iv.	The credit side of one ledger account is N5,000.00 too much.
v.	Bad debt of N12,200.00 has been written off in sales ledger but no entry has been made in the General ledger.
vi.	N22,400.00 in the Purchases Ledger has been set off against a contra account in the Sales Ledger but this is not recorded in both Control Account.
vii.	Discount allowed of N600.00 entered in the cash book has not been carried to the customer’s account.
viii.	An item of N9, 300.00 in the Sales Day Book has been posted as N39, 000.00 in the customer’s account.
Show the adjustments necessary for:
(a)	The balance in the Sales Ledger Control Account
(b)	The Schedule of Debtors

4.0	CONCLUSION

Control account is a summary of customers or suppliers ledger in total. The balance on the control account under normal circumstance must equal the addition of individual customers or suppliers account at a particular date or period. Some of the merits of control accounts are: it
 
saves time, it helps to prevent fraud, it allows homogeneous accounts to be grouped together and it can be used to detect missing figure.

5.0	SUMMARY

This unit focused on control accounts, and it was used to define control accounts, explain types of control accounts, discussedthe merits of control accounts. In addition, debtors control account, creditors control account, debtor’s statement of account and creditor’s statement of account were prepared.

6.0	TUTOR-MARKED ASSIGNMENT

Question 1: The following balances were extracted from the books of Usen Stores on 31st December, 2006.
N
Returns outwards	190
Cash payment to creditors for goods supplied	11,250 Returns inwards		410
Cash received from debtors for sales	17,784
Bills payable	3,404
Discount received	1,054
Bills receivable	2,400
Discount allowed	1,092
Bad debts	506
Balance of creditors for goods supplied as at 1/1/2006	2,678
Balance of debtors for sales as at 1/1/2006	4,260
Balance of creditors for goods supplied as at 31/12/2006	2,678
Balance of debtors for sales as at 31/12/2006	5,720

You are required to determine by Control Accounts, the amount of
(a)	Purchases as at 31st December 2006
(b)	Sales as at that date

Question 2:The net total balances extracted from Starling’s purchase ledger on 31st March 2014 amounted to N5,676, which did not agree with the balance on the purchase ledger control account. The audit revealed the following errors and, when the appropriate adjustments had been made for these, the books balanced.
1.	An item of N20, purchase from A. Brown. had been posted from the purchase day book to the credit of B. Brown’s account.
 
2.	On 31st January 2014, Charles had been debited for good returned to him, N84, and no other entry had been made.
3.	Credit balances on the purchase ledger amounting to N562 and debit balances amounting to N12 had been omitted from the list of balances.
4.	Returns of N60 allowed by Austin had been correctly recorded and posted in Starling’s books. This item was later disallowed, entered in the sales return book, and credited to Austin’s account in the sales ledger.
5.	The transfer of N90 from the debit of Cook’s account in the sales ledger to the credit of his account in the purchase ledger had not been entered in the journal.
6.	The purchase day book had been undercast byN100
7.	A payment to Brook of N3 for a cash purchase of goods had been recorded in the cash book and posted to his account in the purchase ledger, no other entry having been made.

You are required to set out:
(a)	Journal entries, where necessary, to correct these errors, and
(b)	The purchase ledger control account showing the balance before the correction of the errors and the necessary adjustments thereon.

Question 3: The following transactions relate to a sales ledger for the year ended 31st December 2015
N
Balance on sales ledger control 1 January 2015	8,952
Sales as per positing summaries	74,753
Receipts from debtors	69,471
Discounts allowed	1,817

The clerk in charge had prepared from the ledger cards a list of balances outstanding on 31st December 2015 amounting to N9,663 but this did not agree with the balance of the sales ledger control account. There were no credit balances on the ledger cards.

Investigation of the differences revealed:

i.	The bank statement showed credit transfers of N198 which had been completely overlooked
ii.	Journal entries correctly posted to the ledger cards had been overlooked whenpositing control account: debts settled by set off against creditors’ account N2,896, bad debts N640.
iii.	When listing the debtors balances three ledger cards with debit balances of £191 had been incorrectly filed and consequently had not been included in the list of balances.
iv.	The machine operator when posting a ledger card had incorrectly picked up an old balance of N213.50 as N13.50 and had failed to check her total balance.
 
v.	N1,173 entered in the cash book as a receipt from J. Spruce had not been posted as no account under that name could be traced. Later it was discovered that it was in payment for a car which had been used by the sales department and sold to him second-hand.

Required:
(a)	Prepare the sales ledger control account for the year ended 31st December 2015 taking into account the above adjustments.
(b)	Reconcile the clerk’s balance of N9,663 with the corrected balance on the sales ledger account.
(c)	Explain the benefits that accrue from operating control accounts.


7.0	REFERENCES/FURTHER READINGS

Accounting Technicians Scheme West Africa (2009). Basic Accounting Processes and System Part 1, Study Pack. Lagos: Abina Publishers
Garbutt, D. (1984), Carter’s Advanced Accounts “7th Edition”. London: Pitman Publishing Limited

Igben, R. O. (2014), Financial Accounting Made Simple. Lagos: ROI Publishers

Jat, R.B. and Jugu, G.Y. (2008). Modern Financial Accounting: Theory and Practice. Jos: Ehindero (Nig.) Limited
Oluyombo, O. (2017). Introduction to Financial Accounting I: SMS 203. Abuja: NOUN. Oluyombo, Onafowokan (2016) Financial Accounting With Ease (3rd Edition). Magboro:
Kings & Queen Associates

Soyode, A. (1980), Financial Accounting: Principles and Practice. Uk: Graham Burn.
The Institute of Chartered Accountants of Nigeria, (2006). Fundamentals of Financial Accounting. Foundation Study Pack. Lagos: Vikas Publishing Limited
 
UNIT 13: BANK RECONCILIATIONS

1.0	Introduction
2.0	Objectives
	Main Content
	Bank Reconciliation Statement
	Merits of Bank Reconciliation Statement
	Preparation of Bank Reconciliation Statement
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
6.0	References/Further Readings

1.0	INTRODUCTION

Two column cash book was considered in unit 10 which shows how both cash and bank accounts of an organisation are treated in the account. The bank column records the transactions carried out in the company’s bank account. However, the balance of the bank column in the cash book may not be the same with the bank statement provided by the bank to the company. This unit examines how the bank column of the cash book and the bank statement balances can be reconciled including the factors responsible for differences in both balances that necessitate the preparation of bank reconciliation statement.

2.0	OBJECTIVES
At the end of this unit, you should be able to:
	i ii. iii. iv.	Define and explain bank reconciliation statement Understand why cheques are dishonoured by the banks.
Prepare adjusted cash book
prepare a Bank reconciliation statement
3.0	MAIN	CONTENT
3.1	BANK	RECONCILIATION STATEMENT

Bank reconciliation is the process of making the balance on the bank column of a cash book to agree with the balance on the bank statement received from the bank. Put differently, bank reconciliation statement is a report prepared to show the process of agreeing entries in the bank statement with those in the cash book with a view to arriving at a reconciled balance.
 
The reconciliation becomes necessary as a result of differences between the cash book prepared by an account holder and the bank statement prepared by the bank. These differences are corrected using adjusted cash book and bank reconciliation statement.

Most of the time, the differences do not occur deliberately, but could be as a result of:
i.	Errors – These are mistake either by the bank and/or the customer.
ii.	Timing differences – These are due to unpresented cheques and uncredited lodgements.
iii.	Entries not brought to the notice of the company by the bank e.g. bank charges, interests, transfers, commission on turnover etc.

	Unpresented cheques

These are cheques which have been issued for payment by a bank account holder but have not been presented for payment at the bank as at the date the bank prepared the bank statement.Unpresented cheques will appear on the credit side of the cash book but will not be seen on the debit column of the bank statement.

	Uncredited lodgements

These are cheques deposited into the bank, but which have not been credited to the customer’s account by the bank as at the date of preparing the bank statement. This delay may be due to the cheque being banked other than at the customer’s branch of the bank or delay in cheque clearing system which may take up to three working days for local cheques to clear or even more for up- country cheques.

	Direct transfers or Standing orders

These are payments made directly by the bank as a result of previous instructions given by the customer to the bank. They include an order to pay annual insurance premium, professional membership subscription etc.

	Others

These include bank charges, account maintenance fee, interest on loan and overdraft account, dishonoured cheque etc. not brought to the notice of the account holder by the bank except through the bank statement.

	Reasons for Dishonoured Cheques

A cheque may be dishonoured for the following reasons:
 
i.	If the cheque is not dated.
ii.	If the amount in words does not correspond to the amount written in	figure on the cheque.
iii.	If the balance on the drawer’s account is not sufficient to accommodate the amount      to be drawn with the cheque.
iv.	Cheque mutilations (i.e. unsigned alteration).
v.	Stale cheques: The date on the cheque is more than six months beforeit is presented      to the bank for payment.
vi.	Irregular signature from the issuer
vii.	Unsigned cheques.
viii.	Cheque post-dated: Presenting cheque at the bank before the date written on it.
ix.	Notice of death of customer received by the bank.

	MERITS OF BANK RECONCILIATION STATEMENT

i.	It aids the bank customer to monitor unpresented cheques, uncredited lodgements etc.
ii.	It assists in detecting errors that might have occurred in the cash book or in the bank statement.
iii.	It is useful in detecting fraud either from the bank or office
iv.	Where the bank reconciliation statement is prepared regularly, it helps to prevent fraud.

	PREPARATION OF BANK RECONCILIATION STATEMENT

i.	Ensure that both cash book and bank statement are prepared up to the same date
ii.	Check off items in the cash book against the bank statement
iii.	Update the cash book by preparing adjusted  cash  book which will  be credited with  bank charges, commission on turnover, interest on overdraft and loans, dishonoured cheques, direct transfers, standing orders etc. Debit the adjusted cash book with direct payment to the bank like dividend received, interest on deposit account etc.
iv.	Check for errors which occur in the cash book and bank statement for corrections, and correct cash book errors. But include bank errors in the reconciliation statement for notification to the bank.
v.	Prepare the bank reconciliation statement using any of these two formats.

	Format of Bank Reconciliation Statement Starting with Cash Book Balance

 
Big Life Ventures
Bank Reconciliation Statement
 


As at 31st December 2015
N
 
Balance as per adjusted cash book	x x
Add unpresented cheques	x x
x x
Less uncredited lodgements/cheques		(x) x x
Add or deduct bank error(s)	 x
Balance as per bank statement	x x




	Format of Bank Reconciliation Statement Starting with Bank Statement Balance

 
Unlimited Grace& Company Bank Reconciliation Statement
 


As at 30th April 2016
N
 
Balance as per bank statement	x x
Add uncredited cheques/lodgements	x x
x x
Less unpresented cheques	(x)
x x
Add or less bank error(s)	 x
Balance as per cash book	x x

Where the balance from the bank statement or adjusted cash book is an overdraft, it does not change the formats above. Overdraft should be indicated in bracket to show that it is a negative balance.

A bank reconciliation statement will only contain those entries that are necessary for the bank to make correction in future bank statements. Adjusted cash book should take care of all necessary entries to be made by the company.

Example 1:Joy Investment Company has the following transactions in its cash book and bank statement for July 2015.
Cash Book Lodgement into bank	Payment ordered
Chq.	6789	14,000	Chq.	123456	4,000
Chq.	4591	12,000	Chq.	123457	6,000
Chq.	4826	9,500	Chq.	123458	7,500
 
Chq.	4725	19,000	Chq.	123459			12,500
Chq.	4228	9,000	Chq.	123460			8,000
Cash		66,000	Chq.	123461			1,500
		 			Bal.	c/d	90,000	
129,500	129,500
Bal. b/d	90,000

Bank Statement
Debit	Credit	Balance
Chq.	123459	12,500		(12,500)
Chq.	123458	7,500		(20,000)
Chq.	4826		9,500	(10,500)
Chq.	6789		14,000	3,500
Chq.	123460	8,000		(4,500)
Chq.	4826 contra	9,500		(14,000)
ICAN- Standing order	250		(14,250)
Account maintenance fee	500		(14,750)
Commission	1,750		(16,500)
Chq.	4228		9,000	(7,500)
Chq. 123457	6,000		(13,500)
Cash		66,000	52,500

You are required to
1.	Prepare an adjusted cash book
2.	Reconcile the adjusted cash book balance with bank statement.

Adapted from Institute of Chartered Accountants of Nigeria

SUGGESTED SOLUTION TO EXAMPLE 1

Joy Investment Company
Adjusted Cash Book

 
Bal. b/d	90,000


 	 90,000
Bal. b/d	87,500
 
ICAN – Standing order	250
Account maintenance fee	500
Commission	1,750
Bal. c/d	87,500
90,000
 

Joy Investment Company
Bank Reconciliation Statement		
	As at 31st July 2015	
	N	N
Balance as per bank statement		52,500
Add uncredited lodgements:		
Chq. 4591	12,000	
Chq. 4826	9,500	
Chq. 4725	19,000	40,500
	93,000	
Less unpresented cheques:		
Chq. 123456	4,000	
Chq. 123461	 1,500 5,500	
Balance as per cash book		87,500


Example 2: Okoro’s cash book showed a debit balance of N3,344 on 31st January, 2016. His bank statement for January, 2016 however showed a credit balance of N3,424. On investigation it was discovered that.
i.	The opening balance on the cash book for the month had been wrongly brought down as N1,505 instead ofN1,550.
ii.	Payment for rent N250 had been debited in the cash book
iii.	A customer had paid N600 direct into the bank
iv.	The bank had paid, on a standing order, N300 to an insurance company
v.	A cheque for N870 deposited in the bank on 25th January, was not credited until 3rd February, 2016.
vi.	Cheques paid to suppliers totalling N1,875, had not been presented for payment.
vii.	Cost of cheque book and other charges by bank totalling N90 had not been entered in the Cash Book.
viii.	The bank had paid a cheque of N680 in error from Okoro’s Account.

You are required to prepare:
a.	Adjusted Cash Book
b.	Bank Reconciliation Statement as at 31st January, 2016.

SUGGESTED SOLUTION TO EXAMPLE 2

Mr. Okoro
Adjusted Cash Book
 
Balance. b/d	3,344	Rent	500
Opening Bal. difference	45	Standing order	300
Direct payment	600	Bank charges	90
 		Bal. c/d	3,099
3,989	3,989
Bal. b/d	3,099


Mr. Okoro
Bank Reconciliation Statement
As at 31st January 2016	
N
Balance as per bank statement	3,424
Add uncredited cheque	   870
	4,294
Less unpresented cheque	1,875
	2,419
Add Bank error	   680
Balance as per cash book	3,099
The adjusted cash book was credited with rent of N500 because the account ought to have been credited initially with N250, but was debited, hence the need to credit the cash book with N500 to correct the error and also reflect N250 in rent account after the error.

SELF ASSESSMENT EXERCISE

1.	T. Emeka maintains a business bank account with Second Bank Nigeria Limited. The bank statement received for the month of March 1999 showed a balance of N14,265 to his credit while according to his Cash Book; he should have N13,380. Subsequent investigation revealed the following:
(a)	Two cheques A000111 for N3,400 and X222419 for N6,000 deposited to the bank on 28th March, 1999 were not credited by the bank until 2nd April, 1999.
(b)	A cheque for N6,500 issued to Jango Ltd. had not been presented for payment.
(c)	A cheque for N3,000 received from a customer in full settlement of a debt of N3,300 had been entered in the Cash Book at the full value of the debt.
(d)	Dividend of N650 from PZ Ltd. had been paid direct to the bank.
(e)	The bank deducted a total of N125 as its charges.
(f)	The bank had credited a cheque of N3,560 of V. Amaka in error to T. Emeka Account.

You are required to prepare:
(i)	Adjusted Cash Book; and
 
(ii)	A Bank Reconciliation Statement for the month of March, 1999.

2.	Define the bank reconciliation statement.

3.	On 31st July 2016 the bank statement of Ene Nyong showed a credit balance of N140,163. The Cash Book has a debit balance of N55,750 as at 31st July 2016. Cheques drawn prior to 31st July 2016 but not presented until after that date:-
N
Abe Auto Works
Early Childhood School	
80,117	2,920
UCT Stores		574
Abu Momoh	13,232	

Cheques paid into the bank on 31st July 2016 but not credited until 4thAugust 2016 N11,619. Bank charges and interest to 31st July 2016 not entered in the Cash Book N811.

Required:
Prepare the Bank Reconciliation Statement

4.	Discuss the process of preparing bank reconciliation statement.



4.0	CONCLUSION

Usually the balance of the bank column in the cash book may not be the same with the bank statement provided by the bank to the company. When this occurs, the two balances from the bank column of the cash book and the bank statement can be agreed by preparing a bank reconciliation statement.

5.0	SUMMARY

The importance to agree bank column of the cash book with the bank statement balance and the reasons for differences between the cash book and bank statement balances were considered in this unit. Adjusted cash book and bank reconciliation statement were also prepared.


6.0	TUTOR-MARKED ASSIGNMENT
 
Question 1: Below is an extract of the Bank Statement of Messrs. Jackson & Co for April,  1987.

Date	Details	Dr.	Cr.	Balance
		N	N	N	
1/4/87	Balance			176,000Cr
4/4/87	Dasco Engineering		40,000	216,000Cr
5/4/87	Adebayo Builders		60,000	276,000Cr
7/4/87	Bisi Motors Cheque 011201	32,000		244,000Cr
9/4/87	Jide Foods Cheque 011202	57,000		187,000Cr
13/4/87	Okin Oloja & Co. Cheque 011204	32,800		154,200Cr
14/4/87	Bank Charges	7,280		146,920Cr
15/4/87	Interest on Fixed Deposit		4,000	150,920Cr
16/4/87	Tolu Adeolu & Co. Cheque 011205	8,000		142,920Cr
30/4/87	Kingsway Stores Cheque 011206	19,200		123,720Cr

You are given the following additional information:
(a)	Cheque No 011203 issued in favour of Tayo Ajao and Associates for N24,800 was presented to the Bank on 2nd May, 1987.
(b)	Advice in respect of Bank charges was received by Messrs. Jackson & Co. on 6th May, 1987.
(c)	Cheque issued in favour of Jide Foods is for supplies to the Directors.

You are required to prepare:
i.	The Cash Book of Messrs. Jackson & Co. for April, 1987 and
ii.	A Bank Reconciliation Statement as at 30th April, 1987.

Question 2: On 30th June 2016, Olisa’s cash book showed that he had an overdraft of N12,000 on his current account at the bank. On checking the cash book with the bank statement you find the following.
(a)	Cheque drawn amounting to N20,000 had been entered in the cash book but had not been presented.
(b)	Cheques received amounting toN16,000 had been entered in the cash book but had not been credited to the bank.
(c)	On instructions from Olisa, the bank had transferred interest of N2,400 from his deposit account to his current account, recording the transfer on 5th July 2016. This amount had however, been credited in the cash book as on 30th June 2016.
(d)	Bank charges of N1,400, shown in the bank statement had not been entered in the cash book.
(e)	The payment side of the cash book had been under cast byN400;
 
(f)	Dividends amounting to N8,000 had been paid direct to the bank, and not entered in the cash book.
(g)	A cheque of N2,000, drawn on deposit account had been shown in the cash book as drawn on current account.
(h)	A cheque issued to Jolayemi for N1,000 was replaced when out of date. It was entered again in the cash book, no other entry being made. Both
cheques were included in the total of unpresented cheque shown above.

You are required to indicate the appropriate adjustment in the cash book, and prepare a statement reconciling the amended balance with that shown in the bank statement.

7.0	REFERENCES/FURTHER READINGS

Accounting Technicians Scheme West Africa (2009). Basic Accounting Processes and System Part 1, Study Pack. Lagos: Abina Publishers
Garbutt, D. (1984), Carter’s Advanced Accounts “7th Edition”. London: Pitman Publishing Limited

Igben, R. O. (2014), Financial Accounting Made Simple. Lagos: ROI Publishers

Jat, R.B. and Jugu, G.Y. (2008). Modern Financial Accounting: Theory and Practice. Jos: Ehindero (Nig.) Limited
Oluyombo, O. (2017). Introduction to Financial Accounting I: SMS 203. Abuja: NOUN. Oluyombo, Onafowokan (2016) Financial Accounting With Ease (3rd Edition). Magboro:
Kings & Queen Associates

Soyode, A. (1980), Financial Accounting: Principles and Practice. Uk: Graham Burn.

The Institute of Chartered Accountants of Nigeria, (2006). Fundamentals of Financial Accounting. Foundation Study Pack. Lagos: Vikas Publishing Limited.
 

















UNIT 14:	COST ACCOUNTING

CONTENTS

1.0	Introduction
2.0	Objectives
	Main Content
	Cost Accounting Information
	Cost Accounting - Definition
	Usefulness of Cost Accounting
	Conceptual clarification of cost
	Cost Build-up
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
7.0	References/Further Readings

1.0	INTRODUCTION

The unit introduces you to the concept of cost accounting, its definition, the range of information that could be supplied by the system, usefulness of accounting information and cost build-up.

2.0	OBJECTIVES

At the end of this you unit, you should be able to:

(i)	define cost accounting;
(ii)	itemize the range of information that could be supplied by the cost accounting system;
(iii)	explain the various concepts associated with cost
(iv)	describe the build up of cost
 
	MAIN CONTENT

	Cost Accounting Information
The cost accounting system of any organization is the foundation of the internal financial information system. Management needs a variety of information to plan, to control and to make decisions. Information regarding the financial aspects of performance is provided by the cost accounting system. The table below shows the examples of cost accounting information and their uses.



S/N	Information provided by Cost
Accounting System	
Possible Uses by Management
1.	Cost per unit of production or service or
for a process.	As a factor in pricing decisions, production
planning and cost control.
2.	Cost of running a section, department or
factory.	Organisational planning cost control.
3.	Wage costs for a unit of production or
per period of production.	Production planning, decisions on alternative
methods, wages cost control.
4.	Scrap/Rectification costs.	Material cost control, production planning.
5.	Cost behaviour with varying levels of
activity.	Profit planning, make or buy decisions, cost
control.


	Cost Accounting – Definition

Cost accounting (traditionally termed ‘costing’) may be defined as:

“Gathering of cost information and its attachment to cost objects, the establishment of budgets, standard costs and actual costs of operations, processes, activities or products; and the analysis of variances, profitability or the social use of funds”.

An important part of the managerial task is to ensure that operations, departments, processes and costs are under control and that the organization and its constituent parts are working efficiently towards agreed objectives. Although there are numerous other control systems within a typical organization, for example, Production Control, Quality Control, and Inventory Control, the Cost Accounting system is the key financial control system and monitors the results of all activities and all other control systems. The detailed analysis and location of all expenditure, the calculation of job and product costs, the analysis of losses and scrap, the monitoring of labour and departmental efficiency and the other outputs of the Cost Accounting system provide a sound basis of information for financial control.

Decision making is concerned with making a choice between alternatives and frequently an important factor in making that choice is the financial implications of the various alternatives.
 
Correctly presented cost information can be of great value to management in decision making and accordingly material on short and long term decision making shall be included later in this unit.

The analysis and recording of past costs and activities is but one element of cost accounting. Management is also concerned to know what costs will be in the future so that appropriate plans and decisions can be made in good time. Also, having some standard or target against which to compare actual costs greatly assists the control function.

Pricing decisions are complex and many interacting factors need to be considered including: the type of market in which the firm operates, the degree of competition, demand and the elasticity of demand, the cost structure of the product and firm, the state of the economy and numerous other factors. Pricing is not simply a cost based decision although past costs and expected future costs are factors to be considered in pricing decisions.

	Usefulness of Cost Accounting

It cannot be emphasised too strongly that if the information produced by the cost accounting system is not useful for managerial decision making, for control or for planning, then it has no value and should not be prepared. To ensure its usefulness, the following questions should be considered:

(a)	Is the cost accounting system appropriate to the organization the way services are provided or goods manufactured?
(b)	Do the reports, statements and analyses produced by the cost accounting system contain the relevant information for the intended purpose?
(c)	Are the reports and statements produced at appropriate intervals and early enough to be effective?
(d)	Are they addressed to the person responsible for planning/decision making/control?
(e)	Is the information produced in a relevant form and to a sufficient degree of accuracy for the intended purpose?

It follows from the above that every cost accounting system will, in certain respects, be unique, because it must be designed to suit the particular organization, products and processes and personalities involved.

SELF ASSESSMENT EXERCISE
1.	Describe the information provided by cost accounting system
2.	Explain the usefulness of cost accounting


	Conceptual clarification of cost

	Cost may be defined as:
 
Cost as a noun – The amount of cash or cash equivalent or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction (IAS 16).

The word ‘cost’ may also be used as a verb, in which case, it can be defined thus:

To ascertain the cost of a specified thing or activity. The word cost can rarely stand alone and should be qualified as to its nature and limitations.

It will be clear from a study of these definitions that they relate to past costs which are the basis of cost ascertainment. At the simplest level, cost includes two components, quantity used and price, i.e.

cost = quantity used x price

	Cost Object

A cost object is any item, process or activity for which a separate measurement of cost is required.

Examples include: the cost of manufacturing a component or product, the cost of operating a department, the cost of dealing with an enquiry at a call centre, the cost of an operation at a hospital or indeed the cost of running the whole hospital. When an individual unit cost is required it is normal to refer to cost units.

	Cost Units

Costs are always related to some object or function or service. For example, the cost of a car, a haircut, a ton of coal etc. Such units are known as cost units and can be formally defined as:

A unit of product or service in relation to which costs are ascertained.

The cost unit to be used in any given situation is that which is most relevant to the purpose of the cost ascertainment exercise. This means that in any one organization numerous cost units may  be used for particular parts of the organization or for differing purposes. For example, in a factory manufacturing typewriters the following cost units might be used for different purposes in the cost accounting system.

Cost Unit	Used
A typewriter	production cost ascertainment
Kilowatt-hours	electricity cost ascertainment
Computer minutes of operation	computer running cost ascertainment
Tonne-miles	transport cost ascertainment
Canteen meals	catering cost ascertainment
 
Cost units may be units of production, e.g. tones of cement, typewriters, gallons of beer, or units of service, e.g. consulting hours, number of invoices processed, patient nights, kilowatt-hours  etc.

They may be identical units as in the above examples, or they may be dissimilar as in a jobbing engineering factory where the cost unit will be the job or batch, each of which will be costed individually.

	Direct Costs

Costs may be classified in numerous ways, but a fundamental and important method of classification is into direct and indirect costs.

Direct costs (comprising direct material costs, direct wages cost and direct expenses) are those costs which can be directly identified with a job, batch, product or service. Typical examples  are:

Direct materials	The raw materials used in a product, bought in parts and assemblies incorporated into the finished products.

Direct wages or Direct labour cost	The remuneration paid to production workers for work
directly related to production, the salaries directly attributable to a saleable service (audit clerks’ salaries for example).

Direct expenses	Expenses incurred specifically for a particular product, job, batch or service; royalties paid per unit for a copyright design, plant or tool hire charges for a particular job or batch.

It follow therefore that direct costs do not have to be spread between various categories because the whole cost can be attributed directly to a production unit or saleable service.

The total of direct costs is known as prime cost, i.e.:

direct material + direct labour + direct expenses = prime cost
Invariably when direct costs are mentioned, the costing of production cost units is involved. Technically, this need not be so, but unless the context of the question clearly points to some other conclusion, any reference to direct costs should be taken to refer to product costs units.

	Indirect Costs

All material, labour and expense costs which cannot be identified s direct costs are termed indirect costs. The three elements of indirect costs: indirect materials, indirect labour and indirect expenses are collectively known as overheads. Typical examples of indirect costs in the production area are the following:
 

INDIRECT MATERIALS:	Lubricating oil, stationery, consumable materials, maintenance
materials, spare parts for machinery, etc.

INDIRECT LABOUR:	Factory supervision, maintenance wages, storemen’s wages, etc. INDIRECT EXPENSES:	Rent and rates for the factory, plant insurance, etc.
INDIRECT MATERIAL + INDIRECT LABOUR + INDIRECT EXPENSES = OVERHEADS

Note:
In practice, overheads are usually separated in categories such as Production Overheads, Administration Overheads, Selling Overheads. The above are examples of Production Overheads.

It must be emphasised that the choice of cost object determines what can be classified as a direct or indirect cost. For example, in a manufacturing firm, the cost object may be to find the cost of running the Inspection Department; in which case the salaries of the inspectors would be a direct cost. However, if the cost object was to find a unit component cost then the inspector’s salaries would be an indirect cost because they cannot be directly identified with an individual component. The more costs that can be classified as direct; the more accurate will be the cost assignment.

	Cost Build-up
Having defined direct and indirect costs, the framework of cost build-up can be shown thus: DIRECT MATERIAL	INDIRECT MATERIAL
+	+
DIRECT LABOUR	INDIRECT LABOUR
+	+
DIRECT EXPENSE	INDIRECT EXPENSE
PRIME COST + OVERHEADS = TOTAL COSTS

4.0	CONCLUSION
Cost and financial information is not the only information required for management decision- making, but it is usually an important if not a crucial factor. Decision-making is concerned with the future and with future costs and revenues. Cost accounting, which is based on historical data, can nevertheless provide some guide to future costs and is frequently a critical part of the information upon which a decision is made. The word cost is rarely used on its own. It is invariably qualified in some way, e.g. Prime Cost, Factory Cost, Indirect Cost, etc.

5.0	SUMMARY
 
In this unit, we have learnt that: Cost accounting is concerned with the ascertainment and control of costs; The purpose of cost accounting is to provide detailed information for control, planning and decision-making; To be of use, cost accounting information must be appropriate, relevant, timely, well presented and sufficiently accurate for the purpose intended. Also, in this unit we have treated various concepts such as: cost object; direct cost; indirect cost, etc.
	TUTOR-MARKED ASSIGNMENT
1.	Define cost accounting with reference to its scope and uses
2.	Differentiate between Direct and Indirect cost

7.0	REFERENCES/FURTHER READING
Adeniji, A.A. (2013) An Insight Into: Management Accounting. Lagos: Value Analysis Publishers

Lucey, T. (2009). Costing. Hampshire: CENGAGE Learning
 
UNIT 15:	ELEMENTARY BREAK-EVEN ANALYSIS


CONTENTS

1.0 Introduction

2.0 Objectives

	Main Content

	Break-even point

	Break-even analysis

	Simple Break-Even Point Application
	C-V-P Analysis Assumptions
	Restrictions Of B-E-P

4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment

7.0 References/Further Reading

1.0	INTRODUCTION

Break-Even analysis can be used to give answers to business questions such as “what is the minimum level of sales that can be made wherein a company will not experience loss” or “by how much can sales be reduced and the company still continues to be profitable”. Break-even analysis is the analysis of the level of sales at which a company (or a project) would make zero profit. As its name implies, this approach determines the sales needed to break-even.
2.0	OBJECTIVES

At the end of this unit, you should be able to:

i.	Explain break-even analysis

ii.	Calculate the break-even point for any product using formulars

iii.	Present the break-even point in a diagram

iv.	Mention the major assumptions behind the C-V-P analysis
 
v.	Describe restrictions surrounding the break-even point analysis

	MAIN CONTENT

	BREAK-EVEN POINT

Break-Even point (B.E.P.) is determined as the point where total income from sales is equal to total expenses (both fixed and variable). In other words, any point under this point indicates that the company is operating at a loss. If all the company’s expenses were variable, break-even analysis would not be relevant. But, in practice, total costs can be significantly affected by long-term investments that produce fixed costs. Therefore, a company–in its effort to produce gains for its shareholders has to estimate the level of goods (or services) sold that covers both fixed and variable costs.
	BREAK-EVEN ANALYSIS

Break-even analysis is based on categorizing production costs between those which are variable (costs that change when the production output changes) and those that are fixed (costs not directly related to the volume of production). The distinction between fixed costs (for example administrative costs, rent, overheads, and depreciation) and variable costs (for example production wages raw materials, sellers’ commissions) can easily be made, even though in some cases, such as plant maintenance, costs of utilities and insurance associated with the factory and production manager’s wages, need special treatment. Total variable and fixed costs are compared with the sales and revenue in order to determine the level of sales volume, sales value or production at which the business makes neither a profit nor a loss.
SELF-ASSESSMENT EXERCISE

Explain in details the break-even analysis with reference to the break-even point.

	SIMPLE BREAK-EVEN POINT APPLICATION

B.E.P is explained in the following example, the case of Eleganza Ltd. This company produces and sells quality pens.
Fixed costs = N400,000 Cost per pen = N12
Selling price per pen = N20

The following table shows the outcome for different quantities of pens sold (Diagram1):



Number of Pens Sold (Q)	20,000	50,000	80,000
 
Total Sales (S)	N400,000	N1,000,000	N1,600,000
Variable Costs (VC)	N240,000	N600,000	N960,000
Contribution Margin (C.M.)	N160,000	N400,000	N640,000
Fixed Costs (FC)	N400,000	N400,000	N400,000
Profit/(Loss)	(N240,000)	0	N240,000
Diagram 1: Different quantities of pens sold

The break-even point can easily be calculated. Since the sales price is N20 per pen and the variable cost is N12 per pen, the difference per item is N8. This difference is called the contribution margin per unit because it is the amount that each additional pen contributes to profit, in other words, each pen sold offers N8 in order to cover the fixed expenses. In our examples, fixed cost incurred by the firm is N400,000 regardless of the number of sales. As each pen contributes N8, sales must reach the following level to offset the above costs (Diagram 2):
















Fixed Costs	=		Fixed Costs	= N400,000	=50000pens (B.E.P) SP- VC (u)		Contribution Margin		N8

Thus, 50,000 pens is the B.E.P required for an accounting profit.




Break-even analysis is a useful tool because it helps managers to estimate the outcome of their plans. This analysis calculates the sales figure at which the company (or a single project) breaks even. Therefore, a company uses it during the preparation of annual budget or
 
in cases of new product development. The B.E.P formula can be also used in the case of new product development. The various formulas relevant for BEP analysis are shown below:
1.	Break-even point (in units) =	Fixed cost
Contribution margin/unit

2.	Break-even point (N sales) =	Fixed cost x Selling price/unit
Contribution/unit
3.	Contribution/unit = Selling price/unit – Cost price/unit
4.	Number of units for target profit = Fixed cost + Target profit
Contribution/unit
5.	Sales value for target profit = Number of unit for target profit x Selling price/unit

The B.E.P formula can be also used in the case where a company wants to specify the exact volume of sold items required to produce a certain level of profit. This is depicted in ILLUSTRATION 2.
ILLUSTRATION 2
Honey PLC produces bottles of honey with a Selling price of N1,000 and a variable cost of N600. Fixed cost is N6,000,000 per annum. Calculate:
i.	Number of units to break-even
ii.	Sales at break-even point
iii.	The number of units to be sold to achieve a profit of N2,000,000
iv.	The sales value for target profit of N2,000,000

SOLUTION
Contribution/unit = N1,000-N600
= N400
i.	BEP (units) = N6,000,000 = 15,000 bottles of honey
N400

ii. BEP (N sales) = N6,000,000 x N1000 = N15,000,000 N400
iii.	Number of units for target profit = N6,000,000 + N2,000,000 = 20,000 bottles
N400
iv.	Sales for target profit = 20,000 bottles of honey x N1,000 = N20,000,000


From Illustration 2 it is clear that BEP is not only concerned with the level of activity that produces neither profit or loss but also considers the behavior of costs and profits at other levels which is of much greater significance. As a result of this consideration, the B-E-P is alternatively referred to as cost-volume-profit analysis or C-V-P analysis
 
	C-V-P Analysis Assumptions

a)	All costs can be resolved into fixed and variable elements

b)	Fixed costs will remain constant and variable costs vary proportionately with activity

c)	Over the activity range being considered, costs and revenues behave in a linear fashion

d)	The only factor affecting costs and revenues is volume

e)	Technology, production methods and efficiency remain unchanged

f)	Particularly for graphical methods, the analysis relates to one product only or to a constant product mix
g)	There are no stock level changes or that stocks are valued at marginal or variable cost only.
	RESTRICTIONS OF B-E-P

Beside its useful applications, break-even analysis is subject to some restrictions.

1.	In every single estimation of the break-even level, we use a certain value to the “selling price”. Therefore, if we want to find out the level that produces profits under different selling prices, many calculations and diagrams are required.
2.	A second drawback has to do with the variable “total costs”, since in practice these costs are difficult to calculate due to the fact that there are many things that can go wrong and mistakes that can occur in production.
3.	Another effect that is not algebraically measured is that changes in costs may alter products’ quality. Also, the break-even point is not easily estimated in the ‘real world’, because there is no in mathematical calculation that allows for the “competitive environment”. This refers to the fact that the competition may cause prices to drop or increase according to demand.


4.0	CONCLUSION

The Break-even analysis, or more descriptively, cost-volume-profit analysis studies the relationship between costs, volume, sales and profit. The main purpose of this analysis is to have some idea of how much to sell, before a profit will be made. Break-even analysis is extremely important before starting a new business or to early stage business because it gives answers to crucial questions such as how sensitive is the profit of the business to decreases or increases in costs.
 
5.0	SUMMARY

In this unit, we have discussed the meaning of Break-even analysis and shown how to make use of formular and graph to calculate the Break-even point. The cost-volume-profit analysis is also described as more encompassing than the B-E-P in studying the behavior of costs and profit at varying level of activity. This unit also discussed the assumptions behind C-V-P analysis and restrictions of B-E-P.
	TUTOR-MARKED ASSIGNMENT

1.	What are the major assumptions behind C-V-P analysis?

2.	A company makes a single product with a selling price of N40 and a variable cost of N24. Fixed cost is N240,000 per annum. Calculate the following and present in a graph:
a.	Number of units to break even

b.	Sales at break-even point

c.	What is the number of sales that is needed to achieve a profit of N80,000

d.	What is the level of sales that will achieve a profit of N80,000

7.0	REFERENCES/FURTHER READING

Lucey, T. (2002) Costing. London: BookPower/ELST

Tsorakidis, N., Papadoulos, S. Zerres, M. & Zerres. Break-Even Analysis. Retrieved from www.bookboon.com

November 19, 2025 12:39 PM

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Electricity	2,730	
Salaries	85,110	
Tenement Rate	3,030	
Telephone	1,020	
Furniture	33,120	
Sales		2,204,940
Returns	1,680	11,760
Bad Debts	780	
Insurance	5,760	
Commission received		52,500
Debtors	146,460	
Creditors		252,150
Cash in hand	10,560	
Bank	113,760	
Stock 1st Jan. 2013	360,750	 	
3,005,070	3,005,070

Additional information is as follows:
i.	The stock at 31st December 2013 was N323,610
ii.	Depreciation is as follows: Premises at 5 per cent
Motor vans at 10% per annum Furniture at 10% per annum
 
Prepare statement of profit or loss for the year ended 31st December 2013, and statement of financial position as at that date.

7.0	REFERENCES/FURTHER READINGS

Accounting Technicians Scheme West Africa (2009). Basic Accounting Processes and System Part 1, Study Pack. Lagos: Abina Publishers
Garbutt, D. (1984), Carter’s Advanced Accounts “7th Edition”. London: Pitman Publishing Limited
Igben, R. O. (2014), Financial Accounting Made Simple. Lagos: ROI Publishers
Jat, R.B. and Jugu, G.Y. (2008). Modern Financial Accounting: Theory and Practice. Jos: Ehindero (Nig.) Limited
Olanrewaju, Oluseyi (2012) IFRS PAL – Handy Approach. Lagos: Dimkem Publications Limited.
Oluyombo, O. (2017). Introduction to Financial Accounting I: SMS 203. Abuja: NOUN. Oluyombo, Onafowokan (2016) Financial Accounting With Ease (3rd Edition). Magboro:
Kings & Queen Associates

Soyode, A. (1980), Financial Accounting: Principles and Practice. Uk: Graham Burn.

The Institute of Chartered Accountants of Nigeria, (2006). Fundamentals of Financial Accounting. Foundation Study Pack. Lagos: Vikas Publishing Limited
 





UNIT 11:	END OF YEAR ADJUSTMENTS IN FINAL ACCOUNTS

1.0	Introduction
2.0	Objectives
	Main Content
	Accruals
	Prepayments
	Provisions
	Reserves
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
7.0	References/Further Readings

1.0	INTRODUCTION

A business is a legal entity whose operations and financial transactions are continuous in nature from one year to another. As a result, there are financial transactions in business organisations that cannot be fully completed within a year and more importantly at the end of the accounting year. Furthermore, the accounting year of organisations vary from one company to another; as a result some transactions will not fall within the same accounting year for two or more companies. Events like this lead to adjustments in the final accounts at the end of the accounting period.

Business involves the giving and taking of credits, while all expenditure and income for a particular year may not be fully paid and received as at the year end. However, those incomes due but not yet received and expenses due for settlement but not yet paid as at the year-end should be brought into the final accounts to show a true and fair position of the company through proper adjustment. This unit focuses on end of year adjustments which include prepayments, accruals, reserves and provisions.

	OBJECTIVES

At the end of this unit, you should be able to:
i.	Explain entries on accruals
ii.	Discuss entries for prepayments
 
iii.	Understand the concept of bad debts
iv.	Explain the entries for provisions
v.	Recognise and treat increase and decrease in provisions
vi.	Explain reserves
vii.	Prepare final accounts with end of year adjustments


	MAIN CONTENT

	Accruals

These are services and goods that have been consumed or enjoyed during the year but which payment has not been made either in full on in part at the end of that financial year. e.g. Government water uGrace of N15,000 for December 2015, but bill was received in January 2016. It means that the amount was owed as at December 31, 2015 and form part of the accruals to be adjusted for in the final accounts. Accrual can also be called owing or due. Any amount owing on expenses is added to that expense in the statement of profit or loss and reflected under current liabilities in the statement of financial position. Accruals are necessary in order to allocate all expenses relating to an accounting period to that period.

Example 1: Big Success Limited paid the following expenses by cash amongst others during the accounting year ended 31st December 2015.
Office rent	N72,080
Office salaries	N45,800

A further examination of the company’s records shows that:
i.	Office salaries of N4,000 was due as at 31st December 2015..
iv.	Office rent of N32,600 owed has not been paid by 31st December 2015.

You are required to show how the accruals will be treated in the final accounts.

SUGGESTED SOLUTION TO EXAMPLE 1

Method 1: This entails the preparation of an account for items affected by the accruals. Accrued expenses are credit balance in the ledger as depicted in the account below. With this method, the total of expenses paid and those owed will be posted to the statement of profit or loss and statement of financial position.
 
Balance c/d	32,600 	Statement of profit or loss	104,680
	104,680		104,680
		Balance b/d	32,600


Office salaries account
Cash	45,800		
Balance c/d	4,000	Statement of profit or loss	49,800
	49,800		49,800
		Balance b/d	4,000


Big Success Limited
Statement of Profit or Loss (Extract)
N
Office rent	104,680
Office salaries	49,800


Big Success Limited
Statement of Financial Position (Extract) Current liabilities:
Office rent due	32,600
Office salaries owed	4,000


Method 2: This method does not require the preparation of an account for items affected by the accruals. The amount paid and the accrual will be posted to the statement of profit or loss separately while the accrued expenses will be reflected in the statement of financial position under the current liabilities.

Big Success Limited
Statement of Profit or	
Loss (Extract)	

Office rent	
72,080	N
Add accrual	32,600 	104,680
Office salaries	45,800	
Add owing	 4,000	49,800
 

Big Success Limited
Statement of Financial Position (Extract) Current liabilities
Office rent due	32,600
Office salaries owed	4,000

	Prepayments

These are goods and services that have been paid for, but the benefit is yet to be enjoyed or consumed either in full or in part. A good example is payment of rent in advance. Prepayment or payment in advance or amount prepaid is deducted from the total payment in respect of the expense in statement of profit or loss and the prepayment is recorded under current assets in the statement of financial position. Prepayment is to enable the organisation not to understate the profits for the accounting period in which the prepayment occurs.

Example 2:No Loss Enterprises paid the following expenses by cheque during the accounting year ended 31st December 2014.
Office rent	N156,650
Water rate	N50,000

The information below was provided as at 31st December 2014
i.	Three months office rent of N26,650 for January to March 2015 are included in the N156,650 paid.
iv.	N5,000 was paid in advance to the water board as water rate.

You are required to show how the above transactions will be treated in the final accounts.

SUGGESTED SOLUTION TO EXAMPLE 2

Method 1: This entails the preparation of accounts for items affected by the prepayments.

Office rent account
Bank	156,650	Statement of profit or loss	130,000
	 		Balance c/d	26,650 
	156,650		156,650
Balance b/d	26,650		


Water rate account
 
Bank	50,000	Statement of profit or loss	45,000
	 		Balance c/d	  5,000 
	50,000		50,000
Balance b/d	5,000		


No Loss Enterprises
Statement of Profit or Loss (Extract)
N
Office rent	130,000
Water rate	45,000


No Loss Enterprises
Statement of Financial Position (Extract) Current assets:
Office rent prepaid	26,500
Water rate in advance	4,000


Method 2: This method does not require the preparation of an account for items affected by the prepayments.

No Loss Enterprises
Statement of Profit or Loss (Extract)
	N	N
Office rent	156,650	
Less prepayment	26,500	130,000
Water rate	50,000	
Less payment in advance	5,000	50,000


No Loss Enterprises
Statement of Financial Position (Extract) Current assets:
Office rent prepaid	26,500
Water rate in advance	4,000

	Provisions
 

Provisions are important because most business transactions are done on credit. As long as organisations relate with their suppliers and customers on credit basis, bad debts and other provisions are inevitable.


	Bad Debts

Bad debts are debts that have gone bad and there are no chances of the debt being recovered.  Bad debts could be as a result of death of the debtor, bankruptcy of a debtor, mental illness of a debtor, lack of good credit control procedures, disagreement as to amount due between the debtor and the creditor and closure or permanent negative disruption of the debtors business.


Bad debt is an expense to be charged against the profit for the year it occurred. This is done by debiting the bad debt account and credit the debtors account to reduce the value of the debtors after the bad debt. It is the net debtors figure after adjusting for bad debts that will reflect in the statement of financial position.


Example 3:Goodness Limited decided to write off N4,000 and N3,000 as bad debts for two customers namely Lola and Doyin respectively for year 2014. The balances on these account for year 2013 are Lola N48,400 and Doyin N11,500.


Show the journal, ledgers, statement of profit or loss and statement of financial position to record the above.


SUGGESTED SOLUTION TO EXAMPLE 3


Journal	
	Dr.	Cr.
Bad debts	4,000	
Debtors - Lolade		4,000
Being debt written off a debtor account		
Bad debts Debtors – Doyin	
3,000	

3,000
 
Being bad debt on a debtor account

Statement of profit or loss	7,000
Bad debts	7,000
Being bad debts for the year written off

Ledgers





Statement of Profit or Loss
Expenses:	N
Bad debts	7,000

Statement of Financial Position
Current assets:	N
Debtors	59,900
Less bad debts	 7,000	52,900

	Provision for Bad or Doubtful Debts

Doubtful debts are those debts which in the opinion of management of an organisation may not be fully recovered. The provision for such debt is largely subjective.It is an estimation of debts of which their probability of recovery is below hundred percent. To avoid sudden bad debts,
 
business organisations have devised a way of guarding against this by creating provision for bad or doubtful debt in their records for debts that they are not sure of being able to collect.

Provision for doubtful or bad debts will be charged on the debtors after the deduction of the bad debts for the period or after the bad debts have been written off.

Example 4:A company provide 5% as provision for bad debts. As at year 2015, the debtors balance was N60,000 and bad debt to be written off was N6,000. What is the doubtful debt provision for the year?

SUGGESTED SOLUTION TO EXAMPLE 4
N
Debtors	60,000
Less bad debt	(6,000) 54,000

Provision for doubtful debt is N54,000 x 5% = N2,700

The accounting entry for provision for doubtful debt is a function of the time the provision occurs. It can take two forms namely, the first year and subsequent years.

Where the provision is for the first year, the amount will be charged against the profit by: Debiting	-	Statement of profit or loss
Crediting	-	Provision for doubtful debts account
The provision will be deducted from the debtors after deducting bad debts in the statement of financial position.

Example 5:Oluwaseyi Investment decided to provide 7% as provision for bad debt on his debtors figure of N88,200. Show this in form of a journal, ledger and statement of financial position extract.

SUGGESTED SOLUTION TO EXAMPLE 5


Journal	
	Dr.	Cr.
Statement of profit or loss	6,174	
Provision for bad debt account		6,174
Being 7% provision for bad debt on debtors		
 
Ledgers





Expenses
 

Provision for bad debt account
Statement of profit or loss	6,174


Statement of profit or loss
 
Provision for bad debt	6,174

Oluwaseyi Investment
Statement of Financial Position (extract)
Current asset:	N
Debtors	88,200
Less provision for bad debt	 6,174
 82,026

Where the provision is for subsequent years, it can either be an increase over what was provided for in previous year (which is an expenses) or a decrease over previous year provision (which is an income). Increase can occur if the closing provision is higher than the opening provision for doubtful debts.

Example 6: The bad debt provision for a company in 2014 and 2015 are N2,000 and N2,800 respectively. Show the above entries using ledgers and statement of profit or loss as at 2015.

SUGGESTED SOLUTION TO EXAMPLE 6

Provision for bad debt Account
		Bal b/d	2,000
Bal c/d	2,800	Statement of profit or loss	   800
	2,800		2,800
		Bal b/d	2,800

Statement of profit or loss
Expenses
Provision for bad debt - increase	800
Decrease in provision can occur if the closing provision is lower than the opening provision for doubtful debts. This could be a result of improved payment habits of the customers and/or reduction in credits granted to customers.
 
Example 7: Provision for doubtful debts of a company was N1,550 and N1,300 for year 2010 and 2011 respectively. By means of ledger and statement of profit or loss, show how this will appear in the books.

SUGGESTED SOLUTION TO EXAMPLE 7

Provision for Doubtful Debts Account
Statement of profit or loss	250	Bal b/d	1,550
Bal c/d	1,300		
1,5501,550			
Bal b/d			1,300

Statement of Profit or Loss
Other income:
Provision for doubtful debts - decrease	250


	Reserves

These are amounts set aside out of profit earned by a company and constitute part of shareholders fund. Reserves may be voluntarily created by the directors or statutorily created. We have revenue, capital and general reserves. Reserves are posted to the statement of changes in equity and statement of financial position as appropriate for limited liability company.

	Revenue Reserve

This type of reserve is distributed to the shareholder and other capital providers in form of debenture interest, retained profit etc.

	Capital Reserves

They are non-distributable reserves that are retained to comply with certain laws or for accounting requirement. e.g. capital redemption reserve fund, share premium, revaluation reserve etc.

	General Reserves

They are reserves not set aside for a specific purpose.
 
Example 8:The trial balance below is drawn from the books of Palace Ventures for the year ended 31st March 2016.

	DR.
N	CR.
N
Capital account		17,000
Drawing account	8,400	
Purchases	38,000	
Sales		60,000
Discounts	2,400	1,900
Office rent	1,080	
Travelling expenses	960	
Warehouse rent	1,320	
Fire insurance	180	
Insurance on purchases	240	
Office salaries	4,800	
Wages	720	
Carriage inwards	160	
Carriage outwards	140	
Furniture & fittings	3,600	
Opening stock	4,000	
Trade debtors	17,400	
Sundry creditors		15,020
Cash at bank	10,224	
Cash in hand	110	
Bank charges	36	
General expenses	 	150	
	93,920	93,920
Note the following:		
i.	Office salaries of N40 due as at 31st March 2016.
ii.	Closing stock was N4,800
iii.	Sales of N600 made on credit during the period were omitted in the record keeping process
iv.	Office rent of N360 owed has not been paid by 31st March 2016
v.	Bank charges of N12 were not entered in the books
vi.	You are to prepare statement of profit or loss and statement of financial position for the year.

SUGGESTED SOLUTION TO EXAMPLE 8

Palace Ventures
 
Statement of profit or loss For the year ended 31st March 2016


Sales		N		N
60,000	
Omitted sales				 	600	
Total sales				60,600	
Opening stock		4,000			
Purchases		38,000			
Carriage inwards		 	160			
		42,160			
Less closing stock		  4,800			
Goods available for sale		37,360			
Wages		720			
Purchases insurance		240			
Warehouse rent
Cost of gods sold		  1,320			
39,640
Gross profit
Other income
Discount received					20,960

 1,900

Discount allowed			
2,400		22,860
Office rent	1,080				
Add accrual	   360		1,440		
Travelling expenses			960		
Fire insurance
Office salaries	
4,800		180		
Add owing	    40		4,840		
Carriage outwards
Bank charges	
36		140		
Add omission	12		48		
General expenses Net profit	    150	10,158	
12,702

SELF ASSESSMENT EXERCISE

1.	(a)	Define bad debts.
(b)	What is the objective of making provision for bad debt?
 

2.	Babafidau Bim is the owner of Babafem Enterprises. The trading concerns sells on credit to a sizeable number of the well-known customers. The company has been experiencing bad debts and commenced providing for suchdebts from the last financial year (1989). On 1st January, 1990 the provision for bad debts was N2,570. During the year N680 of these debts actually proved uncollectible and the sum of N1,409 proved collectable. The sum of N315 debts that became bad were not provided for. At the end of the year a new provision of N3,498 is required.
Show the treatment of provision for bad debts and bad debts in the ledger and statement of profit or loss.

4.0	CONCLUSION

End of year adjustments in the final accounts are necessary to show the true and fair position of the financial statements. As such, the end of the year adjustment in the statement of profit or loss and the statement of financial position include how entries are passed in both statements for accruals, prepayments, bad debts, reserves and provisions for doubtful debts - including the recognition and treatment of increase and decrease in provisions.

5.0	SUMMARY

This unit has discussed in details the end of year adjustments in final accounts. It specifically examined bad debts, provisions for doubtful debts, reserve, prepayments and accruals with relevant discussion and question, and how they are treated in the statement of profit or loss and the	statement	of	financial	position.

6.0	TUTOR-MARKED ASSIGNMENT

Question 1: Madam Florence provide the following information


Year	Debtors	Bad debts
2000	120,000	-
2001	155,000	14,000
2002	62,500	2,500

The debtors’ figures are before bad debts, while provision for bad debts is estimated at 10 percent for each year. Prepare the following:
(a)	Bad debt account.
(b)	Provision for bad debts account
(c)	Statement of profit or loss
 
(d)	Statement of financial position extract for the three years.

Question 2:	The following were extracted from the books of Orelope and Co. on 31st December 2003.
N
Debtors – without any adjustment	58,500
Provision for bad debts	5,460
Bad debts	1,560

The company’s provide for 10% as doubtful debts.
You are required to prepare
(a)	Provision for doubtful debts account.
(b)	Statement of profit or loss.
(c)	Statement of financial position.

Question 3: Emaka is a sole trader, who has no knowledge of accounting. However, some of his business transactions are recorded in a personal diary. Financial records as at 1st January 2015 are as follows:

N
Rent owing to landlord	500
Stock	31,000
Amount owing by Emaka to suppliers	11,500
Debtors	7,500
Capital	47,100
Non-current assets	30,000
Bank	3,100
Depreciation to date	12,500

During the year, an analysis of his bank statement revealed: Cheques drawn:
To suppliers	48,650
Rent	3,500
Other expenses	10,250
Drawings	11,000
Electric oven	13,000

Lodgement:
From customers	75,900
Amount inherited	5,500
 

A further look at his diary showed that before banking the cash and cheques received from customers, N5,000 was paid out for purchases and N1,000 for personal drawings. Rent is N5,000 a year.

As at 31st December 2015 the following figures were computed.
Debtors	N11,500
Stock	N39,000
Creditors	N19,750
Depreciation is at 15% on the reducing balance method.

Required:
(a)	Statement of profit or loss for the year ended 31st December 2015.
(b)	Statement of financial position as at that date. Show all workings

7.0	REFERENCES/FURTHER READINGS

Accounting Technicians Scheme West Africa (2009). Basic Accounting Processes and System Part 1, Study Pack. Lagos: Abina Publishers
Garbutt, D. (1984), Carter’s Advanced Accounts “7th Edition”. London: Pitman Publishing Limited
Igben, R. O. (2014), Financial Accounting Made Simple. Lagos: ROI Publishers
Jat, R.B. and Jugu, G.Y. (2008). Modern Financial Accounting: Theory and Practice. Jos: Ehindero (Nig.) Limited
Olanrewaju, Oluseyi (2012) IFRS PAL – Handy Approach. Lagos: Dimkem Publications Limited.
Oluyombo, O. (2017) Introduction to Financial Accounting I: SMS 203. Abuja: NOUN. Oluyombo, Onafowokan (2016) Financial Accounting With Ease (3rd Edition). Magboro:
Kings & Queen Associates
Soyode, A. (1980), Financial Accounting: Principles and Practice. Uk: Graham Burn.
The Institute of Chartered Accountants of Nigeria, (2006). Fundamentals of Financial Accounting. Foundation Study Pack. Lagos: Vikas Publishing Limited
 
UNIT 12: ACCOUNTING TREATMENT OF CONTROL ACCOUNTS

1.0	Introduction
2.0	Objectives
	Main Content
	Control Account System
	Merits of Control Account
	Working of Control Account
	Debtors Control Account:
	Creditors Control Account
	Debtor’s Statement of Account
	Creditor’s Statement of Account
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
5.0	References/Further Readings

1.0	INTRODUCTION

As businesses keep growing, the number of accounts kept will be on the increase and this will of necessity require more personnel to work on the preparation of such accounts. When the various accounts are prepared, there will be need to harmonise these accounts into one at a particular period to check the arithmetical accuracy of what has been posted to individual accounts. The process of harmonising all individual accounts in the same class will give rise to a control account which serves as the total or summary of what happens within that period for those accounts in the same class.

	OBJECTIVES

At the end of this unit, you should be able to:
i.	Define Control Account
ii.	Explain Types of Control Accounts
iii.	Discuss Merits of Control Accounts
iv.	Prepare Debtors Control Account:
v.	Prepare Creditors Control Account
vi.	Prepare Debtor’s Statement of Account
vii.	Prepare Creditor’s Statement of Account

	MAIN CONTENT
 
	Control Account System

Control account is a summary of customers or suppliers ledger in total. The balance on the control account under normal circumstance must equal the addition of individual customers or suppliers account at a particular date or period.Another name for control accounts is total account, because the account is maintained on total basis.

Due to mistakes and errors in the completion of the control account and/or individual customers or suppliers account, the control account may not agree with the addition of all the individual customers or suppliers balances, and this will lead to reconciliation. It should be noted that any entry on the debit side of an account will also be on the debit side of the control for such an account, likewise the credit side.

There are two major types of control accounts namely
i.	Sales ledger control or Debtors control account
ii.	Purchases ledger control or Creditors control account

	Merits of Control Account

The following are the merits of control accounts
i.	It allows homogeneous accounts to be grouped together.
ii.	Useful in detecting fraud and errors relating to debtors and creditors.
iii.	It can be used to detect missing figure.
iv.	Allows for quick preparation of draft annual account.
v.	It also helps to localise errors in a trial balance because such errors can be easily traced to a set of account(s).

	Working of Control Account

With simple illustration about customers, readers will grasp the working of control account systems.

Assuming there is a company with over two thousand customers located all over Nigeria and neighbouring countries. A separate account will be maintained or kept for these customers individually where their transactions with the company are recorded. At the end of the month, the account will be closed for the month to know what each customer owes.

The control account to be prepared will only record the total of each transaction as it affects all the customers for the month and the balance on the control account should be equal to the sum of the balance on the individual customers account.
 


	Debtors Control Account

Any transactions that will increase the customers’ indebtedness to the organisation are debited to the debtors control account while those that will reduce the debts are credited to the same account. At the end of the period, the sales ledger control account or debtors control account will have a debit balance to show how much is due from all the credit customers. Debtors control account is not used for cash customers. The format for debtors control account is as prepared below.

3.4.1 Format of Debtors Control Account


Sales Ledger Control Account	
Bal. b/d	xx	Receipts from customers	xx
Credit sales	xx	Discount allowed	xx
Dishonoured cheque	xx	Returns inward	xx
Bills receivable dishonoured	xx	Bad debts	xx
Cash refund to debtors	xx	Creditor control contra	xx
Interest charge to customer	xx		
Bad debt written off recovered	xx	Bal. c/d	xx
	xxx		xxx
Bal. b/d	xx		

	Creditors Control Account
The transactions that will increase the financial obligation to the supplier will be credited to the creditors control account. Same account will be debited with those transactions that will reduce the obligation like discount received, returns outwards and payments to creditors.

3.4.1	Format of Creditors Control Account

Purchases Ledger Control Account
Cash paid Returns outward Discount received Cheque paid
Debtors control contra
Bal c/d	xx xx xx xx xx
xx	Bal. b/d
Credit purchases Dishonoured cheque
Bills payable dishonoured Interest charge by supplier	xx xx xx xx xx	
xxx		
Bal. b/d	xxx
xx	
 


Example 1: Ascertain by means of control accounts, the amount of ‘purchases’ and ‘sales’ for the year ended 31st, December 2015


Total for the year:
N
Returns outwards	95
Cash payment to creditors for good supplied	5,625 Returns inwards		205
Cash received from debtors for sales	8,892
Bills receivable	1,200
Discount received	527
Bills payable	1,702
Discount allowed	546
Bad debts	253
Amount due from debtors set off by contra
against amount due to him for supplies	340
At January 1, 2015
Sundry creditors for goods supplied	1,226
Sundry debtors for sales	2,130
At 31st December 2015
Sundry creditors for goods supplied	1,339
Sundry debtors for sales	2,860

SUGGESTED SOLUTION TO EXAMPLE 1

Debtors Control Account
Bal. b/d	2,130  Returns inwards	205
Credit sales (bal figure) 12,166	Cash from debtors	8,892
Bills receivable	1,200
Discount allowed	546
Bad debts	253
Set-off	340
 
 	 14,296
Bal. b/d	2,860
 
Bal. c/d	2,860
 14,296
 


Creditors Control Account
Returns outwards	95	Bal. b/d	1, 226	
Payment to creditors	5, 625	Credit purchase(bal figure)	8, 402	
Discount received	527			
Bills payable	1, 702			
Set-off	340			
Bal. c/d	1, 339			
	9, 628		9, 628	
		Bal. b/d	1, 339	

The credit sales and credit purchases are balancing figures.

Example 2: The following balances were extracted from the books of Top Performers International Limited as at 31st December 2015.
N
Opening balance: Debtors	4,000
Creditors	3,300
Purchases:	on credit	16,500
in cash	7,400
Sales:	on credit	25,500
for cash	10,200
Payment to creditors	15,000
Receipt from debtors	23,600
Cash discount allowed	540
Cash discount received	400
Trade discount allowed	12,000
Returns inwards	760
Returns outwards	215
Contra settlements	500
Bad debts written off	85
Provision for bad debts	120
Bills receivable	600
Cheques dishonoured	45
Bills payable	1, 020
You are required to prepare:	
i.	Sales Ledger Control Account:	
ii.	Purchases Ledger Control Account	
 

SUGGESTED SOLUTION TO EXAMPLE 2

Top Performers International Limited Sales Ledger Control Account
As at 31st December, 2015
Bal. b/d		4,000	Receipt from debtors	23,600
Sales on credit	25,500		Discount allowed	540
Cheque dishonoured		45	Returns inwards	760
			Contra settlement	500
			Bad debt written off	85
			Bills receivable	600
		 		Balance c/d	  3,460
	29,545			29,545
Bal. b/d	3,460			


Top Performers International Limited Purchases Ledger Control Account As at 31st December, 2015
Payment to creditors	15,000		Bal. b/d		3,300 Discount received	400	Purchases on credit	16,500 Returns outwards	215
Contra Settlement	500
Bills payable	1,020
Bal. c/d	 2,665
19, 800	19,800
Bal. b/d	2,665

Trade discount is given at the point of sales and the amount is deducted before arriving at the sales figure to be recorded in the books of account. Hence it is not posted in the control account.

Example 3:Sani Dongo Ventures maintains self-balancing ledgers. From the details given below you are required to prepare the control accounts for purchases and sales ledgers for the year ended 31st, December 2015
N
Purchases	153,270
Bad debts written off	2,200
Bills payable accepted	21,700
Bills receivable drawn	50,200
 
Interest charged to customers Purchases returns
Payment to creditors	
890	70

125,380
Receipts from debtors		143,080
Bills receivable dishonoured		5,750
Discount allowed		5,280
Discount receivable		3,270
Sales returns		3,010
Cash refund to debtors		750
Cheques from debtors returned unpaid		250
Sales and Purchases ledger contra		10,170
Bills receivable discounted		47,850
Bills payable retired for non-payment		1,500
Sales		200,510
Bad debts recovered (included in cash from debtors)		80
Creditors ledger balance at 31st December, 2015	50,860
Debtors ledger balance at 31st December, 2015	68,180
Purchases ledger control balance at 1st January, 2015	57,500
Sales ledger control balance at 1st January, 2015	74,710

SUGGESTED SOLUTION TO EXAMPLE 3	
Sani Dongo Ventures
Purchases Ledger Control Account As at 31st December, 2015	
Bills payable	21,700	Bal. b/d		57,500
Purchases returns	890	Purchases		153,270
Payment	125,380	Bills repayable retired	1,500	
Discount receivable	3,270			
Sales ledger contra	10,170			
Bal. c/d	50,860			
212,270	212,270
Bal. b/d	50,860



Sani Dongo Ventures
Sales Ledger Control Account	
As at 31st December, 2015				
Bal. b/d	74,710	Bad debts	2,200	
 
Dishonoured bills	5,750	Bills receivable	50,200
Cash refund	750	Receipts	143,080
Returned cheques	250	Discount allowed	5,280
Sales	200,510	Sales returns	3,010
Bad debt recovered	80	Purchases ledger contra	10,170
Interest charge	 	70 _	Bal. c/d	  68,180
	282,120		282,120
Bal. b/d	68,180		

Bills receivable discounted has nothing to do with the control account because the company can as well wait till the bill is matured for payment instead of discounting it.

	Debtor’s Statement of Account

It is a statement sent periodically, usually once a month by a seller to his customers, showing the position of their accounts up to a certain date. It shows the particulars of invoices, debit notes  and credit notes originated from the seller to the buyer during a given period.It also includes payments made and how much the customer owes. At times, the age of the debt may be revealed in the statement. The statement is kept by the buyer for reference and settlement purpose.

A debtor’s statement can also be regarded as a memorandum statement showing the details of unpaid invoices for each debtor, which is supposed to agree with the total amount outstanding against the customer in the general ledger. It is also expected to give some information about the customer and analyse the amount outstanding at the end of the month according to their age.

Example 4: You have been engaged as Account Officer of Efiong Enterprises. Your immediate assignment is the preparation of monthly Statements of Account. From the following information, you are required to prepare the statement of account of B. Dabir, a supplier.

Type of	Date	Number	Particulars	Amount
Document	2016			N
Invoice	Jan. 2	024	Goods Supplied	4,820
Invoice	Jan. 3	027	Goods Supplied	8,240
Debit Note	Jan. 4	018	Goods Returned	360
Receipt	Jan. 5		A2845	10,820
Invoice	Jan. 6	058	Goods Supplied	6,452
Invoice	Jan. 12	086	Goods Supplied	5,462
Invoice	Jan. 18	098	Goods Supplied	6,325
Debit Note	Jan. 21	021	Goods Returned	2,132
Invoice	Jan. 28	0123	Goods Supplied	3,256
 
Receipt	Jan. 29	A3451	15,584

Additional information:
i	The last statement sent to B. Dabir showed that Efiong Enterprises owed him N7,215 at 1st Jan. 2016
ii	A cheque for N3,500 in favour of B. Dabir dated January 30, 2016 has just been dispatched.

SUGGESTED SOLUTION TO EXAMPLE 4
Efiong Enterprises To:
B. Dabir	No.  A807
Address …………………..	Date……………….
…………………………….. Statement of Accounts
















Prepared by ………………	Approved by ……………
Date ……………………….	Date ……………………..


	Creditor’s Statement of Account
 
It is a statement sent periodically usually once a month by a buyer to his suppliers, showing the position of their accounts up to a certain date. The statement gives particulars of invoices, debit notes and credit notes received from the supplier during a given period. Details of payments made to the supplier and how much is outstanding to the supplier are also shown. The creditor’s statement is very useful for reconciliation purposes.

Example 5: Mr. Favour is a supplier to whom we owed a balance of N4,075 on March 1, 2012 March 2.	We paid the outstanding balance by cheque, less N204 discount
March 13.	Mr. Favour supplied goods value at N8,500 March 17.	He supplied more goods valued at N1,650
March 18.	We returned goods to Mr. Favour valued at N575
March 19.	He gave an allowance on goods that needed repackaging because of damage in transit N840
March 27	He supplied goods valued N13,250 and also charged insurance on goods in transit N 50

You are required to
i	Prepare creditors statement of account of Mr. Favour as at 31 March 2012. ii Post the above transactions from the month into his ledger account.

SUGGESTED SOLUTION TO EXAMPLE 5

Creditor’s Statement Mr. Favour Statement of Account

Date: March 31, 2012	Account No:

Date	Description	Ref	Debit	Credit	Balance
N	N	N
Mar. 1	Balance b/f	4,075
Mar. 2	Bank Cheq No	3,871	204
Mar. 2	Discount	204	0
Mar. 13	Invoice  Inv. No	8,500	8,500
Mar. 17	Invoice	1,650	10,150
Mar. 18	Debit note – returns	575	9,575
Mar. 19	Debit not – allowance	840	8,735
Mar. 27	Invoice	13,250	21,985
Mar. 27	Insurance of goods in transit	150	22,135
 
Prepared by ……………………….	Checked by …………………………..


Mr. Favour Account
Date	Particulars	Amount	Date	Particulars	Amount
Mar. 2	Bank
Discount received Purchases return Purchase returns
(Allowance) Bal. c/d	3,871	Mar.1	Bal. b/d			4,075
2		204	13	Purchases			8,500
18		575	17	Purchases			1,650

November 19, 2025 12:39 PM

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-	identify errors not affecting the trial balance

	MAIN CONTENT

	Definition of Trial Balance

A trial balance is a list of ledger account balances within a ledger, at a particular instance. If we balance all the ledger accounts at a particular instance and then prepare a statement of balances we get the "Trial Balance".


	Uses of Trial Balance
The first step in the preparation of the final accounts is the compilation of a Trial Balance, with a view to:
(a)	Proving the arithmetical accuracy of the postings, and

(b)	Providing in one statement a concise summary of the items, which are to be included in the comprehensive Income statement and the Statement of financial position. Debit balances recorded in the trial balance normally represent either assets, or losses and expenses. The assets are entered in the Statement of financial position, while losses and expenses are debited to the
 
Income statement. Likewise, the credit balances represent liabilities, provisions, reserves, or revenues and gains. The liabilities are entered in the statement of financial position as deductions from assets of the firm, while income and gains are credited to the Income statement.

	Purpose of a trial balance

A trial balance is prepared to check the mathematical/arithmetic accuracy of postings. This is the only (main) purpose of the "Trial Balance". Since it is anyhow prepared for a purpose, it is put to some other uses like for the preparation of final accounts.























	Format of a Trial Balance

The most common format in which we find a trial balance is as below.

Trial Balance of MYZ 	as on  	


 

Particulars	
L/F	Debit Amount (in Naira)	Credit Amount (in Naira)
Account	Head	1	—	
–
–
–	
–
–
–
Account	Head	2	—		
Account	Head	3	—		
			—		
Total		Xxxx	Xxxx


Illustration 1

On 1 April 2012, K. Obinna sets up a business with a capital of N150,000, made up of Plant and Machinery N100,000, Furniture and Fittings N20,000 and the rest in cash which he banked, except N2,500. The following transactions were recorded during the month:

April 2 Bought goods for resale on credit from R. Samson, valued N5,650

April 5 Paid rates N1,500, electricity GHC350, all by cheque

April 9 Bought materials for use in making up goods for resale, by cheque N12,500

April 15 Sold in cash N 4,800, Sold on credit to K. Michael N1,500.

April 17 Paid for postage N550 cash, travelling expenses N420 cash, and

bought goods for resale, N 27,500 on credit from R. Jones.

April 28 Sent invoice to B. Morison for goods sold to him on credit N5,000.

Receives invoice from D. Mowe for goods supplied by him for resale N4,500.

You are required to:

Open necessary accounts, record the transactions and extract a Trial Balance on 30 April 2012.
 
SELF ASSESSMENT EXERCISE

1. What is a Trial balance?

	Correction of Errors

Due to the imperfection of human beings, it is inevitable that errors made in recording transactions would exist in the accounting records. Errors cannot be eliminated completely; they can only be reduced to the barest minimum by, among other measures, engaging the services of well trained personnel to maintain accounting records.
	Types of Errors

Errors are of two kinds:

-	Those that do not affect the trial balance
-	Those that affect the trial balance
	Errors not affecting the Trial balance

Despite the existence of these errors, the trial balance still balances i.e. the debit and credit sides are the same. These errors are not easily identifiable.
	Error of Original Entry `

This error occurs when a transaction is recorded with the wrong amount at the beginning of the recording process i.e errors that are made when the source document is being raised or when the source document is being posted to the appropriate subsidiary book.
	Error of Omission

This is an error involving failure to post a transaction into the accounts i.e. no debit entry, no credit entry.
	Error of Principle

This is an error whereby a transaction is posted to the wrong class of accounts. For example, the cost of an office air-conditioner may be wrongly debited to office expense account (an account
 
belonging to the class of nominal accounts) instead of the office equipment account (an account belonging to the class of real accounts).


	Error of Commission

This is an error involving the posting of a transaction of the correct class of accounts but the wrong account within that class. This could also happen where a correct figure is recorded in the correct side of a wrong person’s account. This type of error takes place where the bookkeeper is not used to the names of customers that are common in the locality.
	Error of complete reversal of entry

This is an error involving the complete reversal of the normal double-entry for a transaction. For example, the payment by cheque for stationery may be wrongly debited to bank account and credited to stationery account. The trial balance will still balance because the debit and credit sides have been affected with the same amount.
	Compensating Errors

This is a situation in which errors cancel each other out. For example, the erroneous adding up of the debit side of cash book by, say N20,000 would be cancelled out if, later taken from sales day book and credited to sales account is understated by N20,000.

	Errors affecting Trial Balance

These are errors the existence of which would cause the Trial balance not to agree. They consist of the following:
	Casting Error

This is an error involving wrong addition of figures.

	Error of partial reversal of entry

This is an error involving reversal of one leg of the double-entry for a transaction.
 
	Omission or misstatement of account balance

This is the omission or misstatement of account(s)’ balances while drawing up a Trial balance.

	Posting only one side of a transaction

This is an error whereby one aspect of the double-entry for a transaction is posted without posting the corresponding opposite entry.
	Suspense Account

When a trial balance does not balance and there is no time or it is inconvenient to immediately locate and correct the errors because the final accounts are urgently required, the Trial balance can be made to balance by inserting the balance figure and describing it as Suspense account.
4.0	CONCLUSION

The trial balance contains the list of balances from the ledger and it provides the platform for the preparation of the final accounts.
5.0	SUMMARY

In this unit, we looked at the meaning of trial balance, the uses of trial balance and the errors that affect and do not affect the trial balance.
6.0 TUTOR-MARKED ASSIGNMENT

1.	List and explain the errors that affect the trial balance

2.	State the uses of Trial Balance

3.	What are the errors that do not affect the trial balance?

4.	Define the suspense account.

7.0 REFERENCES/FURTHER READING

Anao A.R. (2002). Introduction to Financial Accounting. Longman Nigeria Limited, Ikeja, Lagos
 

Aguolu, O. (2010). Financial Accounting. A Practical Approach. Institute for Development Studies, Enugu, Nigeria

ICAN Study Pack (2006). Fundamentals of Financial Accounting. VIPublishing Limited, Lagos, Nigeria

Igben, R.O. (2000). Financial Accounting Made Simple. ROI Publishers, Lagos, Nigeria


Accounting Technicians Scheme West Africa (ATSWA). Basic Accounting Processes and Systems.

Professional Accounting Tutors Limited (2007). Accounting Standards. Vol. 111, Lagos, Nigeria
 

UNIT 9:	FINAL ACCOUNTS OF A SOLE TRADER 1: STATEMENT OF PROFIT OR LOSS

CONTENTS

1.0	Introduction
2.0	Objectives
	Main Content
	Statement of Profit or Loss
	Definition of Technical Terms
	Preparation of Statement of Profit or Loss
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
7.0	References/Further Readings

1.0	INTRODUCTION

The preparations of accounting records from the subsidiary books of accounts, to the ledger and the extraction of trial balance are the processes involved in the preparation of final accounts. The final accounts are the end points of books of accounts which are used to determine the income, profit, loss, assets and liabilities of a business concern. The final accounts of a sole trader consist of statement of profit or loss and statement of financial position. However, the statement of profit or loss for traders who deals in the buying and selling of goods are discussed in this unit while their statement of financial position is considered in the next unit.

2.0	OBJECTIVES

At the end of this unit, you should be able to: i	Define final accounts
ii.	Understand the components of final accounts
iii.	Prepare statement of profit or loss for a sole trader
iv.	Discuss the importance of final accounts

	MAIN CONTENT

	STATEMENT OF PROFIT OR LOSS
 
The final accounts represent the presentation of financial information for a particular period or year to the users of financial report. The final accounts of a sole trader basically consist of statement of profit or loss and statement of financial position. Our focus in this study unit is the statement of profit or loss without end of year adjustment.
The preparation of statement of profit or loss will enable the business owner to ascertain the profit or loss from the business for a particular period, month or year. Statement of profit or loss is technically divided into two sections to show the gross profit or loss and the net profit or loss for a particular period.

	DEFINITION OF TECHNICAL TERMS

Let us look at some basic words that will come up regularly under the final accounts of a sole trader in this unit and the next two units namely units 18 and 19.

	Sales

Sales represent total of all credit and cash sales made to a third party. This excludes good taken by the owner for personal use and sales of non-current assets.

	Returns Inwards

They are goods previously sold to customers but were later returned either in whole or in part probably as a result of:
i.	Wrong specification, model, colour etc.
ii.	Deficiency
iii.	Disagreement between the buyer and seller that can be traced to either pricing, discount, payment terms etc.
iv.	Shortage in quantity, weight and other measuring discrepancies.
v.	Government policy.
The total amount of returns inwards will be deducted from sales value.

	Opening Stocks

These are the value of stock of goods meant for sale that are available with the business at the beginning	of	the	accounting	year	or	period.

	Purchases

Purchases represent total value of goods that are bought for cash and on credit for resale. This does not include the purchases of non-current assets.
 

	Carriage Inward

This represents the cost of transporting goods meant for resale into the organisation. Carriage inward is added to purchases because it is an additional cost incurred as goods are bough for resale by the business which enables the goods to get to where buyers can come for them.

	Returns	Outwards

These are goods previously bought for resale but later returned to the supplier due to one reason or the other such as late delivery and wrong specification. The total value of returns outwards should be deducted from the purchases of the same accounting period.

	Closing Stocks

The closing stocks represent the value of stock of goods that are meant for sale which a business has at the end of the accounting year or a stated period or date.

	Cost of Goods Sold

This is the cost price of goods sold for a particular period and it can be derived in a simple way by adding the purchases to opening stock then deducting the closing stock. There could be other things that will form part of the cost of goods sold like purchase return, carriage inward, goods withdrawn by the owner, etc., depending on the question. Cost of goods sold is also referred to as cost of sales.

	Gross Profit

This is the profit realised on trading activities alone without other expenses incurred in the business. It is derived by deducting cost of goods sold from the sales value.

	Other Income

They are revenues that are generated outside the sales of goods or services that the firm regularly deals with. It includes bank interest, rent received, discount received etc.

	Expenses

These are cost of goods (other than those related to goods to be sold) and services consumed or used during the period covered by the account, and such goods and services are meant for the
 
business. These expenses include: transport, rent and rates, electricity, depreciation, salaries etc., and they are charged against the profit in the statement of profit or loss.

	Carriage Outwards

This represents the cost of transporting goods meant for resale to the buyer. Carriage outwards are expenses that relate to sales and they are included among the other running cost of an enterprise to determine the net profit.



	Net Profit

Net profit is the profit derived after all expenses and cost of sales have been deducted from the net income including sales of goods and other income. Where all expenses are higher than the income, it will be a net loss.

	PREPARATION OF STATEMENT OF PROFIT OR LOSS
When preparing the statement of profit or loss, it should be done in a way to reveal the income generated, cost of sales, gross profit, other income, expenses and the net profit. A typical statement of profit or loss is presented below as a guide.

	Format of Statement of Profit or Loss

Statement of profit or loss For the year ended 31st December 20XX


Sales
Less returns inwards	N	N
XXXX (XXX)
Net sales		XXXX
Opening stock	XXXX	
Add purchases	XXXXX	
Add carriage inwards

Less returns outwards	XXX XXXXX
XXX	
Less closing stock
Cost of gods sold	XXXX	
  XXX
Gross profit		XXXX
 
Other income:	
Discount received		XXX
Commission received		XXX
Dividend received		XXX
Fixed deposit interest		  XXX
		XXXXX
Expenses:		
Lighting and heating	XXX	
Discount allowed	XX	
Office rent	XXX	
Advertising	XX	
Travelling expenses	XXX	
Rates	XXX	
Fire insurance	XXX	
Postages	XX	
Office salaries	XXX	
Repairs	XXX	
Carriage outwards	XXX	
Depreciation	XXX	
Bank charges	XXX	
Stationery	XX	
General expenses	XXX		XXXX
Net profit		XXXX


Example 1: From the trial balance below, prepare statement of profit or loss of Treasure Gold Ventures for the year ended December 31, 2015.

	N	N
Capital			24,800
Furniture	24,000		
Stock at start	12,480		
Purchases	37,600		
Returns outwards			4,600
Transport expenses		4,500	
Discount received			300
Returns inwards		1,700	
Travelling expenses		2,000	
Carriage inward		1,500	
Carriage outward		2,500	
 
Salaries	3,200	
Debtors	12,260	
Creditors		14,520
Cash in hand	1,200	
Drawings	5,000	
Sales		64,000
Discount allowed	   280    		
108,220	108,220

The stock at close is N7,400


SUGGESTED SOLUTION TO EXAMPLE 1

Treasure Gold Ventures Statement of Profit or Loss
For the year ended December 31, 2015


N	N	N
Sales	64,000
Less returns inwards	 1,700
62,300
Opening stock	12,480
Add purchases	37,600
Add carriage inwards		 1,500 39,100
Less returns outwards	 4,600	34,500
46,980
Less closing stock	7,400
Cost of goods sold	39,580
Gross profit	22,720
Add discount received	 	300
23,020
Transport	4,500
Traveling	2,000
Carriage outwards	2,500
Salaries	3,200
Discount allowed	 280
12,480
 
Net profit for the year	10,540

Note carefully the treatment of closing stock which is normally written outside of the trial balance. Closing stock is deducted from the addition of opening stock and purchases in the statement of profit or loss.

Example 2: The trial balance below is drawn from the books of Greater Grace Concepts for the year ended 30thJune 2016.

	DR.
N	CR.
N
Capital account		17,000
Drawing account	8,400	
Purchases	38,000	
Sales		60,000
Discounts	2,400	1,900
Office rent	1,080	
Travelling expenses	960	
Warehouse rent	1,320	
Fire insurance	180	
Insurance on purchases	240	
Office salaries	5,520	
Carriage inwards	160	
Carriage outwards	140	
Furniture & fittings	3,600	
Opening stock	4,000	
Trade debtors	17,400	
Sundry creditors		15,020
Cash at bank	10,224	
Cash in hand	110	
Bank charges	36	
General expenses	 	150	 	
	93,920	93,920
Note the following:		
i.	Closing stock was N4,800
ii.	You are to prepare statement of profit or loss for the year.


SUGGESTED SOLUTION TO EXAMPLE 2
 
Greater Grace Concepts Statement of Profit or Loss
For the year ended 30th June 2016

N	N
Sales

Opening stock		

4,000			60,000
Purchases		38,000			
Carriage inwards		 	160			
		42,160			
Less closing stock		  4,800			
Goods available for sale		37,360			
Purchases insurance		240			
Warehouse rent
Cost of gods sold		 1,320			
38,920
Gross profit Other income
Discount received					21,080

 1,900
					22,980
Discount allowed		2,400			
Office rent		1,080			
Travelling expenses		960			
Fire insurance		180			
Office salaries		5,520			
Carriage outwards		140			
Bank charges
General expenses	
 	150	36	
10,466		
Net profit				12,514	


4.0	CONCLUSION

The final accounts represent the presentation of financial information for a particular period or year to the users of financial report. The final accounts of a sole trader consist of statement of profit or loss and statement of financial position.The preparation of statement of profit or loss for sole traders enables the business owner to ascertain the profit or loss from the business for a particular period, month or year. Statement of profit or loss is technically divided into two sections to show the gross profit or loss and the net profit or loss for a particular period.
 
SELF ASSESSMENT EXERCISE
1.	Differentiate between a statement of profit or loss and a trial balance.
2.	The following Trial Balance was extracted from the books of Promise Global Investments on 31st December, 2013
N	N
Premises	150,000
Motor Vans	27,810
Capital 1st January, 2013
Advertising	
3,810	483,720
Postage	4,140	
Purchases	2,054,550	
Electricity	2,730	
Salaries	85,110	
Tenement Rate	3,030	
Telephone	1,020	
Furniture	33,120	
Sales		2,204,940
Returns	1,680	11,760
Bad Debts	780	
Insurance	5,760	
Commission received		52,500
Debtors	146,460	
Creditors	252,150
Cash in hand	10,560
Bank	113,760
Stock 1st Jan. 2013	360,750	 	
3,005,070	3,005,070

Additional information is as follows:
i.	The stock at 31st December2013 was N323,610
ii.	Prepare the statement of profit or loss for the year.

5.0	SUMMARY

This study unit was used to define final accounts, explain the components of final accounts, define technical terms relating to statement of profit or loss such as opening stocks, purchases, carriage inward, returns outwards, closing stocks, cost of goods sold, gross profit, other income, expenses, carriage outwards and net profit. Statement of profit or loss for sole trader was also prepared in this unit.
 
6.0	TUTOR-MARKED ASSIGNMENT

Question 1: The trial balance of Adekanmbi, a sole proprietor for the year ended 31/12/2015 was as follows:
	DR
N		CR
N
Stock 1/1/2015		7,500		
Cash	10,200			
Capital 1/1/2015				199,750
Drawings		1,300		
Bank	85,000			
Land and Building		90,000		
Furniture		1,500		
Rent		500		
Rates		350		
Debtors/Creditors		5,600		15,000
Electricity	300			
Cleaning		50		
Carriage on purchases		150		
Carriage on sales		210		
Motor Vehicles		45,000		
Purchases	40,500			
Returns Outwards			1,200	
Returns Inwards		400		
Sales				85,000
Interest received				970
Stationery	1,000			
Salaries		12,000		
Insurance	  360			 	
		301,920		301,920

Closing stock, 31/12/2015 N5,300. Prepare for Adekanmbi, statement of profit or loss for the year ended 31/12/2015.

Question 2:	T. Addo’sbusiness affairs on 1st December 2015 stood as follows:
N
Cash in Hand	440
Cash at Bank	2,440
Stock	3,500
Furniture and Fittings	1,200
 

You are required to:
(a)	Enter the above, by means of the journal, into his ledgers, and post thereto the following transactions which took place during the month of December 2015. (Use a two column cash book for cash transactions)
N
Dec. 2	Bought goods from V. Bojon & Sons on credit	1,200
Dec. 3	Paid insurance premium in cash	150
Dec. 5	Paid V. Bojon by cheque the amount due	
Dec. 8	Bought goods – gave a cheque for	840
Dec. 12	Sold goods to Badu &Co. on credit	1,560
Dec. 17	Sold goods to L. Aliyi on credit	2,000
Dec. 22	Sold goods to Badu &Co. on credit	730
Dec. 27	Received a cheque from Badu & Co.	1,290
Dec. 28	Paid salaries by cheque	450
Dec. 31	Drew cheque for personal use	500

(b)	Extract a Trial Balance
(c)	Prepare a statement of profit or loss for the month ended 31stDecember 2015, Stock on hand was valued at N3,200

7.0	REFERENCES/FURTHER READINGS

Accounting Technicians Scheme West Africa (2009). Basic Accounting Processes and System Part 1, Study Pack. Lagos: Abina Publishers
Garbutt, D. (1984), Carter’s Advanced Accounts “7th Edition”. London: Pitman Publishing Limited

Igben, R. O. (2014), Financial Accounting Made Simple. Lagos: ROI Publishers

Jat, R.B. and Jugu, G.Y. (2008). Modern Financial Accounting: Theory and Practice. Jos: Ehindero (Nig.) Limited

Olanrewaju, Oluseyi (2012) IFRS PAL – Handy Approach. Lagos: Dimkem Publications Limited.
Oluyombo, O. (2017) Introduction to Financial Accounting I: SMS 203. Abuja: NOUN. Oluyombo, Onafowokan (2016) Financial Accounting With Ease (3rd Edition). Magboro:
Kings & Queen Associates
 

Soyode, A. (1980), Financial Accounting: Principles and Practice. Uk: Graham Burn.
The Institute of Chartered Accountants of Nigeria, (2006). Fundamentals of Financial Accounting. Foundation Study Pack. Lagos: Vikas Publishing Limited
 




UNIT 10:	FINAL ACCOUNTS OF A SOLE TRADER 2: STATEMENT OF FINANCIAL POSITION

1.0	Introduction
2.0	Objectives
	Main Content
	Statement of Financial Position
	Components of Statement of Financial Position
	Preparation of Statement of Financial Position
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
7.0	References/Further Readings

1.0	INTRODUCTION

The statement of financial position is part of the final accounts which are prepared from the subsidiary books of accounts, to the ledger and the extraction of trial balance to the statement of profit or loss. The final accounts are the end points of books of accounts which are used to determine the income, profit, loss, assets and liabilities of a business concern. The statement of financial position for sole traders who deal in the buying and selling of goods are discussed in this unit.

2.0	OBJECTIVES

At the end of this unit, you should be able to:
i	Define statement of financial position
ii.	Explain the components of statement of financial position
iii.	Understand the technical terms in statement of financial position
iv.	Prepare statement of financial position for a sole trader
iv.	Know the difference between statement of profit or loss and statement of financial position.

	MAIN CONTENT

	STATEMENT OF FINANCIAL POSITION
 
Statement of financial position is a statement (not an account) that contains the list of assets and liabilities with owner’s capital at the end of a particular period, month or year, and arranged in an orderly manner. Like the trial balance, it is expected that both assets and liabilities figure in a statement of financial position should be equal in total.




	COMPONENTS OF FINANCIAL POSITION

Let us look at the components of financial position which are terms that are unique in accounting.

	Assets

These are valuables, claims, possessions and properties belonging to the business. Assets are normally arranged in order of liquidity in the statement of financial position. There are different types of assets, namely:

	Non-current assets

These are company’s tangible assets that are expected to be used in, and for the organisation for many years e.g. furniture, fittings, land, building, equipment, motor vehicle, etc.

	Current assets

This class of assets are those whose value fluctuate during the year depending on the level of business activities e.g. debtors, stock, bank balance, cash in hand, prepayments etc.

	Intangible assets

These are assets that add value to the organisation but they cannot be seen by their nature e.g. goodwill, copyrights, patent rights, trade mark etc.

	Fictitious assets

These are expenditure incurred to cover a long period of time as a result of which some portions are capitalised or deferred pending the time it is written off against the profit (in statement of profit or loss) for subsequent years e.g. preliminary expenses, research and development expenses, discount on shares etc.
 

	Investments

These are ownership interests a company has in another organisation. It could be in shares or debentures. This investment may be quoted (marketable) or unquoted, and it can be of short term or long term in nature.

	Liabilities

These are financial obligations the business has in favour of outsiders. They are amount owed to individuals and/or organisations. Liabilities can be grouped into:

	Non-current liabilities

These are financial obligations against the company that are not due for repayment within one year e.g. bank loan, mortgage loan, deferred tax etc.

	Current liabilities

They are debts that are due for payment within one year and do change regularly from one period to another within one accounting year e.g. creditors, accruals, bank overdraft etc.

	Capital or owner’s equity

This is the initial investment of the business owner in the company. It represents the value of money, properties and other resources brought in by the owner to start the business and other additions after the commencement of the business.

As business progresses, profits not taken out of the business are added into capitalwhile drawings reduce owner’s interest in the business. Usually, capital is equivalent to total assets minus total liabilities. CAPITAL = Total assets – Total liabilities.

	PREPARATION OF STATEMENT OF FINANCIAL POSITION

	Format of Statement of Financial Position

ABC Business Ventures Statement of financial position
As at 31st December 2014
N	N
 
ASSETS		
Non-current assets
Land	
XXXX	
Less depreciation Furniture
Less depreciation Motor vehicle Less depreciation
Plant and machinery Less depreciation Office equipment
Less depreciation	   XX XXXX
   XX XXXX
   XX XXXX
   XX XXXX
   XX 	XXXX XXXX XXXX XXXX
XXXX
		XXXX

Current assets
Debtors	

XXXX	
Stock	XXXX	
Payment in advance	XXXX	
Cash at bank	XXXX	
Cash in hand	XXXX	XXXX
Total Assets		XXXXX

EQUITY AND LIABILITIES		
Equity
Capital		
XXXX
Add net profit

Less drawings		XXXX XXXX
XXXX
Owner’s equity		XXXX
Current liabilities
Creditors	
XXXX	
Bank overdraft	XXXX	
Accrued expenses	XXXX	XXXX
Total equity and liabilities		XXXXX
 

Example 1: From the balances below, prepare statement of financial position for ABC Businessas at December 31, 2015.

	N
Furniture	24,000
Stock at start	12,480
Capital	24,800
Debtors	12,260
Creditors	14,520
Cash in hand	1,200
Drawings	5,000
Closing stock	7,400
Net profit	10,540






SUGGESTED SOLUTION TO EXAMPLE 1


ABC Business
Statement of Financial Position As at December 31, 2015

Non-current asset	N	N
Furniture		24,000
Current assets
Stock	
7,400	
Debtors	12,260	
Cash	  1,200 	20,860
Total Assets		44,860
Equity and Liability		
Equity
Capital		
24,800
 
Add net profit	10,540
	35,340
Less drawings	  5,000
Owner’s equity	30,340
Current liability
Creditors	
14,520
Total equity and liability	44,860


Example 2 The trial balance below is drawn from the books of Palace Ventures for the year ended 30thJune 2016.

	DR.
N	CR.
N
Capital account		17,000
Drawing account	8,400	
Furniture & fittings	3,600	
Trade debtors	18,000	
Sundry creditors		15,020
Cash at bank	10,200	
Cash in hand	110	
Opening stock	4,412	
Net profit	 		12,702
	44,722	44,722

Note the following as at June 30th.
i.	Prepaid expenses N12
ii.	Closing stock was N4,800
iii.	Accrued expenses N400
iv.	Depreciation on furniture is 10%
You are to prepare statement of financial position for the year.

SUGGESTED SOLUTION TO EXAMPLE 2

 
Palace Venture

As at 30thJune 2016
 

Statement of Financial Position
 

N	N
 
Assets

Non-current asset
Furniture & fittings	


3,600	
Less depreciation	   360	

Current assets	3,240	
Debtors	18,000
Stock	5,160
Prepaid expenses	12
Cash at bank	10,200
Cash in hand	 	110	



33,482	
Total Assets	36,722	
Equity and Liabilities		
Equity
Capital	
17,000	
Net profit	12,702	
	29,702	
Less drawings	  8,400	
Owner’s equity	21,302	
Current liabilities
Creditors	15,020
Accrued expenses	400	

15,420	
Total equity and liabilities	36,722	
SELF ASSESSMENT EXERCISE		
1.	Differentiate between a statement of loss.	financial position	and a statement of profit or

2.	The trial balance of Umaru Blessing, a sole proprietor for the year ended 31/12/2015 was as follows:
DR	CR
N	N
Stock 1/1/2015	7,500
Cash	10,200
Capital 1/1/2015	199,750
 
Drawings Bank
Land and Building	
85,000	1,300

90,000	
Furniture		1,500	
Rent		500	
Rates		350	
Debtors/Creditors		5,600	15,000
Electricity	300		
Cleaning		50	
Carriage on purchases		150	
Carriage on sales		210	
Motor Vehicles		45,000	
Purchases	40,500		
Returns Outwards		1,200	
Returns Inwards		400	
Sales			85,000
Interest received			970
Stationery	1,000		
Salaries		12,000	
Insurance	  360	 	
301,920	301,920

Closing stock, 31/12/2015 N5,300. Prepare the business statement of profit or loss and statement of financial position.


4.0	CONCLUSION

The statement of financial position is part of the final accounts and it serves as the end points of books of accounts for sole traders. The statement of financial position consists of the assets and liabilities of the business, and owner’s equity or capital. The asset is divided into non-current assets, current assets, intangible assets, fictitious assets, and investments while the liabilities consists of non-current liabilities and current liabilities.

5.0	SUMMARY

The statement of financial position was defined while the components of the financial position namely non-current assets, current assets, intangible assets, fictitious assets, investments non- current liabilities, current liabilities and owner’s equity or capital were explained in this unit. Relevant examples were used to prepare typical statement of financial position.
 

6.0	TUTOR-MARKED ASSIGNMENT

Question 1:	List and explain six components of statement of financial position.

Question 2:	What are the similarities between a trial balance and a statement of financial position?

Question 3: The following trial balance was extracted from the books of Olowolayemo Omooba on 31st December, 2013
N	N
Premises	150,000
Motor Vans	27,810
Capital 1st January, 2013 Advertising	
3,810	483,720
Postage	4,140	
Purchases	2,054,550	
 
6.0	TUTOR MARKED EXERCISE
1.	You have just received a debit note for N10,000.
a.	What is a debit note?
b.	How should the N10,000 be accounted for?
2.	List the four books of prime entry that are used to record inventory movements.
3.	What do you have to do to a cheque to make it safe when sending it to a supplier using the postal system?

7.0	REFERENCES/FURTHER READINGS
 
Inua, O.I. (2014). Introduction to Accounting. Abuja: NOUN

Thomas, A. and Ward, A.M. (2012). Introduction to Financial Accounting. Berkshire: McGraw- Hill Education.

Wood, F. and Sangster, A. (2008). Business Accounting. Edinburgh Gate: Pearson Education Limited.
 
UNIT 6	:	PRIME BOOKS, GENERAL LEDGERS AND THE JOURNAL CONTENTS
1.0	Introduction
2.0	Objectives
	Main Content
	Prime Books
	Ledgers
	The Journal
4.0	Conclusion
5.0	Summary
6.0	Tutor Marked Assignment
7.0	references/Further Readings

1.0	INTRODUCTION
Before a transaction is recorded in the general ledger, it must first be entered in a book of prime entry. These are intended to facilitate the posting of the general ledger, in that transactions of the same type are entered in the same book of prime entry, which is periodically posted to the general ledger in total (rather than one transaction at a time). These initial entries in the prime books do not form part of the double-entry bookkeeping.

There are several books of prime entry. This unit examines only those that are used to record credit transactions. These consist of: (1) the sales day book; (2) the purchases day book; (3) the sales returns day book; (4) the purchases returns day book; and (5) the journal. These prime books have been defined in unit 3. So, we shall be considering some illustrations.


2.0	OBJECTIVES

After reading this chapter you should be able to do the following:

•	Describe the transactions and documents that are recorded in each of the prime books and the journal.
•	Enter credit transactions in the appropriate day books or journal and post these to the relevant ledger accounts.

ILLUSTRATION 1

Big Dazzle is an electrical goods wholesaler. The transactions during June 20X3, which are all on credit, were as follows:

1 June	Bought on credit from Power Ltd various bulbs with a retail price of N1,000,000 and received 20 per cent trade discount
4 June	Sold goods on credit to Wire Reserves Ltd for N500,000 and allowed them 10 per cent trade discount on this amount
 
8 June	Sent Wire Reserves Ltd a credit note for goods returned that had a retail value of N300,000
10 June	Sold goods on credit to Wiggle Ltd for N600,000 after deducting 40 per cent trade discount
12 June	Purchased goods with a retail value of N1,000,000 from Switch Ltd who allowed 30 percent trade discount.
15June	Purchases on credit from Cables Ltd goods costing N550,000.
16 June	Sent Wiggle Ltd a credit note' for goods returned that had a retail value of N100,000.
18 June	Switch Ltd sent us a credit note for N300,000•in respect of goods returned
19 June	Received a credit note for goods returned to Power Ltd that had a retail value of N250,000
25 June	Sold goods to Grease Retails Ltd on credit for N250,000
27 June	Sent Grease Retails Ltd a credit note for N50,000 to rectify an overcharge on their invoice
28 June	Sold goods on credit to Wire Reserves Ltd at a price of N569,000.
29 June	Purchased on credit a motor van from Bobo Ltd that cost N800,000.
30 June	Sold on credit to Eko Trading Co. some fixtures and fittings no longer required in the shop for 350,000. (Prior. to this the business owned fixtures costing N1,000,000.)

Required
Make the necessary entries in the books of prime entry and general ledger.

Solution
Before starting to undertake double entry, the first step is to summarize the transactions in the day books. The first part of this solution deals with the transactions that do not impact on the journal.

	Prime Books Sales day book










Sales returns day book
Date	Name	of	credit	Our	credit	Folio	Amount
 
	customer	note number		
20X3				N’000
8 June	Wire Reserves	CRN06	F34	270
16 June	Wiggle Ltd	CRN07	F8	60
27 June	Gross Retails	CRN08	F45	  50
				380

Purchases day book
Date	Name	of	credit customer	Our ref no for
supplier’s invoice	Folio	Amount
20X3				N’000
1 June	Power Ltd	Inv460	T23	800
12 June	Switch Ltd	1000672	T5	700
15 June	Cables Ltd	S0056932	T10	550
				2,550

Purchase returns sales book
Date	Name of credit suppliers	Our	ref	no	for supplier’s credit note	Folio	Amount
20X3				N’000
18 June	Power Ltd	C00569	T5	300
19 June	Switch Ltd	SC452	T23	200
				500



	Ledgers
The next step is to take the day books and to use them to enter the information into the main double-entry bookkeeping system (the general ledger, sales ledger and purchase ledger). These ledger accounts are shown in T account format.

The first two day books to be closed off and posted are those involving customers (sales day book and the sales return day book). Note the normal double-entry rules in respect of recording the flow of value are being applied.

General ledger entries

Sales account
20X3	Details	N’000	20X3
30 June	Details
Total per sales day book	N’000
1,860


 
20X3
30 June	Details
Total per sales returns day book	N’000
380	20X3	Details	N’000



Sales ledger entries
Wire Reserves Ltd
20X3
4 June
28 June	Details
Sales Sales	N’000
450
560	20X3
8 June	Details
Returns	N’000
270
Wiggle Ltd
20X3
10 June	Details
Sales	N’000
600	20X3
16 June	Details
Returns	N’000
60

Grease Retails Ltd
20X3
25 June	Details
Sales	N’000
250	20X3
27 June	Details
Returns	N’000
50

Next, the two day books involving suppliers (purchases day book and the purchases return day book) are closed and posted.
General ledger entries
Purchase account
20X3
30June	Details
Total purchases day book	N’000
2,050	20X3	Details	N’000

Purchase returns account
20X3	Details	N’000	20X3
30 June	Details
Total per purchases returns day book	N’000
500

Purchase ledger entries
20X3
19 June	Details
Returns	N’000
200	20X3
1 June	Details
Purchases	N’000
800

Light Ltd
20X3
18 June	Details
Returns	N’000
300	20X3
12 June	Details
Purchases	N’000
700

Purchase account
20X3	Details	N’000	20X3
15 June	Details
Purchases	N’000
550

	The Journal

The entries required to post the motor van on credit and the sale of fixtures and fittings are first recorded in the journal before they enter the general ledger bookkeeping system as follows:
 






Date	Details (account in which

the ledger entry is to be made)	Folio	Debit Credit
Amountamount N’000	N’000
20X3
29 June	Motor vehicles
To Bobo Ltd
Being purchase on credit of motor van reg no LAG 12	
Dr Cr	
800	

800
29 June	Eko Trading Co
To fixtures and fittings
Being sale on credit of shop fittings.	Dr Cr	350	
350

Second, the journal is taken and its entries are posted to the individual ledger accounts in the general ledger as follows:

General ledger entries
Motor vehicles account
20X3
29 June	Details
Bobo Ltd	N’000
800	20X3	Details	N’000

Bobo Ltd account (sundry payable)
20X3	Details	N’000	20X3
29 June	Details
Motor vehicles	N’000
800

Fixtures and fittings account
20X3
1 June


1 July	Details
Balance b/d


Balance b/d	N’000
1,000
 	 1,000
650	20X3
30 June
30 June	Details
Eko Trading Co Balance c/d	N’000
350
650
1,000

Eko Trading Co account (sundry receivable)
20X3
30 June	Details
Fixtures and fittings	N’000
350	20X3	Details	N’000

Notes

1.	The fixtures and fittings that were sold must obviously have already been owned by the business. Their cost is therefore included in the balance brought down on the debit side of the fixtures and fittings account along with the cost of other fixtures and fittings owned at that date.
 
2.	The Eko Trading Co. is referred to as a sundry receivable and Bobo Ltd as a sundry payable.



SELF ASSESSMENT EXERCISE

Where possible, approach a local business or a family member who works in the administration function of a business and ask them about the books of account of the business. Ask them to explain the transactions that they record in each type of book. Different names to those used in this chapter may exist, however, they will typically perform the same function.

4.0	CONCLUSION

Before a transaction is recorded in the ledger, it must first be entered in a book of prime entry. These are intended to facilitate the posting of the general ledger, in that transactions of the same type are entered in the same book of prime entry, the totals of which are periodically posted to the general ledger rather than one transaction at a time.

Credit transactions not relating to goods for resale (or services), such as the purchase and sale of non- current assets, are recorded in another book of prime entry known as the 'journal. This is also used to record transactions that are not appropriate to any other book of prime entry, and various accounting adjustments that are not the subject of a transaction such as the correction of errors. The format of the journal includes a details column and two money columns labelled 'debit' and 'credit: The narrative in the details column and amounts in the money columns indicate the entries that will be made in the ledger in respect of a given transaction or item.


5.0	SUMMARY
In this unit we have considered how credit transactions pass through the prime books before postings are made to the ledgers using the double entry bookkeeping rules. We also considered the use of the journals for transactions that do not involve the use of prime books
6.0	TUTOR MARKED ASSIGNMENT

1.	B. Jeje is in business as a builders' merchant. The following credit transactions took place during April 20X3:

1 Apr	Bought goods on credit from Bibi Ltd for N725,000 2 Apr	Sold goods on credit to Pool Ltd for N410,000
4 Apr	Bought goods costing N315,000 from Board Ltd on credit 7 Apr	Sold goods on credit to Bunch Ltd for N870,000
11 Apr	Bought goods costing N250,000 from Grace Ltd on credit 15 Apr	Sold goods to Lemon Ltd for N630,000 on credit
17 Apr	Bought goods on credit from Bibi Ltd for N290,000
 
19 Apr	Received a credit note for N120,000 from Bibi Ltd 22 Apr	Sent Pool Ltd a credit note for N220,000
24 Apr	Board Ltd sent us a credit note for N75,000 in respect of goods returned 27 Apr	Sent Bunch Ltd a credit note for N360,000
28 Apr	Bought a delivery truck on credit from Coscharis motors for N5,000,000. Required:
You are required to make the necessary entries in the books of prime entry and the general ledger.

7.0	REFERENCES/FURTHER READINGS

Inua, O.I. (2014). Introduction to Accounting. Abuja: NOUN

Thomas, A. and Ward, A.M. (2012). Introduction to Financial Accounting. Berkshire: McGraw- Hill Education.

Wood, F. and Sangster, A. (2008). Business Accounting. Edinburgh Gate: Pearson Education Limited.












UNIT 7:	INVENTORY VALUATION CONTENTS
1.0 Introduction

2.0 Objectives

	Main Content
 
	Inventory and Simple Inventory Valuation

	Meaning and Nature of Inventory

	Methods of Inventory valuation

	Inventory and Its Effects on Profit and Financial Position

	Illustrative Examples

4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment

7.0 References/Further Reading








1.0 INTRODUCTION

Merchandising organisations have goods they sell in order to generate revenue and ultimately profit. It is naturally inappropriate for these entities to wait for customers to demand their products before the order for inventory, otherwise, the attendant delays will lead to potential loss of customers arising from customers’ dissatisfaction. In order to avoid this negative eventuality, entities usually hold inventory as a buffer prior to when customers demand for them. However, the need to place a value on the unsold inventories at the end of the year and the cost of those
 
sold in order to know the portion of the relevant cost to charge against revenue and the one to carry forward as an asset in the financial positionis usually not that simple. This Unit therefore examines the nature of inventory, the methods of valuing inventory and the effects of inventory valueson profit and asset.
	OBJECTIVES

After studying this Unit, the student should be able to:

•	define what inventory is and identify when assets can be regarded as inventories;

•	explain the nature of periodic inventory model or system;

•	identify and compute the common methods of valuing inventory;

•	describe the effects of inventory on the profit or loss and financial position.








	MAIN CONTENT

	Inventory and Simple Inventory Valuation

	Meaning and Nature of Inventory

Inventories are generally referred to as the unsold portion of goods held for resale. What constitutes inventories depends on the nature of the business of an entity. Purchases give rise to inventories when the goods purchased are not fully sold in the period. However, non-current
 
assets such as motor vehicle, plant and equipment, land and building, for example, might equally be regarded as purchases and ultimately inventories by firms that deal on buying and selling them. For example, estate developer will regard buildings acquired for the purpose of resale as purchases and ultimately inventories if not sold in the particular accounting period. Students should not be confused about this. What constitutes a non-current asset to a firm depends on what it does with that asset. This is also true of purchases as what constitutes purchases is a function of the nature of the business of an entity or simply what the entity does with the particular assets. There are three basic types of inventories namely, raw materials, work-in- progress (or semi-finished goods) and finished goods. Whereas a manufacturing firm will obviously have these three types of inventories, a merchandising firm (i.e., a firm that buys and sells) which does not engage in manufacturing will only have finished goods inventories.
A major concern to entities in respect of inventory involves the value to be placed on the inventory at the end of the accounting year or at such time when a physical count of inventory is taken, which will also have implications for the amount to be allocated to cost of sales in that period. For the purpose of inventory valuation, a periodic or perpetual/continuous inventory valuation could be applied. We shall discuss periodic inventory in this Unit and defer perpetual inventory model to Unit 13. A periodic inventory valuation occurs where an entity takes inventory count and determines the value at the end of the accounting year as a basis for preparing the financial statement. The entity using periodic inventory model will be unable to determine the value of its closing inventory and cost of sales until stock-taking is done at the end of the financial year or at such time when inventory count is undertaken.
	Methods of Inventory valuation
 
Generally, inventories are valued at lower of cost and net realisable or fair value. However, the value/cost is only ascertained after applying a particular method of valuation. It is worth mentioning here that different valuation methods yield different values of inventory and ultimately cost of sales. An entity’s accounting policy (see Unit 15) determines the method the entity would adopt for valuing its inventory. The common methods of valuing inventory are: First In First Out (FIFO), Last In First Out (LIFO), Average (simple and weighted) and standard cost. We shall now discuss them in turn.
	First In First Out (FIFO)

The underlying assumption of this method of valuing inventory is that earlier purchases of goods for resale are considered sold prior to subsequent purchases. This means that if an entity has three batches of purchases in a period: A = 300 units (at N10 each), B = 500 (at N11) and C =
600 (at N15), what would be the value of closing inventory and cost of sales if 1,000 units were

sold in the period.

Units of closing inventory = Total units purchased less units sold Inventory = 1,400 – 1,000 = 400.
The order of sales following the FIFO assumption would be: Batch A, followed by Batch B and then Batch C. So the closing inventory of 400 units would come from Batch C. The value of the closing stock would then be N6,000 (i.e., 400 units x N15). By implication, cost of sales would
be determined as follows:

(300 x N10) + (500 x N11) + (200 x N15)


N3,000 + N5,500 + N3,000 = N11,500.
 
	Last In First Out (LIFO)

The assumption is that the last batches of goods are considered to be sold first prior to earlier purchases. This means that later batches are assumed to be sold before earlier ones. Using our FIFO data above, LIFO will produce the following values of closing inventory and cost of sales:
Closing inventory = (300 x N10) + (100 x N11)


N3,000 + N1,100 = N4,100


Cost of sales = (600 x N15) + (400 x N11)


N9,000 + N4,400 = N13,400


	Simple Average Method (SAM)

This applies a simple average of the unit costs/prices to the goods sold to determine the cost of goods sold and average of the unit costs to the units of closing inventory to get the value of closing inventory. If we use our example above, the values of closing inventory and cost of sales would be as follows:
First, we compute the average price, which is the aggregate of the prices of the three batches divided by 3.

Average price =  

  = N12

Closing inventory = 400 x N12 = N4,800
 
Cost of sales = 1,000 x N12 = N12,000


Because the average computation ignores the units purchased that would eventually absorb the average price as inventory and cost of sales, the total of the computed cost of sales and inventory is not equal to the total cost of purchasing the three batches. We learnt from FIFO and LIFO examples above that the total cost of purchases (inventory and cost of sales) is N17,500 but the
simple average produced a different result because of the averaging of the prices independent of the corresponding units purchased.
	Weighted Average Method (WAM)

Unlike the simple average method that ignores the units of goods purchased in determining the average cost, this method uses the weighting of the unit prices of all the batches purchased before dividing by the total units purchased. The average cost then becomes the unit cost for computing both the values of cost of sales and closing inventory. Using our example above, the value of inventory and cost of sales would be as follows:
Weighted average =  

=  

=      = N12.50

Therefore, the value of closing inventory and cost of sales are: Closing inventory = 400 units x N12.50 = N5,000
Cost of sales = 1,000 units x N12.50 = N12,500
 
	Standard cost

This method uses a predetermined rate set by the entity’s management for the purpose of calculating the cost of sales and inventory. While this method is easy and convenient to apply, it does not utilise actual cost used in purchasing the batches of goods. However, the entity does not set the standard cost per unit arbitrarily but probably based on experience and other prevailing circumstances. Following our previous example, if we assume that the management sets a standard cost of N13.50/unit, the closing inventory and cost of sales would respectively be:
N5,400 (400 units x N13.50) and N13,500 (1,000 units x N13.50).


	Inventory and Its Effect on Profit and Financial Position

The value of inventory will equally affect the reported profit and the value of current asset. The higher the value placed on the closing inventory, the higher the profit of the period would be. Remember that closing inventory is deducted from the cost of goods available for sale to get the cost of sales, which is invariably similar to adding it to sales. Closing inventory also affects the value of current assets: the higher the closing inventory the higher the value of current assets.
Nevertheless, after valuing inventory using any of the inventory valuation methods and the entity compares that value with a potential market value the inventory would sell for, the lower of the cost-based value and net realisable value would be used as the value of closing inventory for the purpose of computing profit in the statement of comprehensive income and current asset in the statement of financial position. After making this comparison, the estimated loss in value is charged as an expense to the profit or loss for the year.
	Illustrative Examples
 
Example 1

From the information below relating to five business entities, determine the (i) basis of valuing the inventory (cost or net realisable value) at the end of the year (ii) value of closing inventory that would appear in their financial statements, and (iii) amount to be written off to profit or loss as inventory loss and how this will be treated in the ledger account.

Entities	Inventory	at Cost
N	Inventory	at NRV
N
Chip-Chip Enterprises	561,000	673,400
Omede Shop	675,000	526,700
Akin Carpet	988,000	1,060,000
Adamu Merchandising	350,000	344,100
Bisi Toiletries	674,300	550,000



Example 2

Adesuwa Toy Shop orders and sells toys at Ikoyi High Street in Lagos. On 1st January, the Shop had 800 units of toys which were purchased at N100 each. During the year, Adesuwa Toy Shop made four batches of purchases of toys as follows:




Batches	Units	Unit price	Total cost
 
		N	N
February	1,000	105	105,000
May	1,200	110	132,000
September	1,300	120	156,000
November	1,600	122	195,200



The Shop sold 4,700 units during the year. Required:
(a)	Compute the quantity of closing inventory

(b)	Compute the cost of sales and closing inventory using the following methods: (i) FIFO

(ii) LIFO (iii) SAM, and (iv) WAM

(c)	Determine the value of closing inventory if the net realisable value of inventory held at the end of the year is: (i) N95 (ii) N112




SOLUTION

Solution to Example 1

The important thing the student should note here is that inventory is recognised in the financial statements at lower of cost and net realisable value. If the cost is less than the NRV, the value to be recognised in the financial statements will be cost; if NRV is less than the cost, then the NRV
 
will be the recognisable value of inventory in the financial statements. However, when the cost is greater than the NRV (i.e., NRV less than cost), a potential loss occurs and that loss has to be charged to the profit or loss for the year.

Entities	Inventory at Cost
N (A)	Inventory at NRV
N	Basis of valuation	Closing inventory
N (B)	Inventory loss
N
(A - B)
Chip-Chip Enterprises	561,000	673,400	Cost	561,000	Nil
Omede Shop	675,000	526,700	NRV	526,700	148,300
Akin Carpet	988,000	1,060,000	Cost	988,000	Nil
Adamu Merchandising	350,000	344,100	NRV	344,100	5,900
Bisi Toiletries	674,300	550,000	NRV	550,000	124,300



The treatment of the losses in the ledger accounts are as follows:

Generally, the accounting entries for the inventory loss in value are: Dr Profit or loss and Cr Inventory.
Omede Shop


Inventory A/c

 
Bal. b/f675,000 675,000
Bal. b/f	526,700
 
Bal. c/f	526,700
675,000
 





Adamu Merchandising


 
Inventory A/c N

Bal. b/f350,000 350,000
Bal.b/f	344,100
 


N
Profit or Loss	5,900
Bal. c/f	344,100
350,000
 




Bisi Toiletries


 
Inventory A/c N

Bal. b/f674,300 674,300
Bal. b/f	550,000
 


N
Profit or Loss	124,300
Bal. c/f	550,000
674,300
 







Solution to Example 2
 
(a)

Computation of quantity of closing inventory


Batches	
Opening	800
February	1,000

May	
1,200
September	1,300
December	1,600
Goods available for sale	5,900
Less: Goods sold	(4,700)
Units of closing inventory	1,200




(a)	i

FIFO

Computation of Cost of sales


Batches	Units Purchased	Units sold from batch	Unit price
N	Cost of sales
N
Opening	800	800	100	80,000
 
February	1,000	1,000	105	105,000
May	1,200	1,200	110	132,000
September	1,300	1,300	120	156,000
November	1,600	400	122	48,800
TOTAL		4,700		521,800






Computation of Cost of Closing Inventory (FIFO)

Since the first batches are deemed to be sold first, it means that the closing inventory of 1,200 units will come from the November batch.
Value of closing inventory = 1,200 x N122 = N146,400




*NB:	If you were to compute the cost of goods available for sale, that would simply be the value of the closing inventory plus the cost of sales and this will give us N668,200.
 

(b)	ii

LIFO

Computation of Cost of sales


Batches	Units Purchased	Units sold from batch	Unit price
N	Cost of sales
N
Opening	800	0	100	0
February	1,000	600	105	63,000
May	1,200	1,200	110	132,000
September	1,300	1,300	120	156,000
November	1,600	1,600	122	195,200
TOTAL		4,700		546,200






Computation of Cost of Closing Inventory (LIFO)

Since the first batches are deemed to be sold last, it means that the closing inventory of 1,200 units will come from the opening and February batches.
Value of closing inventory = Opening batch	800 units x N100 = N80,000

February batch	400 units x N105 = N42,000
 
Closing inventory cost	N122,000
 

(b)iii

Simple Average Method (SAM)

Computation of Cost of sales and Closing Inventory


Batches	Unit price
N
Opening	100
February	105
May	110
September	120
November	122
TOTAL	557



Average Cost =    , where the number of batches is 5 (i.e, Opening, February, May, September, November)

=    = N111.40

Cost of sales = 4,700 units x N111.40 = N523,580


Value of closing inventory = 1,200 x N111.40 = N133,680
 
(b) iv

(Periodic) Weighted Average Method (WAM)

Computation of Cost of sales and Closing Inventory


Batches	Units purchased	Unit price N	Weighted cost
N
Opening	800	100	80,000
February	1,000	105	105,000
May	1,200	110	132,000
September	1,300	120	156,000
November	1,600	122	195,200
TOTAL	5,900		668,200



Weighted Average Cost =


=    = N113.25 (approximated/rounded to 2 decimal places)

Cost of sales = 4,700 units x N113.25 = N532,275


Value of closing inventory = 1,200 x N113.25 = N135,900


(c)
 
Determination of value of closing inventory @ N95 NRV


Method	of Valuation	
Units	of Inventory	Cost	NRV @
N95/unit	Inventory Value
N
FIFO	1,200	146,400	114,000	114,000
LIFO	1,200	122,000	114,000	114,000
SAM	1,200	133,680	114,000	114,000
WAW	1,200	135,900	114,000	114,000



Determination of value of closing inventory @ N112 NRV


Method	of Valuation	
Units	of Inventory	Cost	NRV @
N112/unit	Inventory Value
N
FIFO	1,200	146,400	134,400	134,400
LIFO	1,200	122,000	134,400	122,000
SAM	1,200	133,680	134,400	133,680
WAW	1,200	135,900	134,400	134,400



4.0 CONCLUSION
 
We have examined inventory and its valuation and how it affects the cost of sales and reported profit.
5.0 SUMMARY

In this Unit we studied the nature of inventory and the different inventory valuation methods such as FIFO, LIFO, SAM, WAM, and standard cost. Moreover, this Unit equally looked at how inventory valuation methods affect the cost of sales and profit as well as the carrying value of closing inventory in the statement of financial position.
	TUTOR-MARKED ASSIGNMENT

1.	Explain what you understand by periodic inventory system.

2.	What is the rationale for applying the notion of lower of cost or net realisable value?

What accounting concept do you think underpins this rule?

3.	The following data for the month of January relate to the records of Mimido Enterprises which deals on ‘I love mummy’ branded baby nappies. On 1st January, the shop had 800 units of nappies which were purchased at N10 each:







Dates	Units Purchased	Units Sold	Purchase price/unit
N	Sales price/unit
N
Jan. 3	1,000		10.50	
Jan. 5		1,200		25
 
Jan. 10	500		11	
Jan. 12	800		12	
Jan. 15		1,600		29
Jan. 20	1,000		12.75	
Jan. 25		600		30
Jan. 29	400		12.45	



Required:

a.	Compute the cost of sales and closing inventory following the periodic inventory model assumption: (i) FIFO (ii) LIFO (iii) SAM, and (iv) WAM
b.	If the firm’s pre-determined unit price of valuing inventory is N12.65, compute the cost of sales and closing inventory for the month.
4.	The following costs and net realisable valueswere drawn from the books of Apo Paints Merchants which deals on five product lines of paints:
Product Line	Inventory	at Cost
N	Inventory	at NRV
N
Chiplex	800,000	873,400
Delux	675,000	582,700
Dumaplux	988,000	982,000
 
Sweetex	380,000	404,100
Lunaplex	645,300	650,000
Required:

(i)	Identify the basis of valuing the inventory of each product line for the period (Hints: state whether it is cost or net realisable value)
(ii)	Determine the value of closing inventory of each of the product lines asit would appear in the financial statements and the total inventory value that would appear in the financial statements.
(iii)	Determine the amount to be written off to profit or loss as inventory loss and how this will be treated in the ledger account.
7.0 REFERENCES/FURTHER READING

Hindmarch, A. and Simpson, M. (1991): Financial Accounting: an introduction, London: Macmillan
Hodge, R. (2008). Accounting: a foundation, London: Cengage Learning


Wood, F. & Sangster, A. (2012) Frank Wood’s business accounting 1, Harlow, England: Pearson Education Limited
 



















UNIT 8:	TRIAL BALANCE


CONTENTS

1.0 Introduction

2.0 Objectives

	Main Content

	Definition of Trial Balance

	Uses of Trial Balance
	Purpose of a trial balance
	Format of a Trial Balance

	Correction of Errors

	Types of Errors

	Suspense Account

4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment

7.0 References/Further Reading
 

1.0 INTRODUCTION

The trial balance helps to ascertain the arithmetical accuracy of all the postings made. In this unit, we will be looking at the uses of the trial balance, errors affecting the trial balance and errors that does not affect the trial balance.
2.0 OBJECTIVES

After studying this unit, you should be able to;

-	explain the uses of trial balance

-	describe the purpose of trial balance

-	determine the errors affecting the trial balance

November 19, 2025 12:38 PM

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NATIONAL OPEN UNIVERSITY OF NIGERIA DEPARTMENT OF FINANCIAL STUDIES
Course Guide


COURSE TITLE; ELEMENTS OF BOOK-KEEPING II

COURSE CODE; ACC 102



Course Developer/Writer:	Dr. (Mrs) Ofe I. Inua

Department of Financial Studies Faculty of Management Sciences National Open University of Nigeria



Course Editor:	Prof. ThankGod O. Imo Department of Accounting
Rivers State University, Port-Harcourt




Head of Department:	Dr. (Mrs) Ofe I. Inua

National Open University of Nigeria




Course Coordinator:	Anthony I. Ehiagwina
 
National Open University of Nigeria






CONTENT

Introduction Course Aim Course Objectives Study Units Assignments
Tutor Marked Assignment Final Examination and Grading Summary
 
INTRODUCTION

What you have in your hand is the course guide for ACC 102 (Elements of Bookkeeping II). The purpose of the course guide is to relate to you the basic structure of the course material you are expected to study as a B.Sc. Entrepreneurship Student in National Open University of Nigeria. Like the name ‘course guide’ implies, it is to guide you on what to expect from the course material and at the end of studying the course material.


COURSE CONTENT

The course content consists basically of the methods of recording accounting data: manual and mechanical; the final account of a sole trader which consists of the statement of profit or loss account, statement of financial position and end of year adjustments; accounting treatment of control accounts; bank reconciliation statement; cost accounting with emphasis on elementary break-even analysis.


COURSE AIM

The aim of the course is to introduce you to basic principles of accounting and to understand how financial documents are posted into accounting record in order to determine the profit or loss of an organisation and the financial position of the organization. It also includes practical treatment of accounting transactions conducted through the bank and how errors associated with the trial balance are treated. This course will also introduce the break-even analysis using the formula or the mathematical and graph methods.


COURSE OBJECTIVES

At the end of studying the course material, among other objectives, you should be able to:

1.	Distinguish between book keeping and accounting;
2.	Explain the methods of preparing accounting data using manual accounting system and computerized accounting system;
3.	Explain key accounting concepts and the building blocks of accounting
4.	Explain the meaning of the key terms and concepts in the accounting equation.
5.	List the books of prime entry and state what each is used for.
6.	Describe common methods of valuing inventory and inventory costing
7.	Identify the errors affecting the trial balance as well as those not affecting the trial balance
 
8.	Prepare a statement of profit or loss and a statement of Financial position Explain and prepare the different types of control accounts
9.	Prepare an adjusted cash book and bank reconciliation statement
10.	Calculate the Breakeven point using formula or the mathematical method and graph



COURSE MATERIAL

The course material package is composed of:

The Course Guide The Study Units
Self-Assessment Exercises Tutor Marked Assignment References/Further Reading

THE STUDY UNITS

The study units are as listed below:

Unit 1	Basic Accounting
Unit 2	Methods of recording data: manual and mechanical Unit 3	Accounting concepts
Unit 4	The accounting equation and its components Unit 5	Basic documentation and prime books
Unit 6	Prime books, general journals and the ledgers Unit 7	Inventory valuation
Unit 8	Trial balance
Unit 9	Final accounts of a sole trader 1: Statement of profit or loss
Unit 10	Final accounts of a sole trader 1: Statement of Financial position Unit 11	End of year adjustments in final accounts
Unit 12	Accounting treatment of control accounts Unit 13	Bank reconciliations
Unit 14	Cost accounting
Unit 15	Elementary Break-even analysis
 
ASSIGNMENTS

Each unit of the course has a self assessment exercise. You will be expected to attempt them as this will enable you understand the content of the unit.
TUTOR MARKED ASSIGNMENT

The Tutor Marked Assignments (TMAs) at the end of each unit are designed to test your understanding and application of the concepts learned. Besides the preparatory TMAs in the course material to test what has been learnt, it is important that you know that at the end of the course, you must have done your examinable TMAs as they fall due, which are marked electronically. They make up to 30 percent of the total score for the course.
SUMMARY

It is important you know that this course material consists of both academic and professional materials. This provides you the opportunity of obtaining a BSc. degree in Entrepreneurship and preparation for your professional examinations. Therefore, it is very important that you commit adequate effort to the study of the course material for maximum benefit.
 

UNIT 1:	BASIC ACCOUNTING CONTENTS
1.0 Introduction

2.0 Objectives

	Main Content

	The Historical development of Accounting

	Regulatory Framework

	Book keeping and Accounting
	Scope of Accounting
	Financial Accounting
	Cost Accounting
	Management Accounting
	Auditing
	Government Accounting
	Accounting for Taxation
	The Need for Accounting Information
	Qualities of Good Accounting Information
4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment

7.0 References/Further Reading

1.0 INTRODUCTION

Accounting is concerned basically with accountability. The underlying purpose of accounting is to provide financial information about an economic entity. The information is provided, periodically, to shareholders and others connected with the organization to enable them decide the extent to which they want to continue to associate with the organization.
2.0 OBJECTIVES

After studying this unit, you should be able to:
 
-	Explain the historical development of accounting

-	Distinguish between bookkeeping and accounting

-	State the qualities of a good accounting information system

	MAIN CONTENT

	The Historical Development of Accounting

Rudimentary form of accounting started with bookkeeping by Lucia Pacioli, an Italian monk. In his book titled “Summa de Arithmetical, Geometrica, proportioni et proportionalita,” published in 1494 on Arithmetic, Geometry and Proportion, he devoted a chapter to expound the principles of the double entry system. It became necessary for managers to report to the owners of their business activities during the period under review. Such report mainly includes the following:
•	How the financial resources of the business have been invested during the period,

•	The profit earned or loss incurred during the period, and

•	The assets, liabilities and the owner’s equity at the end of the period under review.

After this initial development, a lot of changes have been witnessed in accounting. These changes were informed by sophistication and complexity of businesses, industrial and political environments which placed more responsibilities on management of business to disclose more information to owners and other interested parties.
	Regulatory Framework

Due to the increasing changes in the economic and political environment, statutory and other regulations have been put in place to ensure the reliability, relevance and comprehensiveness of financial information, and to narrow areas of differences.
The main statutory document for the regulation of business in Nigeria is the Companies and Allied Matters Act 1990 (as amended in 2004). The company laws are enforceable in the court of law.
Other legislations relate directly to specific industry such as:
•	Banks and Other Financial Institutions Act of 1991 (BOFIA 1991)
 
•	Insurance Act 2003

Other regulations consist of the following accounting standards:
•	Statements of Accounting Standards (SAS) issued by Nigerian Accounting Standards Board (NASB) now Financial Reporting Council (FRC) from time to time
•	International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by IASB from time to time.
SELF ASSESSMENT EXERCISE
Briefly explain the regulatory framework of accounting in Nigeria
	Book keeping and Accounting
Bookkeeping is the recording phase of accounting. It is the classification and recording of business transactions in the books of account. The recording of the transactions is a routine task, therefore it tends to be repetitive. Accounting on the other hand includes not only the keeping of accounting records, but also the design of efficient accounting systems, the interpretation of accounts and the development of forecast. The processes involved in bookkeeping are as follows:
(a)	The classification of business transactions using source documents;

(b)	Recording of classified transactions in appropriate subsidiary books or books of prime entry;

(c)	Posting of entries from subsidiary books to the ledger; and

(d)	Extraction of the Trial Balance .
	Scope of Accounting
The starting point in the study of accounting is financial accounting; others are cost accounting, management accounting, auditing, government accounting, and tax management.
	Financial Accounting
Financial accounting involves an accounting process that starts with bookkeeping and ends with the preparation and interpretation of financial statements. The components of financial statements are the statement of financial position (the balance sheet), the statement of financial performance (the income statement) and the cash flow statement.
	Cost Accounting
 
Cost accounting is the procedure for accumulating data to provide information for managerial action. Cost accumulation is the collection of cost data in some organized ways by means of an accounting system.
	Management Accounting
Management accounting provides information to management of a business to help them take better decision and to improve upon the efficiency and effectiveness of existing operations (Drudry, 2004). It is concerned with providing accounting information to management for the purpose of planning, decision making and control.
	Auditing
Only complete and reliable financial statements can be of any use to the creditors, investors, government agents and other interested parties. To guarantee these, the accounts must be audited by an independent person called an Auditor. Auditing is the independent examination of the books of accounts and records of the company
	Government Accounting
Government accounting is the process of recognizing and reflecting in the appropriate books of accounts and records government generated revenue and disbursed expenditure in such a way as to extract with ease relevant financial information vital for appropriate decision making from time to time, and in compliance with the laws regulating government finances.
	Accounting for Taxation
The accounting profits generated in the financial statements provide the basis for determining the taxable profits of a company. The taxable profits are different from the accounting profits because certain expenses and income are allowable for accounting purpose but disallowable for tax purpose. A good understanding of the knowledge of these taxable incomes and expenses and non-taxable incomes and expenses would help a business in its tax management.
	The Need for Accounting Information
The need for accounting information can be summarized as follows:
•	It provides information useful for making economic decisions.
•	It provides information to users for predicting, comparing and evaluating the earnings power and financial strength of a business.
•	It is used to judge the ability of management to utilize the entity’s resources effectively in achieving the goal of the entity.
 
•	It provides information to creditors for predicting and evaluating the cash flows of the entity.
•	It provides management with detailed accounting data for use in planning and controlling the daily operations of the business.
•	It provides information to government for determining the tax payable on the profit and/or other incomes of an individual or company and for formulating fiscal policies.
•	It forms the basis of reporting on the activities of an enterprise as they affect the society.
•	It serves as the basic instruments by which investors decide the securities in which to invest.
	Qualities of good accounting information
Accounting information should possess the following qualities before users can rely on it:
(a)	Relevance: The accounting information must include enough facts to satisfy the need of the user. For instance management accounting information should be relevant to the decision to be taken with it. Financial accounting information should disclose enough information to satisfy the various users.
(b)	Reliability: The source of information must be verifiable and one source of evidence must corroborate the other.
(c)	Comparability: There should be no change in the basis for the preparation of the accounting information from period to period so that it will be easy to compare the result of operations over some accounting periods.
(d)	Timeliness: Accounting information must be made available early enough for its use. For instance management requires certain information on daily basis or weekly basis for effective running of the business; if it comes late it would be useless. Annual reports and accounts must be published not long after the year end.
(e)	Objectivity: There must be no bias, window dressing or subjective judgments in the presentation of accounting information. Objectivity includes ability to trace transactions to documentary evidence and complying with required regulations in its presentation.
(f)	Comprehensiveness: Accounting information must contain just enough details for good understanding. The detail must neither be too little nor too much.
 


4.0 CONCLUSION

Accounting as a discipline has been undergoing series of development. These increasing changes are due to the economic and political environment, statutory and other regulations have been put in place to ensure the reliability, relevance and comprehensiveness of financial information, and to narrow areas of differences.
5.0	SUMMARY

In this study, we examined the historical development of accounting, its relevant framework and the need for accounting information.

6.0	TUTOR-MARKED ASSIGNMENT	
	1. State four qualities of good accounting information	
	2. Differentiate between Bookkeeping and Accounting	
	3. Explain the scope of accounting	
	4. What are the qualities of good accounting information?	
	5. Differentiate between the computerized accounting system and the	manual
	accounting system	
	6. Identify the building blocks of accounting and explain each one	
6.0	REFERENCES/FURTHER READING	
Aguolu, O. (2010). Financial Accounting. A Practical Approach. Institute for Development Studies, Enugu, Nigeria
Anao A.R. (2002). Introduction to Financial Accounting. Longman Nigeria Limited, Ikeja, Lagos
ICAN Study Pack (2006). Fundamentals of Financial Accounting. VIPublishing Limited, Lagos, Nigeria
Professional Accounting Tutors Limited (2007). Accounting Standards. Vol. 111, Lagos, Nigeria Igben, R.O. (2000). Financial Accounting Made Simple. ROI Publishers, Lagos, Nigeria
 
Accounting Technicians Scheme West Africa (ATSWA). Basic Accounting Processes and Systems.
 
UNIT 2:	METHODS OF RECORDING ACCOUNTING DATA: MANUAL AND COMPUTERIZED

CONTENTS

1.0	Introduction
2.0	Objectives
	Main Content
	Manual Accounting System
	Computerized Accounting System
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
7.0	References/Further Readings


1.0	INTRODUCTION

The computer information age of the 21st century led to the use of computerized accounting system by different organizations. This is a departure from the manual system. However, most of the accounting source documents in Nigeria such as invoice, receipt are prepared manually by small businesses except few organizations whose accounting system is fully computerized to the extent of generating computer based invoices and receipts. This unit focuses of how accounting data are recorded using both manual and mechanical methods

	OBJECTIVES

At the end of this unit, you should be able to:
i.	Explain manual accounting system.
ii.	Discuss computerized/mechanical accounting system.
iii.	Know the procedure for preparing accounting data using manual method
ii.	Understand how accounting data can be prepared mechanically.

	MAIN CONTENT

	Manual Accounting System

The manual accounting system refers to the keeping of accounting record by hand written of relevant posting in the books of accounts. It means that electronic device such as computer is not used in posting.
 

The computerised information systems enable some companies to use different accounting software for the financial records, but some organisation still prefer the manual system for one reason or the other.

Some of the advantages of manual system over the computerised system are:

i.	A manual system is cheaper to install in terms of cost when compared with a computerized system of maintaining financial records.

ii.	Cost of acquiring computer, accounting software and training of account personnel in a computerised accounting system are not required for manual system.

iii.	A manual system may be more secure because the possibility of computer crash and virus do not affect it.

Some of the disadvantages of manual system are:

i.	It is highly prone to more mistakes and errors because humans factor do all the calculation without electronic assistant which a computer can generate with ease.

ii.	The manual system takes longer time, efforts and paper to post.

iii.	The security of the manual system is threatening because it is prone to destruction by flood and fire deface without any back-up.

iv.	Auditing of manual accounting system is cumbersome because documents have to be checked and identified one after the other.

v.	More space is required to keep manual accounting record because they are always voluminous.

vi.	It takes more time to effect changes and correct mistakes in a manual system because it may require redoing a posting from the subsidiary books to the ledger.

	Mechanical Accounting System

The word ‘mechanical’ means the use or adoption of electronic device in the posting and preparation of accounting records. This is achieved through the use of computer with relevant
 
software as appropriate for each business. Computerised or mechanical accounting system makes the recording, processing and reporting of accounting data easier than the manual system.

The recording of accounting data in a computerised accounting system is different from the manual system of accounts. The recordings in mechanical accounting system are not the same for all accounting software, but there are common processes and procedures that are applicable to accounting software.

i.	Accounting data are entered from the source documents to the computer through the key board and other input devices.

ii.	The entry requires the classification of account or chart of account through the creation of ‘account code’ for each transaction head.

iii.	It will be necessary in most computerised accounting system to specify the account to be debited and those to be credited while imputing accounting data.

iv.	Information to prepare and generate the final accounts is in the data base from where the software automatically extracts the reports and accounts based on the user’s specification which can be modified.

	Chart of Account

This is a set of numbers and codes that define each account head and also differentiate between classes of accounts e.g. The serial code for receipt differs from expenses

Account Types
Account types define how the account will be grouped in reports and financial statements. They also control what happens during financial year-end.

Typical Chart of Account


Code	Account Description	Account Type
10000	SALES	Income
10001	DONATION	Income
10002	INTEREST ON DEPOSIT	Income
80001	PURCHASES	Cost of Sales
80002	CARRIAGE INWARDS	Cost of Sales
20001	PRINTING AND STATIONERY	Expenses
20002	TELEPHONE	Expenses
 
20003	POSTAGE	Expenses
20004	RENT	Expenses
20005	SALARIES AND WAGES	Expenses
20008	ADVERTISEMENT	Expenses
30000	FURNITURE AND FITTINGS	Non-Current Assets
30001	OFFICE EQUIPMENT	Non-Current Assets
40000	RENT ADVANCE	Current Assets
40001	MAIN CASH	Cash
40002	DEBTORS	Account Receivable
50000	CAPITAL	Equity
50001	RETAINED EARNINGS	Equity-Retained Earnings
60000	LOAN – DC BANK PLC	Non-Current Liabilities
60001	LOAN – GF MORTGAGE BANK	Non-Current Liabilities
70000	LOAN – COOPERATIVE	Current Liabilities
70001	CREDITORS	Accounts Payable


Some advantages of computerised accounting system are:

i.	The use of computer is an efficient way of keeping and recording accounting transactions because entry of data is faster than in manual system.

ii.	With the use of computer for accounting records, it becomes easy to generate different reports and financial statement within a short period.

iii.	It helps to communicate with customers and supplier better and faster because of email facility available in some accounting software,

iv.	Accounting data and other information in accounting software are secure and safe because they can be back-up in different locations and folders such as internet, cloud, e-mail attachment and external drive.

v.	The risk or loss of data is reduced to the barest minimum

vi.	It helps to avoid the problem of duplication of same records which are found in manual system

vii.	Quick and fast decision can be made by managers with timely report that are available in a computerised accounting system. This help in strategy formulation and realignment
 
viii.	Up to date accounting records are made possible because accounting software update records automatically after they are posted.

Computerised accounting system has the following demerits

i.	Computerised accounting system is prone to risk of computer virus and hard disk crash.

ii.	Some software require the service of external consultants who have to be paid consultancy fee on annual basis in some cases

iii.	The existence of computer hackers and identity theft are major challenge of computerised accounting system especially for those with internet and cloud back-up.

iv.	Irregular power supply and other electrical faults can damage computer and other accessories used for computerised accounting system.

v.	There is no limit to the effect of a single mistake in data entry. A mistake in data entry has negative effect on different reports, records and statements.

SELF ASSESSMENT EXERCISE

1.	Define manual accounting system?

2.	State	the	disadvantages	of	computerised	accounting	system?

4.0	CONCLUSION

Accounting data can be recorded, posted and processed manually and mechanically depending on what the business owner’s desire. The manual system is hand written while the mechanical method uses computer system in data recording and processing. It is important for business organization to examine the merits and demerits of each system before deciding on the system of accounting record to use.

5.0	SUMMARY

In this unit we discussed manual accounting system and mechanical accounting system. It shed light on the advantages and the disadvantages of each system while a typical chart of account used in a computerized accounting system was given.
 
6.0	TUTOR-MARKED ASSIGNMENT

1:	What are the merits of manual accounting system?
2:	What do you understand by computerized accounting system? 3:	What are the disadvantages of manual accounting system?
4:	Prepare	a	typical	chart	of	account	for	a	trading	organization.




7.0	REFERENCES/FURTHER READINGS

Accounting Technicians Scheme West Africa (2009). Basic Accounting Processes and System Part 1, Study Pack ABINA Publishers

Oluyombo, Onafowokan. (2014) Fundamentals of Finance, Money and Banking. Magboro: Kings & Queen Associates

Oluyombo, Onafowokan (2016) Financial Accounting with Ease (3rd  Edition).  Magboro:  Kings & Queen Associates

Oluyombo, O. (2017). Introduction to Financial Accounting I :SMS 203. Abuja: NOUN

Vitez, O. (2015) Role of accounting in the modern business environment. Retrieved from: http://smallbusiness.chron.com/role-accounting-modern	-business-environment- 4010.html
 
UNIT 3:	ACCOUNTING CONCEPTS CONTENTS
1.0	Introduction
2.0	Objectives
	Main Content
	Key Accounting Concepts
	Other Concepts
4.0	Conclusion
5.0	Summary
6.0	Tutor-Marked Assignment
7.0	References/Further Readings

1.0	INTRODUCTION

An appreciation of the conceptual and theoretical foundations of financial accounting is fundamental to the preparation, understanding and interpretation of financial statements. The conceptual and theoretical foundations can be described as a set of rules, principles, postulates, conventions and methods. This unit explains the nature of the underlying concepts of accounting. Some of the concepts are referred to specifically in the International Accounting Standard Committee’s (IASC’s) Framework for the Preparation and Presentation of Financial Statements (the Framework) (IASC, 1989 quoted in Thomas and Ward, 2012).

	OBJECTIVES
At the end of this unit, you should be able to:
•	Define accounting concept;
•	Explain the key accounting concepts;
•	Describe the other accounting concept.

	MAIN CONTENT
	Key Accounting Concepts
Accounting concepts can be defined as broad basic assumptions that underlie the periodic financial statements of business enterprises. Two concepts have been specifically in the Framework and they are the going concern and the accruals concepts.

	Going Concern Concept
The going concern concept is the assumption that an entity will continue in operational existence for the foreseeable future. Any user when looking at an entity’s financial statements has the  right to assume that the company is not going to liquidate or curtail materially the scale of its operations. Users should be able to look at the financial implications of prior activity as captured in the financial statements and use this as an indication of future activity.

The implication of the going concern assumption is that assets are valued at their historical cost (or fair value), not their scrap value. If there is reason to believe that the entity will not be able  to continue in business, then the going concern principle no longer holds and the assets should be
 
valued on a cessation basis; that is, at their net realizable value. For example a  N10,000 machine, which can easily generate output for the next 10 years, would be recognized in the statement of financial position at cost price less depreciation, if the company is a going concern. However, if the company decides to go into voluntary liquidation, then this machine is not going to produce revenue for the next 10 years, hence should be written down to the value expected to be received on its sale (its net realizable value). This may be zero.

Self Assessment Exercise
Explain the nature of the going concern concept and its implications for the preparation of financial statements.

	Accruals Concept
According to the Framework and IAS 1, to meet their objectives, financial statements should be prepared on the accruals basis of accounting.

The accruals concept is concerned with allocating expenses and income to the periods to which they relate (when the expenses were used by the entity, or when the income was earned, as distinctly different to when cash is paid out for expenses and when cash is received from a sale). The Framework states that the transactions should be ‘recorded in the accounting records and reported in the financial statements in the periods to which they relate’. In most instances this refers to the accounting period in which the goods or services physically pass from the seller to the buyer.

The accruals concept also assumes that costs should be recognized when they occur, and not when money is paid: that is, goods and services are deemed to have been purchased on the date they are received and services consumed, for which no invoice has been received at the end of an accounting year (e.g. electricity, gas, telephone), are treated as a cost for that year. The amount due is treated as a liability. These are referred to as accrual expenses. In contrast, services paid for in advance (e.g. rent, insurance, road tax, local government taxes) that have not been received at the end of an accounting year are treated as a cost of the following accounting year, and thus carried forward as an asset at the end of the current year. These are referred to as prepaid expenses or prepayments.

Self Assessment Exercise
Explain the accrual concept and its implications for the preparation of financial statements.

	Other Concepts
The fundamental concepts (going concern and accruals) are discussed above. There are a  number of other concepts that are implicit in the preparation of financial statements and are so engrained in the process of accounting. To be comprehensive, a short explanation of each is given in this section.

	Matching Concept
The matching concept/principle refers to the assumption that in the measurement of profit, costs should be set against the revenue that they generate at the time when they arise. A classic example of the application of the matching principle is inventory. Where goods are bought in
 
one accounting year but sold in the next, their cost is carried forward as inventory at the end of the year and set against the proceeds of sale in the accounting year in which it occurs.

	Entity Concept
The entity concept, otherwise known as the accounting entity or the business entity concept. In simple terms this concept allows the user to look at a reporting entity’s financial statements and to know that these represent the performance and financial position of the business unit and do not include any assets, liabilities, income or expenditure that are not related to the business. Therefore, when a sole trader uses the business cheque book to buy a car for personal use, this car will not form part of the business’s assets; it will be treated as the owner withdrawing equity capital. This is called a ‘drawing’.

	Materiality Concept
The materiality concept affects every transaction and every set of financial statements. This concept affects two main areas: presentation and application of accounting standards. In respect of the first, this concept assumes that only material items should be disclosed in financial statements. This is important for achieving the objective of financial statements as attention being afforded to immaterial items can mislead the user. The user should be able to look at a set of financial statements and focus on the important figures, not see a mass of information, much of which is of no use for economic decision-making. For example, it is irrelevant to disclose a yearly spend on stationery of N100 and a yearly spend on coffee of N75, if the company has a turnover of N10 million and total expenditure of N8 million. The immaterial items need to be grouped together, or grouped into categories that are material. For example, the stationery and coffee could be combined into administration expenses that might have a total of N2.5 million.

	Time Period Concept
Another concept, the time period concept, otherwise known as the time interval concept, refers to the practice of dividing the life of an entity into discrete periods for the purpose of preparing financial statements. The norm, as required by company law, is one year. Therefore, a user has the right to assume that the figures shown in a set of financial statements refer to a one-year period. When the period is different to one year, the financial statements need to make it clear that this is the case. Indeed, company law limits the ability of companies to change their accounting year-end date. Entities can of course elect to report for different time periods; however, to comply with law and the tax authorities they will also need to prepare financial statements every 12 months.

	Historical Cost Concept/Fair Value
The historical cost concept allows a user to assume that all the transactions in an entity’s financial statements reflect the actual cost price billed, or revenue charged, for items.  In addition, it allows the reader to see the history of the management team’s investment decision- making from the statement of financial position. This concept is becoming less relevant now as  it is widely believed that historical cost information does not support financial statements in their aim of producing information that is useful for economic decision-making. In particular the impact of inflation means that many of items recorded at historic cost, do not reflect current value. Measuring items at fair value is deemed to provide more relevant information. Fair value is defined by the International Accounting Standards Board (IASB) as the amount for which an
 
asset could be exchanged, or a liability settled, between knowledgeable, willing parties in arm’s length transaction.

	Money Measurement Concept
The money measurement concept allows the user to assume that the performance and financial position of a reporting entity will be expressed in monetary amounts (usually in the currency of the country where the business is registered).

	Duality Concept
The duality concept, otherwise known as the dual aspect concept or double entry, assumes that every transaction has two aspects. Every transaction affects two accounts in a set of financial statements in such a manner as to keep the accounting equation in balance (i.e. assets will always equal liabilities plus owners’ capital).

	Prudence Concept
The prudence concept, as the name implies, assumes that the financial statements have been prepared on a prudent basis. This allows the user to have confidence that no profits are included that are not earned and, if not yet received, are reasonably certain to be received. The user can also be confident that expenses are complete and are not understated, that assets are not overstated and liabilities are complete and are not understated. At one time this concept was deemed to be fundamental to the objective of financial statements (i.e. to provide relevant information to a wide range of users for economic decision-making). However, it was abused by some companies. When companies did well they tended to overstate expenses (by creating provisions for expenditure) and understate revenue. Then, in years when performance was not strong, the companies reversed the adjustments – reducing the provisions and the expenses in the year and increasing revenue. The result was that users could not quite work out how  the company really performed. For this reason prudence was downgraded and provisions and manipulations that were based on the prudence concept are no longer allowed.

These transactions did not follow the spirit of this concept. They manipulated it for earnings management purposes. Earning management is where the preparers of financial statements use accounting adjustments to alter the reported performance of the reporting entity. They usually  try to smooth profits, that is, to show steady profits. The concept still is applicable; however, it cannot be used as a defence for earnings management or earnings manipulation.

	Substance Over Form Concept
This concept assumes that when accounting for transactions the preparer should look at the economic substance of a transaction, not its legal form. This was a  reactive concept/standard  that was introduced to try to stop the accounting practices that had emerged of creating complicated legal transactions which, because of their legal form, allowed transactions to be omitted from the financial statements. In particular, debts/ liabilities were arranged in such a manner as to enable them to be left off the statement of financial position. This would make the company look stronger, healthier and in general masked the real debt commitment that the entity had, from the users. This is no longer allowed. Regardless of the legal contract underlying a transaction, the preparer of the financial statements has to determine whether the transaction
 
creates an asset or a liability as defined by the Framework. If the transaction does, then the preparer has to account for it as such.
	Consistency Concept
The consistency concept allows the user to look at a set of financial statements over a number of years for an entity and to assume that the same methods, policies and estimation techniques have been used from year to year. This allows the user to compare the performance of the entity over time. Financial information should allow users to determine trends in the performance of an entity over time. If accounting policies, techniques and methods used were allowed to vary from year to year, this would make comparisons meaningless. Similarly, users should be able to look at the financial statements of several entities within the same industry and make informed comparisons in the performance and financial standing of each entity; relative to each other. If consistent accounting policies and practices are not adopted, this process would be very difficult. Consistency is one of the qualities that financial information should have, as detailed in the Framework.

	Separate Determination Concept
This concept allows the user to look at the assets, liabilities, income and expenditure and to know that the reported figure is the total value for each of these elements. The entity should have a separate record of every asset held. The asset category in the financial statement should not be just a big bath that includes a whole host of untraceable past transactions. This concept also does not allow a company to net one element against another. This is important as netting can mislead users.

For example, if a company were able to net its debt against some assets so that less debt is shown in the statement of financial position, then the user would be unable to make a proper assessment of the entity’s ability to pay back the debt as the user would assume the repayments required to clear it were less than they actually were.

4.0	CONCLUSION
The IASB’s conceptual/theoretical Framework of accounting may be described as essentially being a set of accounting principles. These are said to comprise the objective of financial statements, the underlying assumptions of accounting (the concepts), the qualitative characteristics of financial information, the elements of financial statements, recognition in financial statements, measurement in financial statements and concepts of capital maintenance.

5.0	SUMMARY
In this unit, we have explained the nature of the going concern concept, the accruals concept, the matching concept, the entity concept, the materiality concept, the time period concept, the cost concept, the money measurement concept, the prudence concept, the duality concept, the substance over form concept, the consistency concept and the separate determination concept, including their implications for the preparation of financial statements;

6.0	TUTOR-MARKED ASSIGNMENT
In a paragraph each, explain the materiality, time period, historical cost, money measurement, duality, prudence, substance over form, consistency and the separate determination concept.
 
7.0	REFERENCES/FURTHER READINGS
Inua, O.I. (2014). Introduction to Accounting. Abuja: NOUN

Thomas, A. and Ward, A.M. (2012). Introduction to Financial Accounting. Berkshire: McGraw- Hill	Education.

Wood, F. and Sangster, A. (2008). Business Accounting. Edinburgh Gate: Pearson Education Limited.
Weygandt, J, Kimmel, P, Kieso, D 2012 Accounting PRINCIPLES 10TH Edition,John Wiley and Sons
 

UNIT 4: THE ACCOUNTING EQUATION AND ITS COMPONENTS CONTENTS
1.0	Introduction
2.0	Objectives
	Main Content
	The Accounting Entity
	The statement of financial Position as an Accounting Equation
	The accounting period and profit reporting
3.5	Revenue expenditure versus capital expenditure
4.0	Conclusion
5.0	Summary
6.0	Tutor Marked Assignment
7.0	References/Further Reading

1.0	INTRODUCTION
In this unit we shall be considering the components of the accounting equation and how each component is affected when a transaction takes place.

2.0	OBJECTIVES
After reading this chapter you should be able to do the following:
•	Explain the meaning of the key terms and concepts in the accounting equation.
•	Explain the relevance of the accounting entity concept in financial accounting.
•	Explain the nature of assets, liabilities and capital.
•	Distinguish between revenue expenditure and capital expenditure, including their effects on the statement of financial position.

	MAIN CONTENT
	The Accounting Entity
The entity concept was introduced in the previous unit. Accounting for a reporting entity focuses on setting up a means of recording all accounting information in relation to that entity, as distinct from information that does not relate to the entity. The reporting entity may be, for example, a particular company, club or business partnership. We are used to hearing that a financial report relates to a specific organization, but now the organization is called an 'entity'. The use of the word 'entity' emphasizes the properties of being separate and discrete. Greater precision is demanded by accounting in deciding what is, and is not, part of the entity. Boundaries are created to separate out the accounting entity. Realizing that these boundaries are necessary, even though they may be artificial, is the key to the entity concept. It becomes possible to accept that a business may be separate from its sole proprietor.

Example: A trainee accountant is starting to prepare the financial statements for a  sole proprietor who has a retail shop as his business. The following items appear in the list of cheques written by the businessman. The trainee accountant has been asked
 
to state whether or not the items of expenditure below should be included in the financial statements of the retail shop.

1.	Cheque paying the shop's rates.
2.	Cheque paying the sole proprietor's house rates.
3.	Cheque paying for new cash till.
4.	Cheque paying for a new washing machine for the proprietor's wife's birthday.
5.	Cheque for stationery (90 per cent is for the shop, 10 per cent is for his kids).
6.	Cheque purchasing overalls for himself for cleaning the shop.
7.	Cheque paying for a new outfit, which he can wear to work.

Required:
Complete a table detailing whether the items should enter the accounting system of the reporting entity or not.


1.	Shop rates
2.	House rates	Yes
v	No

v
3.	Till	v	
4.	Watching machine		v
5.	Stationery	v (90%)	v (100%)
6.	Overalls	v	
7.	New outfit		v

In sum, an accounting entity can be a legal entity, part of a legal entity, a combination of several legal entities, part of another accounting entity, or a combination of accounting entities.

The accounting/reporting entity concept is also sometimes referred to as the 'business entity' or simply the 'entity concept'.

	The Statement of Financial Position as an Accounting Equation
An accounting entity may also be viewed as a set of assets and liabilities. Perhaps the most familiar form this takes is the statement of financial position. As an equation this would appear as follows:

Proprietor's ownership interest in the business = Net resources of the business
The ownership interest or claims are called owner's equity or owner's capital. The net resources are analyzed into assets and liabilities.

	An asset can be defined as a tangible or intangible resource that is owned or controlled by an accounting entity, and which is expected to generate future economic benefits. Examples of assets include land and buildings, motor vehicles, plant and machinery, tools, office furniture, fixtures and fittings, office equipment, goods for resale (known as inventory), amounts owed to the accounting entity by its customers (i.e. trade receivables), money in a bank account, and cash in hand.
 
The use of the word 'net' to describe the resources possessed by the business recognizes that there are some amounts set against or to be deducted from the assets. There are two major types of such deduction: liabilities and provisions.

	A liability can be defined as a legal obligation to transfer assets or provide services to another entity that arises from some past transaction or event. Liabilities represent claims by outsiders (compared to the owners, whose claims are equity or capital) and may include such items as loans made to the business and amounts owed for goods supplied (i.e. trade payables).

	Provisions are amounts provided to allow for liabilities that are anticipated but not yet quantified precisely, or for reductions in asset values. Examples are bad debts and depreciation.

Given that liabilities can be regarded as being negative in relation to assets, the accounting equation can now be stated in the form:

Assets - Liabilities = Owners' capital

Or alternatively:

Assets = Owners' capital + Liabilities

This equation is based on what is sometimes referred to as the 'duality' or 'dual aspect concept’. This concept purports that every transaction has two aspects: one represented by an asset and the other a liability, or two changes in either the assets or the liabilities. For example, the purchase of an asset on credit will increase the assets and the liabilities by the same amount. The purchase of a vehicle for cash will increase the value of the vehicle asset but decrease the amount of the cash asset. These two aspects of each transaction are also reflected in the duality of double-entry bookkeeping.

The accounting equation is a fundamental equation and is a valuable basis from which to begin understanding the whole process of accounting. It sets out the financial position of the owners at any point in time, although in practice a complete and detailed statement of financial position may only be produced periodically, such as monthly or yearly. For now we will examine accounting simply in terms of statements of financial position. Let us trace how this approach reflects the setting-up of a plumbing business (see Example 1).

ILLUSTRATION
KEHINDE decided to start his business by opening a bank account for business transactions and depositing N200, 000 into it on 1 July 20X2: This transaction involves a flow of value from KEHINDE to his business and will affect two parts of the accounting equation: owner's capital and assets. Owner's capital will increase by N200, 000 as the business is now 'indebted to KEHINDE for the N200, 000 that he provided-to the business and cash at the business bank will have increased by N200, 000. There are several ways of presenting this. In practice companies usually adopt a vertical approach, placing capital vertically below net assets in the form:
 
 

However, a side-by-side or horizontal presentation may illustrate more clearly the accounting equation format.




Following on from the example, if on 2 July 20X2 KEHINDE draws out N80,000cash and spends it all on purchasing tools, then cash at bank will be decreased by N80,000 and a new asset, tools, is introduced on the statement of financial position with a balance of N80,000.







In this case one asset is increased by exactly the same amount as another is decreased (N80,000), so that the accounting equation, assets equals capital plus liabilities, continues to balance.

Following on from the example, on 3 July KEHINDE buys a range of plumbing accessories for N30,000 from the local storekeeper, but arranges to pay in the next few days. The arrangement is described as 'on credit: The credit transaction with the storekeeper becomes a trade payable since he is now owes a debt of N30,000. There is no problem in maintaining the balance of the equation when including the effects of this transaction in the business statement of financial
 
position, since the new liability of N30,000 owed to the store exactly complements the N30,000 increase in assets represented by the inventory of accessories:





Assets	N	Equity and liabilities	N
Tools	80,000	Owner's capital	200,000
Inventory	30,000	Liabilities	
Cash at bank	120,000	Trade payable	30,000
	230,000	230,000




As mentioned, the horizontal approach adopted to portray the outcome of the last three transactions reflects the accounting equation (assets = liabilities + equity). However, in practice this is rarely utilized; therefore, the vertical approach is used throughout the remainder of this course material.


KEHINDE (Plumber)
Statement of financial position as at 4 July 20X2
N
Assets
Tools		80,000
Inventory		30,000
Cash at bank		90,000
		200,000
Equity and liabilities
Owner's capital	
200,000	
200,000

	The Accounting Period and Profit Reporting

The accounting period concept (sometimes called periodicity concept) is a means of dividing up the life of an accounting entity into discrete periods for the purpose of reporting performance for a period of time (in a statement of profit and loss) and showing its financial position at a point in time (in a statement of financial position). The period of time is usually one year and is often referred to as the accounting year, financial year or reporting period. Each accounting year of an entity's life normally ends on the anniversary of its formation, and therefore does not necessarily coincide with the calendar year. It could thus end on any day of the calendar year, but for convenience the accounting year is nearly always taken to be the end of a calendar month, and sometimes adjusted to the end of the calendar year or to the end of a particular month (e.g. for tax reasons). Some companies report on their financial position half-yearly or even quarterly. Thus, the accounting period can be less than one year.
 

	Revenue Expenditure versus Capital Expenditure

The word 'capital' is associated with items that appear in the statement of financial position (e.g. owners' capital), whereas the word 'revenue' encapsulates items that appear in the statement of profit and loss (comprehensive income). Expenditure of the type that is to be matched against the period's revenue and is used up in the period is called revenue expenditure. Revenue expenditure will have no value at the end of the period to which it relates. Revenue expenditure is distinguished from capital expenditure - that which represents amounts which it is appropriate to carry forward as part of the next year's opening statement of financial position. Capital expenditure is carried forward because it will be used over a number of periods and contributes to several periods' revenues.



ILLUSTRATION

A trainee accountant who has been given the task of listing items of expenditure as being either capital or revenue expenditure approaches you for advice. She specifically wants to know whether the following expenditures (which relate to a builder's yard) should be classed as capital or revenue items:

1.	rates charge for the year;
2.	a new delivery van;
3.	rent for the building;
4.	sand that is not yet sold;
5.	stationery;
6.	telephone bills for the year;
7.	a new telephone;
8.	a new fence surrounding the yard (this is expected to reduce theft);
9.	wages;
10.	electricity bills;
11.	timber in the yard that is not yet sold.

Required:
Complete a table detailing whether the items are capital or revenue in nature.

Solution
 




1.	Rates
2.	Delivery van (motor vehicle)	
v	v
3.	Rent
4.	Sand (inventory)
5.	Stationery	
v	v

v
6.	Telephone bill		v
7.	New telephone (office equipment)
8.	Fence (fixtures and fittings)
9.	Wages	v
v	

v
10.	Electricity
11.	Timber (inventory)	
v	v

Capital expenditure typically includes the cost of purchasing a non-current asset (including the costs of getting the non-current asset operational at the begining) and the cost of improvements to a non- current asset that lead to increased revenue, or sustained revenue. Expenditure on tools, which represent the long-term equipment of the business, is capital expenditure and is carried forward from statement of financial position to statement of financial position. Rental expenditure on a building used during the year is revenue expenditure - what it provides is used up in the period. The purchase of the building, however, would be capital expenditure, as it is entirely appropriate to represent ownership being carried forward from period to period.

SELF ASSESSMENT EXERCISE

A trainee accountant who has been given the task of analysing items of expenditure in respect of the motor vehicles of the business in the year approaches you for advice. She specifically wants to know whether the following expenditures should be classed as capital or revenue items:

•	repair of a lorry (the lorry is already included in the opening statement of financial position):
•	purchase of a new truck;
•	motor tax on the truck and lorry;
•	cost of removing seats in the truck to create more room for transporting goods for the business;
•	new tyres for the lorry;
•	advertising painted on the side of both the lorry and the truck.

Required:
Complete a table detailing whether the items are capital or revenue in nature.
4.0	CONCLUSION
The accounting equation : Asset = Owner’s equity + Liability is an explanation of the principle of double entry.
5.0	SUMMARY
In this unit we have discussed the accounting entity, the statement of financial position as an
 
accounting equation, the accounting period and profit reporting, the difference between revenue expenditure and capital expenditure
6.0	TUTOR-MARKED ASSIGNMENT

1.	Explain the relevance of the entity concept in accounting.
2.	Define and distinguish between the following:
a.	assets and liabilities;
b.	capital and revenue expenditure.
3.	State the accounting equation and explain its components.

7.0	REFERENCES/FURTHER READINGS

Inua, O.I. (2014). Introduction to Accounting. Abuja: NOUN

Thomas, A. and Ward, A.M. (2012). Introduction to Financial Accounting. Berkshire: McGraw- Hill Education.

Wood, F. and Sangster, A. (2008). Business Accounting. Edinburgh Gate: Pearson Education Limited.
 
UNIT 5	:	BASIC DOCUMENTATION AND PRIME BOOKS CONTENTS
1.0	Introduction
2.0	Objectives
	Main content
	Basic Documentation for Cash and Credit Transactions
	Source documents
	Prime books
4.0	Conclusion
5.0	Summary
6.0	Tutor Marked Assignment
7.0	References/Further Reading


1.0	INTRODUCTION
No two businesses are exactly the same and the same can be said of the accounting systems used by firms. Most firms have their own particular ways of doing things. Some use manual record- keeping, others use off- the-shelf accounting software packages such as Grace, while others create their own accounting systems. However, there is a certain degree of similarity in keeping accounting records that is prevalent among the great majority of firms. This unit focuses on providing background information on the typical documentation and books of account that are used by most firms.

2.0	OBJECTIVES
After reading this chapter you should be able to do the following:
•	Distinguish between cash transactions and credit transactions.
•	Describe the nature of trade discount and cash discount.
•	Give examples of source documents
•	Explain the purpose of books of prime entry.
•	List the books of prime entry and state what each is used to record.

	MAIN CONTENT
	Basic Documentation for Cash and Credit Transactions
In accounting, a cash transaction is one in which goods or services are paid for in cash or by cheque when they are received or delivered. A credit transaction is one where payment is made or received some time after delivery . This should not be confused with hire purchase or credit card transactions. Credit transactions are extremely common in many industries.
Credit transactions often involve trade discount.
	Trade discount: This is a discount given by one trader to another. It is usually expressed as a percentage reduction of the recommended retail price of the goods, and is deducted in arriving at the amount the buyer is charged for the goods.

A large number of businesses also allow their customers cash discounts.
 
	Cash discount: This is a reduction in the amount that the customer has to pay, provided payment is made within a given period stipulated by the seller at the time of sale (e.g. 5 per cent if paid within one week).
A cash transaction is recorded in the books of account from the receipt received if paid in cash, or from the cheque book stub if paid by cheque.

SELF-ASSESSMENT EXERCISE
Explain the difference between a cash transaction and a credit transaction.

	Source documents
This is where original transaction information is to be found. Examples of source documents include the invoice, debit note, credit note, cheque and receipt.
	The Invoice
The purpose of the invoice, which is sent by the seller, is primarily to inform the buyer how much is owed for the goods supplied. It is not demand for payment.
The information shown on an invoice typically consists of the following items:

•	the name and address of the seller;
•	the name and address of the buyer;
•	the invoice and delivery note number of the seller (usually the same);
•	the date of the invoice;
•	the address to which the goods were delivered;
•	the buyer's order number;
•	the quantity of goods supplied;
•	details/description of the goods supplied;
The buyer checks the invoice against the order and the delivery note (or more usually with a goods received note prepared by the receiving department). If correct, the invoice is then entered in the buyer's books. Similarly, a copy of the invoice would have been entered in the seller's books.
	The debit note
A debit note is sent by the seller if the buyer has been undercharged on the invoice. It has basically the same layout and information as the invoice except that instead of details of the goods, it shows details of the undercharge. It is recorded in the books of the seller and buyer in the same way as an invoice.
	The credit note
A credit note may be sent by the seller for a number of reasons. These include:

•	The buyer has returned goods because they were not ordered, or they were the wrong type, quantity or quality, or are defective.
•	The seller has overcharged the buyer on the invoice. This may be due to an error in the unit price or calculations.

A credit note has basically the same layout and information as an invoice, except that instead of the details of the goods, it will show the reason why it has been issued.
 
A credit note will be recorded in the books of the seller and buyer in a similar way as the invoice, except that the entries are the reverse. This document is called a credit note because it informs the buyer that the account in the books of the seller is being credited. Conversely, a debit note informs the buyer that the account in the seller's books is being debited.
	The Cheque
This is the most common form of payment in business because of its convenience and safety. Most cheques are crossed and therefore have to be paid into a bank account. This makes it possible to trace the cheque if it is stolen and fraudulently passed on to someone else. A crossed cheque may be paid into anyone's bank account if the payee endorses (i.e. signs) the back of the cheque. However, if the words 'account payee only' are written between the crossings it must be paid into the account of the person named on the cheque.

The information that must be shown on a cheque consists of the following items:

•	the date;
•	the signature of the drawer (i.e. payer);
•	the name of the drawee (i.e. the bank at which the drawer has the account);
•	the name of the payee (i.e. who is to receive the money);
•	the words 'Pay ..’. or 'Order the sum of ..;
•	the amount of money in figures and in words.

The bank account number of the drawer, and the cheque and bank number are also shown on pre- printed cheques. Since there is only one copy of a cheque, it is essential to write on the cheque stub to whom the cheque was paid (i.e. the payee), the amount and what the payment was for. Without this information the books of account cannot be prepared..
	The receipt
The law requires the seller to give the buyer a receipt for goods or services that have been paid for in cash. However, there is no legal requirement to do so in the case of payments by cheque.
A receipt must contain the following information:

•	the name of the payer;
•	the signature of the recipient;
•	the amount of money in figures and in words;
•	the date.
A receipt is only recorded in the books of account when it relates to cash receipts and payments.

SELF-ASSESSMENT EXERCISE
Give examples of source documents

	Prime books
The main book of account in which all transactions are recorded is called the ledger (otherwise known as the general ledger, or the nominal ledger). However, before a transaction is recorded in the ledger, it must first be entered in a book of prime entry. These books are designed to show more detail relating to each transaction than appears in the ledger. They also facilitate making entries in the ledger, in that transactions of the same type can be posted periodically in total
 
rather than one at a time. A business may make use of up to nine books of prime entry, which consist of the following:
	The sales day book: records the sale on credit of goods bought specifically for resale. It is written up from copies of sales invoices and debit notes retained by the seller. The amount entered in the sales day book is after deducting trade discount (but before deducting cash discount).

	The purchases day book: in which is recorded the purchase on credit of goods for resale. It is written up from the invoices and debit notes received from suppliers. The amount entered in the purchases day book is after deducting trade discount (but before deducting cash discount).

	The sales returns day book: in which is recorded the goods sold on credit that are returned by customers. It is written up from copies of credit notes retained by the seller.

	The purchases returns day book: in which is recorded the goods purchased on credit that are returned to suppliers. It is written up from the credit notes received from suppliers.

	The petty cash book: in which is recorded cash received and cash paid. This is written up from receipts or petty cash vouchers where employees are reimbursed expenses.

	The cash book: in which are recorded cheques received (and cash paid into the bank) and payments made by cheque (and cash withdrawn from the bank). This is written up from the bank paying-in book stub and cheque book stubs.

	The Journal: in which are recorded any transactions that are not included in any of the other books of prime entry. At one time all entries passed through the journal, but now it is primarily used to record the purchase and sale of non-current assets on credit, the correction of errors, opening entries in a new set of books and any remaining transfers. Non-current assets are items not bought specifically for resale, such as land and buildings, machinery or vehicles. The journal is written up from copies of invoices and adjustments requested by the accountant.


Source documents	Books of prime entry
Sales invoices	Sales day
(copy)	book

Purchase invoices	Purchase day (received)	book

Sales credit notes	Sales returns day (copy)		book	
	
 
 
Source: Thomas and Ward (2012)

4.0	CONCLUSION
In accounting a distinction is made between cash and credit transactions. A cash transaction is one where goods or services are paid for in cash or by cheque when they are received or delivered. A credit transaction is one where payment is made or received some time after delivery. Credit transactions often involve trade discounts and cash discounts.
receipts and payments are entered in a book of prime entry known as the 'petty cash book' Cheque receipts and payments are entered in the 'cash book:

Credit transactions involve a number of different documents, but those which are recorded in the books of account comprise invoices, debit notes and credit notes. These arise in connection with both purchases and sales, and are entered in a set of books of prime entry commonly known as 'day books'.

5.0	SUMMARY
In this unit we have discussed the accounting cycle making reference to the source documents, books of prime entry and the journal

November 19, 2025 12:38 PM

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ACC102 TMA Questions
ACC102 List of Questions
Q1 The following transactions relating to debtors were extracted from the books of a company for the month of January 2014: Balance as at 1st January 2014 N725,000 Cash collected during the month N375,000 Bad Debts written off N25,000 Balance as at 31st January 2014 N650,000 Total credit sales during the month of January, 2014 were:
N325,000
N975,000
N475,000
N350,000
Q2 Valuing inventory at lower of cost or Net Realizable Value (NRV) is an application of the accounting concept of:
Going concern
Consistency
Matching
Prudence
Q3 Which one of the following is a qualitative characteristic of financial statements?
Going concern
Accrual basis
Relevance
All of the above
Q4 Unpaid expenses relating to an accounting period are treated as:
Pre-payments
Accrued expenses
Other expenses
Advances
Q5 Marina purchased goods on a credit basis from Jamoh for N100,000 and returned half of the goods to Jamoh subsequently. Which one of the following documents is issued by Jamoh to record the return of goods?
Invoice
Credit note
Debit note
Remittance advice
Q6 The IASBâ??s Framework identifies reliability as one of the four qualitative characteristics of financial information. Which one of the following is not an element of reliability?
Information should be timely
Information should be free from material error
Information should be free from bias
Information must be complete
Q7 The International Accounting Standards Boardâ??s (IASB) Framework for the Preparation and Presentation of Financial Statements (Framework) is the IASBâ??s conceptual framework. Which one of the following does the Framework not cover?
The format of financial statements
The objective of financial statements
Concepts of capital maintenance
The elements of financial statements
Q8 Where, in a companyâ??s financial statements complying with International accounting standards, should you find dividends paid? 1. Income statement 2. Balance sheet 3. Cash flow statement 4. Statement of changes in equity.
1 and 3
2 and 3
1 and 4
3 and 4
Q9 Which of the following statements about bank reconciliations are correct? 1. In preparing a bank reconciliation, unpresented cheques must be deducted from a balance of cash at bank shown 2.A cheque from a customer paid into the bank but dishonoured must be corrected by making a debit entry in the cash book. 3. An error by the bank must be corrected by an entry in the cash book. 4. An overdraft is a debit balance in the bank statement.
1 and 3
2 and 3
1 and 4
2 and 4
Q10 Which of the following statements are correct? 1. A companyâ??s authorised share capital must be included in its published balance sheet as part of shareholdersâ?? funds. 2.If a company makes a bonus issue of ordinary shares, the total shareholdersâ?? interest (share capital plus reserves) remains unchanged 3. A companyâ??s statement of changes in equity must include the proceeds of any share issue during the period. 4. A company must disclose its significant accounting policies by note to its financial statements.
1 and 2 only
1 and 3 only
3 and 4 only
2, 3 and 4
Q11 Consumer price index (CPI) or ���. Is on very important means determine the degree of change in price level (inflation)
retail price index
retail tax price
general consumer price assessment
wholesaler tax price
Q12 An accounting concept which separated the owner of the business and the business is known as:
entity concept
going concept
consistency concept
dual concept
Q13 �����.occurs when certain amount of money that used to buy certain quantity of goods previously, can now only purchase fewer quantity of the same goods
inflation
deflation
amortization
capitalization
Q14 all these are ,means of generating income of the building societies except
interest on mortgage
returns on investment
rent received
motor vehicle instruction
Q15 the primary aim of establishing a liability society is ��
to receive fund form its member in area
to received fund from its member and advance part of the fund to member of the society
to charge fund to member
to promote internal fund allocation
Q16 �����.. are formed registration with the chief register of friend societies
building deposit
building societies
cooperative societies
B & C
Q17 shareholders funds compose of all except
share capital
retained profit
bill discounted
general revenue
Q18 Example of federal government bill purchase on the open market
treasury bill
treasure exchanged
bill transfer
deposit
Q19 all the following are charge to appropriation account excepts
dividend
retained profit
taxation
general revenue
Q20 All the following are income except
foreign exchange earnings
depreciation
commission
transfer charges
Q21 �����.. are business entitle whose main area of operation are to accept cash deposit from the public and other perform other prominent function
cashier
hirer
vendor
banks
Q22 Normal gross profit percentage is calculate as ��.
normal profit + insured charges/ turnover
normal profit/turnover
normal profit/turnover
normal profit/insured charges
Q23 which of the following is not necessary for the purpose of compiling average clause
amount insured
turnover
retrocession
gross profit
Q24 which of these is not a terminology used in insurance claims accounting
arbitrage
cost of working
standard turnover
consequential loss
Q25 ������. Is a period of dislocation for which the insurance was effected and is normally fixed in the policy
free period
change period
period of indemnity
A & B
Q26 which of the two main classes of lease is a non cancellable lease?
finance lease
capital lease
unfinanced lease
A&C
Q27 which of the following is a finance lease arrangement
leveraged lease
sales â?? type lease
capital lease
opening lease
Q28 periodic payments made by the lesser to the lessor are called
rent
interest
cash price
lease payment
Q29 straight line is calculated as followsâ?¦
finance charge
distribution cost
finance charge /duration of lease
installment price / depreciation
Q30 all these are treatment of finance charges except
actuarial method
straight line method
reducing balance method
sum of the year digit
Q31 ������. Is a contractual agreement between an owner, the lessor and another party the lessee which express the right to use the leased asset for an agreed period of time in return for a consideration
lessor
hire purchase
a lease
vendor
Q32 According to SAS II, treatment and disclosure of lease transaction in the book of both
vendor and hirer
leasor and lessee
hire purchase and sales
C & A
Q33 Valuation of livestock and manorial right are carried out by ����.
an accountancy
an auditor
farm experts
production sector
Q34 Large farms take insurance cover for loss of livestock due to
time consuming
infection or loss of cattle as a result of straying
infection or loss of sales in reduction
A & C
Q35 one major problem with the determination of a plantation is
plantation does not commence early but the last day
plantation does not usually start to produce until after a long gestation period
plantation discourage of large scale production
plantation takes much profit before harvest
Q36 In using appraised value method which of the following factor should be considered?
current market value mutuality factors and the marketability of livestock
Arable stock value and time of the stock
current market value &time value for money
Cost method &prudence method.
Q37 Cost method means â?¦.
adding all cost of every asset and input together
A & C
aggregate all cost to date on each class of livestock
1.    A & B
Q38 Which of the method can be used to value Arable stock?
it should be valued at cost or net realizable value
arable stock should be value at average stock
arable stock must be valued at FIFO
arable stock should be value at LIFO
Q39 What is one approach to valuation of stock of live stock?
cost approach, net realizable value
cost investment method and cost reduction
appraisal devaluation method
A & B
Q40 Which of the following expenses is not exclusive to farm accounting?
fertilizer expenses
dairy expenses
vehicle repair and maintenance expenses
feed expenses
Q41 Which of the following account are prepared by farmerâ??s
partnership account and joint account
trading, profit and loss account and balance sheet
control account and value added account
manufacturing and departmental stock account
Q42 What is the formula for eliminating realized profit from goods sent to branch at cost plus 25%
2.5% of realizable cost
2.5% of value of sold stock
25/125 of value sold stock at hand
25/125x value of unsold stock
Q43 What did you understand by semi autonomous branch in the context of branch accounting
it operate independent at every branch and need office
it operate almost as a separate entity independent of ite head office
semi autonomous branch operate departmental of the branch and head office
A & B
Q44 When is the temporal method applicable for translation of the financial statement of foreign branches?
it is usually applicable when foreign branch is periodic
it is usually applicable when foreign branch is autonomous
it is usually applicable when foreign branch is non autonomous
when goods are over sent
Q45 State how revenue and expense are translated under the closing rate method
revenue and expenses are translated of periodic rate value
revenue and expenses are translated at closing period
revenue and expenses are translated at average rate for the period
they are charge at average appropriate price value
Q46 Some of the reasons why branch current account may not agree with head office current account are:
goods sent is usually overcast
goods sent to branch account is some time under cast
cash in transit and stock in transit
cash and stock are sometime diminishing of decreasing
Q47 Transaction between the head office and independent branches are received in ��.
special ledger general
current account
goods sent account
branch adjustment account
Q48 Head office branch account is a mirror of which account?
branch stock to branch account
branch current account
goods sent to branch account
branch doubt account
Q49 One difference between an independent and dependent branch is
head office parents for dependent branches
accounting records and books are kept by the independent out branches
independent branches are allowed control over sales
B & A
Q50 Sales of goods at involved price between head office and branch will give rise to one of the following if the items are not sold to an external party, at the end of the period.
unrealized profit
profit to head office
foreign currency
increase in turnover
Q51 Which of the following method of translation would you recommend for an independent foreign branch
temporal method
mortuary method
current method
closing rate method
Q52 The liquidatorâ??s of Adebayo limited has settle all creditor of the company except three owed N150,000. At the commencement of the liquidation, the companyâ??s share capital was as follows: 1,000,000 10% preference share of N1 each 85 kobo paid=850. 6,000,000 ordinary share of 50 kobo each, 30 kobo paid=1800. * Calculate the amount of call on refund due to the preference shareholders
150,000 refund
N150, 000 call
N50 call
N300,000 call
Q53 The liquidatorâ??s of Adebayo limited has settle all creditor of the company except three owed N150,000. At the commencement of the liquidation, the companyâ??s share capital was as follows: 1,000,000 10% preference share of N1 each 85 kobo paid=850. 6,000,000 ordinary share of 50 kobo each, 30 kobo paid=1800. *Assume that the preference share rank prior to the ordinary share. Calculate the call per ordinary shares
5 kobo
35 kobo
20 kobo
15 kobo
Q54 The liquidatorâ??s of Adebayo limited has settle all creditor of the company except three owed N150,000. At the commencement of the liquidation, the companyâ??s share capital was as follows: 1,000,000 10% preference share of N1 each 85 kobo paid=850. 6,000,000 ordinary share of 50 kobo each, 30 kobo paid=1800. *If the preference share rank prior to the ordinary shares, calculate the amount of call to be made by the liquidator
N150,000
N1,000,000
450000
1200000
Q55 The effect of bankruptcy on the private estate of the bankrupt is ���
the private estate will be to pay the bankruptâ??s debt to the extent the business asset are inadequate to settle the settle it
only the accrual debts
the debt will be shared
no debt will be pay back
Q56 A company is winding up if it is ���
unable to recover its asset
unable to account his Goodwill
unable to pay up his debt
balance his account
Q57 The word â??liquidationâ? means â?¦â?¦.
winding up
appreciation of a company
recovery a company
re-banking a company
Q58 When a partnership asset has been pledged for the personal debt of a partner, the creditor would claim as ���. and creditor in the ���� estate
secured creditor and joint estate
secured creditor and royal value
unsecured creditor and joint estate
partnership creditor and partnership estate
Q59 Which of the following would contribute to deficiency in liquidation of a company (i) discount on accrued liabilities (ii) liquidation fees (iii) preference divided waved by investors (iv) formation expense
I & II
II & IV
I, II & IV
I, II, III
Q60 Which of the following is a feature of the statement of affairs prepared when a company is being liquidated?
preferential creditors are paid before debenture with floating securities
the shareholders fund is revalued
asset on recorded at book values
A & C
Q61 One use of fire year financial summary is ��.
it may be added to forecast future performance
it provides accurate loss up to date
it increase stock appreciation
it reduce audit up to date
Q62 All the following are excepted to be found in published financial statement of a publicity quoted company except
cash flow statement
value added statement
director summary
the expropriation of assets
Q63 Which of the following item is found in the companyâ??s profit and loss account is described as exceptional item
substantial loss sustain as a result of robbery attack
writing off of Goodwill
discontinuance of a significance put of a business
the expropriation of assets
Q64 Directors report in the financial statement need not disclose
forecast future profitability
principal activities of the company
result of the company for the period
change in board members during the period
Q65 Which of the following should not be classified on a current liability in a financial statement?
provision for staff gratuity
trade creditor and accruals
band overdraft
dividend payable
Q66 The generally accepted accounting principle, which should be stated in a companyâ??s accounting polices as it related to inventory, is that stock should be valve at â?¦â?¦â?¦
lower of cost and net realizable valve
cost
realization cost
replacement cost
Q67 In accordance with section 334 of CAMA, cap c20, LFN 2004 the financial statement of a private company need not includes��.
auditors report
audit committee report
debtor report
note on the account
Q68 Which of these method of depreciation is used by company that make use of loosing tools
straight line method
reducing balance method
revaluation method
machine hour method
Q69 According to IAS 16, depreciation means��.
systematic allocation of cost over the estimated useful life
systematic increase in asset and reduction of liabilities
wear and tear treatment of valve for money
appreciation
Q70 Even, when the bad debts has been eliminated the accounts..
do not represent the true & fair views of the debtor
will usually represent true & fair view
will be transferred to profit & loss account & balance sheet
A and B
Q71 Bad debts are��.
recoverable debts
unrecoverable debts
Receivable debts
profit and loss appropriation debts
Q72 A balance sheet of a company is prepared as follows���.
Balance sheet as at 31st Dec 2014
Balance sheet for the year 2014
Balance sheet as for 21st Dec 2014
all of the above
Q73 Published profit and loss account is usually prepared ���.
as at 31st Dec 2014
for the year ended December 2014
for the account period of the year 2014
as at the account period 2014
Q74 On what basis is interest on loan recognized by banks in their P&L account
it is recognized on accrual basis but interest due for more than 90 days are suspended and recognized on cash basis
it is recognized on advanced basis
it is unpaid capital sum
it is charge to P&L account
Q75 Exceptional item ����
falls within the ordinary activities
falls within exceptional
exceptional item are excepted from tax
) it is deducted from profit after tax
Q76 An extraordinary item falls
outside the ordinary activities and are treated after profit on ordinary activities
it falls between the P & L and treated in the balance sheet
it fall in the ordinary activities and treated in the balance sheet
extraordinary item are usually written off to profit and loss account
Q77 Under the prudential guideline, facilities classified as doubtful refer to loans that have remained unpaid
after their due dates
for 90 – 180 days after their due dates
for 180 â?? 360 days after their due dates
over 7 years
Q78 Which of the following is a Non-bank financial institution?
commercial bank
development bank
mortgage bank
merchant bank
Q79 The asset in the balance sheet of a bank are arranged in the order of
liquidity
solvency
performance
security
Q80 The format in which the final account of a limited liability company should be published in Nigeria is prescribed by
statement of accounting standard (SAS)
company and allied matters act. C20 LFN 2004
international accounting standard
financial reporting standard (FRS)
Q81 One use of fire year financial summary is ��.
it may be added to forecast future performance
it provides accurate loss up to date
it increase stock appreciation
it reduce audit up to date
Q82 All the following are excepted to be found in published financial statement of a publicity quoted company except
cash flow statement
value added statement
director summary
the expropriation of assets
Q83 Which of the following item is found in the companyâ??s profit and loss account is described as exceptional item
substantial loss sustain as a result of robbery attack
writing off of Goodwill
discontinuance of a significance put of a business
the expropriation of assets
Q84 Directors report in the financial statement need not disclose
forecast future profitability
principal activities of the company
result of the company for the period
change in board members during the period
Q85 Which of the following should not be classified on a current liability in a financial statement?
provision for staff gratuity
trade creditor and accruals
band overdraft
dividend payable
Q86 The generally accepted accounting principle, which should be stated in a companyâ??s accounting polices as it related to inventory, is that stock should be valve at â?¦â?¦â?¦
lower of cost and net realizable valve
cost
realization cost
replacement cost
Q87 In accordance with section 334 of CAMA, cap c20, LFN 2004 the financial statement of a private company need not includes��.
auditors report
audit committee report
debtor report
note on the account
Q88 Which of these method of depreciation is used by company that make use of loosing tools
straight line method
reducing balance method
revaluation method
machine hour method
Q89 According to IAS 16, depreciation means��.
systematic allocation of cost over the estimated useful life
systematic increase in asset and reduction of liabilities
wear and tear treatment of valve for money
appreciation
Q90 Even, when the bad debts has been eliminated the accounts..
do not represent the true & fair views of the debtor
will usually represent true & fair view
will be transferred to profit & loss account & balance sheet
A and B
Q91 Bad debts are��.
recoverable debts
unrecoverable debts
Receivable debts
profit and loss appropriation debts
Q92 A balance sheet of a company is prepared as follows���.
Balance sheet as at 31st Dec 2014
Balance sheet for the year 2014
Balance sheet as for 21st Dec 2014
all of the above
Q93 Published profit and loss account is usually prepared ���.
as at 31st Dec 2014
for the year ended December 2014
for the account period of the year 2014
as at the account period 2014
Q94 On what basis is interest on loan recognized by banks in their P&L account
it is recognized on accrual basis but interest due for more than 90 days are suspended and recognized on cash basis
it is recognized on advanced basis
it is unpaid capital sum
it is charge to P&L account
Q95 Exceptional item ����
falls within the ordinary activities
falls within exceptional
exceptional item are excepted from tax
) it is deducted from profit after tax
Q96 An extraordinary item falls
outside the ordinary activities and are treated after profit on ordinary activities
it falls between the P & L and treated in the balance sheet
it fall in the ordinary activities and treated in the balance sheet
extraordinary item are usually written off to profit and loss account
Q97 Under the prudential guideline, facilities classified as doubtful refer to loans that have remained unpaid
after their due dates
for 90 – 180 days after their due dates
for 180 â?? 360 days after their due dates
over 7 years
Q98 Which of the following is a Non-bank financial institution?
commercial bank
development bank
mortgage bank
merchant bank
Q99 The asset in the balance sheet of a bank are arranged in the order of
liquidity
solvency
performance
security
Q100 The format in which the final account of a limited liability company should be published in Nigeria is prescribed by
statement of accounting standard (SAS)
company and allied matters act. C20 LFN 2004
international accounting standard
financial reporting standard (FRS)
Q101 One use of fire year financial summary is ��.
it may be added to forecast future performance
it provides accurate loss up to date
it increase stock appreciation
it reduce audit up to date
Q102 All the following are excepted to be found in published financial statement of a publicity quoted company except
cash flow statement
value added statement
director summary
the expropriation of assets
Q103 Which of the following item is found in the companyâ??s profit and loss account is described as exceptional item
substantial loss sustain as a result of robbery attack
writing off of Goodwill
discontinuance of a significance put of a business
the expropriation of assets
Q104 Directors report in the financial statement need not disclose
forecast future profitability
principal activities of the company
result of the company for the period
change in board members during the period
Q105 Which of the following should not be classified on a current liability in a financial statement?
provision for staff gratuity
trade creditor and accruals
band overdraft
dividend payable
Q106 The generally accepted accounting principle, which should be stated in a companyâ??s accounting polices as it related to inventory, is that stock should be valve at â?¦â?¦â?¦
lower of cost and net realizable valve
cost
realization cost
replacement cost
Q107 In accordance with section 334 of CAMA, cap c20, LFN 2004 the financial statement of a private company need not includes��.
auditors report
audit committee report
debtor report
note on the account
Q108 Which of these method of depreciation is used by company that make use of loosing tools
straight line method
reducing balance method
revaluation method
machine hour method
Q109 According to IAS 16, depreciation means��.
systematic allocation of cost over the estimated useful life
systematic increase in asset and reduction of liabilities
wear and tear treatment of valve for money
appreciation
Q110 Even, when the bad debts has been eliminated the accounts..
do not represent the true & fair views of the debtor
will usually represent true & fair view
will be transferred to profit & loss account & balance sheet
A and B
Q111 Bad debts are��.
recoverable debts
unrecoverable debts
Receivable debts
profit and loss appropriation debts
Q112 A balance sheet of a company is prepared as follows���.
Balance sheet as at 31st Dec 2014
Balance sheet for the year 2014
Balance sheet as for 21st Dec 2014
all of the above
Q113 Published profit and loss account is usually prepared ���.
as at 31st Dec 2014
for the year ended December 2014
for the account period of the year 2014
as at the account period 2014
Q114 On what basis is interest on loan recognized by banks in their P&L account
it is recognized on accrual basis but interest due for more than 90 days are suspended and recognized on cash basis
it is recognized on advanced basis
it is unpaid capital sum
it is charge to P&L account
Q115 Exceptional item ����
falls within the ordinary activities
falls within exceptional
exceptional item are excepted from tax
) it is deducted from profit after tax
Q116 An extraordinary item falls
outside the ordinary activities and are treated after profit on ordinary activities
it falls between the P & L and treated in the balance sheet
it fall in the ordinary activities and treated in the balance sheet
extraordinary item are usually written off to profit and loss account
Q117 Under the prudential guideline, facilities classified as doubtful refer to loans that have remained unpaid
after their due dates
for 90 – 180 days after their due dates
for 180 â?? 360 days after their due dates
over 7 years
Q118 Which of the following is a Non-bank financial institution?
commercial bank
development bank
mortgage bank
merchant bank
Q119 The asset in the balance sheet of a bank are arranged in the order of
liquidity
solvency
performance
security
Q120 The format in which the final account of a limited liability company should be published in Nigeria is prescribed by
statement of accounting standard (SAS)
company and allied matters act. C20 LFN 2004
international accounting standard
financial reporting standard (FRS)

August 19, 2025 2:02 PM

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ACC102 Tma Solutions
ACC102

Question: The initial investment of the business owner in the company is reffered to as
Answer: A and B above

Question: The value derived by adding the purchases to opening stock then deducting the closing stock (in absence of any other information) is known as
Answer: Cost of goods sold

Question: Which of the following will appear on the credit side of the purchases ledger control account?
Answer: Credit purchases

Question: After the initial development of accounting following Lucia PacioliYs publication in 1494 other changes witnessed in accounting were informed by:
Answer: All of the above

Question: In the financial statements of an organisation accruals are treated as
Answer: Current liabilities

Question: A business entity that applies the same methods, policies and estimation techniques in preparing its financial statements from year to year is observing which accounting concept?
Answer: Consistency concept

Question: The sales returns day book records
Answer: Goods sold on credit that are returned by customers

Question: The qualitative characteristic of accounting information that discourages changes in the basis for preparation of accounting information from period to period is
Answer: Comparability

Question: An entity values its closing inventory on the basis of lower of cost and net realisable. If cost of inventory is N600,000 and net realizable value of inventory is N615,000, what is closing inventory?
Answer: N600,000

Question: Which of the following errors affect the trial balance?
Answer: Costing error

August 19, 2025 2:00 PM

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