ABSOLUTELY FREE PILOT ON
PRINCIPLES OF ACCOUNTING 1
NAME:…………………………………………….
MATRIC
NO:…………………………………….
DEPARTMENT:………………………………….
MOBILE
NO:…………………………………….
NOTHING IS MORE NOBLE
THAN HELPING OTHERS!
ILLUSTRATION
1
(a) Define a trial balance.
(b) The following balances were extracted from the
books of Fesojaiye and Son on 31st December, 2018.
N`000
Purchases 100,250
Capital 41,000
Returns Outwards 340
Land and Building 14,000
Loan 32,000
Stationery
1,260
Drawings 180
Insurance 940
Advertisement 420
Debtors 10,000
Carriage Outwards 220
Motor Van
2,050
Machinery 24,280
Creditors 14,000
Fixtures and Fittings
39,830
Returns Inwards 730
Discounts Allowed 160
Rent 260
Commission Receivable 1,400
General Expenses
2,260
Sales 141,000
Equipment 32,000
Discount Received 600
Salaries 1,500
Required: Prepare a trial balance as at 31st
December, 2018 for Fesojaiye and Sons.
SUGGESTED
SOLUTIONS:
(a) A trial balance is
a list of all balances in order to test the arithmetic accuracy of the records
in books of accounts.
(b)
FESOJAIYE AND SON
TRIAL
BALANCE
AS AT
31ST DECEMBER, 2018
DR CR
N`000 N`000
Purchases 100,250
Capital 41,000
Returns Outwards 340
Land and Building 14,000
Loan 32,000
Stationery
1,260
Drawings 180
Insurance 940
Advertisement 420
Debtors 10,000
Carriage Outwards 220
Motor Van
2,050
Machinery 24,280
Creditors 14,000
Fixtures and Fittings
39,830
Returns Inwards 730
Discounts Allowed 160
Rent 260
Commission Receivable 1,400
General Expenses
2,260
Sales 141,000
Equipment 32,000
Discount Received 600
Salaries 1,500
______ ______
230,340 230,340
ILLUSTRATION 2
(a) Ayefele
Nigeria Limited provides the following data:
Year
|
Capital
N
|
Profit
N
|
Return on capital
%
|
2018
|
40,500
|
20
|
|
2017
|
27,000
|
45
|
Required: prepare the following:
i. Calculate
the profit for each of the year.
ii. Profit
decreased by how much?
(b) List ten users of financial statement.
SUGGESTED
SOLUTIONS:
(a) (i)
Profit decreased by:
=(12,150 – 8,100) = N4,050
(ii) Profit for 2018, (40,500x 20%)
= N8,100
Profit
for 2017, (27,000x 45%) = N12,150
(b) Ten users of financial statement are:
i. Owners i.e. managers, shareholders and
directors ii. Employees
iii. Suppliers iv. Trade creditor and loan providers v. Government
vi. Potential buyers of
the business vii. Customers
viii. Financial / Economic Analyst
ix. Supervisory
and Regulatory bodies x.
Competitors xi. General public
ILLUSTRATION 3
(a) List five
subsidiary books.
(b) Write short note with examples on each of the
following:
i. Personal Accounts ii. Nominal Accounts
iii. Real Accounts
SUGGESTED
SOLUTIONS:
(a) Five subsidiary books are:
i. Sales Day Book ii.
Purchases Day Book iii. Cash
Book
iv. Sales Returns Day Book v. Purchases Returns Day Book
(b) i. Personal
Accounts: These are accounts for recording names of individuals, firms or
business enterprises. The rule is to debit receiver and credit supplier.
Examples of personal accounts are Debtors Accounts, Creditors Accounts, T-Money
Account, Brain Drain Nigeria Limited and so on.
ii. Nominal Accounts: These are accounts for
recording items of expenses incurred, income received, losses made and gains
effected. Examples are rent account, discount received account, discount
allowed account, interest account and so on.
iii. Real Accounts: These are accounts in which
tangible things (such as cash, stock, building, machinery, fixtures and
fittings) are recorded. The rule is to debit what comes in and credit what goes
out.
ILLUSTRATION 4
.(a) Who is an accountant? State five roles of an
Accountant.
(b) What do you understand by source documents?
State ten source documents that are known to you.
SUGGESTED
SOLUTIONS:
.(a) An
Accountant is a person who has undergone a formal or professional training in
the process of accounting and who belongs to at least one of the recognized
professional accountancy bodies such as Association of Certified Chartered
Accountants (ACCA), the Institute of Chartered Accountants of Nigeria (ICAN)
among others.
The following are the roles of
Accountants:
i.
Preparation and presentation of timely
and accurate financial / accounting reports to management.
ii. Identification
of areas of inefficiency and wastage of resources.
iii. Treasury
functions i.e raising finance, cash management and so on.
iv. Setting
up effective system of internal and accounting controls.
v. Preparation
of feasibility reports i.e. these
reports assist management in assessing the viability / profitability or
otherwise of proposed capital expenditure such as the opening of a new factory
or branch.
(b) Source documents are business documents
evidencing business transactions and forming the basis of entries in the
subsidiary books.
Ten source documents are:
i. Invoice ii.
Receipt iii. Debit Note iv. Credit Note
v. Petty Cash Voucher vi. Payment Voucher vii.
Cheque Book
viii. Bank Statement ix.
Statement of Accounts x. Delivery
Note
ILLUSTRATION 5
Write short note on the following:
(a) Materiality
(b) Matching Concept
(c) Periodicity
(d) Going Concern Concept
(e) Entity Concept
SUGGESTED
SOLUTIONS:
(a) Materiality:
The principle that financial
statement should separately disclose items which are significant enough to
affect evaluation or decisions.
(b) Matching
Concept: The concept hold that for
any accounting period, the earned revenue and all the incurred cost that
generated that revenue must be matched and reported for the period.
(c) Periodicity: Although, the results of a business unit
cannot be determined with precision until its final liquidation, the business
community and users of financial statements require that the business be
divided into accounting periods usually one year and that changes in position
be measured over these periods.
(d) Going
Concern Concept: The assumption is that the business unit will operate in
perpetuity that is the business is not expected to be liquidated in the
foreseeable future.
(e) Entity Concept: Every economic unit,
regardless of its legal form of existence, is treated as a separate entity from
parties having proprietary or economic interest in it.
ILUUSTRATION 6
The following information has been given to you
about factory plant and machinery of
Ajimatanraeje Nigeria Limited.
Cost N5
million
Scrap value
N250,000
Useful life 5years
You are required to calculate the annual
depreciation charges for each year using:
(a) Reducing Balance Method
(b) Sum of
the year Digit Method
SUGGESTED
SOLUTIONS:
(a) Reducing Balance Method
R = 1 - N√S/C
R= 1- 5√250,000
5,000,000
R = 1- 5√0.05
R= 1 – 0.55 =
0.45 or 45%
N
Cost
5,000,000
1st Year Depreciation (5,000,000 X 0.45) 2,250,000
Net Book Value 2,750,000
2nd Year Depreciation (2,750,000 X 0.45)
1,237,500
Net Book Value 1,512,500
3rd Year Depreciation (1,562,500 X 0.45)
680,625
Net Book Value 831,875
4th Year Depreciation (831,875 X 0.45)
374,344
Net Book Value 457,531
5th Year Depreciation (457,531 X 0.45)
205,889
Net Book Value 251,642
(b) Sum of the Year Digit Method
Year Allocation of sum of the year Depreciation Charged
Ratio X ( Cost- Scrap Value)
N
1 5 5/15 X ( 5,000,000- 250,000) 1,583,333
2 4 4/15 X ( 5,000,000- 250,000) 1,266,667
3 3 3/15 X ( 5,000,000- 250,000) 950,000
4 2 2/15 X ( 5,000,000- 250,000) 633,333
5 1 1/15 X ( 5,000,000- 250,000) 316,667
ILLUSTRATION 7
(a) What do you understand by a trial balance?
(b) The following balances were extracted from the
books of Felefele Laye and Sons on 31st December, 2018.
N
Capital 380,000
Insurance
235
Cash 311,515
Bank
81.750
Motor Van 100,000
Sales 8,150
Drawings 3,500
Purchases
6,250
Loan-Queen Aaliyat 120,000
Returns Inwards 150
Returns Outwards
300
Debtor-David 500
Creditors-Totland
1,200
Furniture and fittings 5,750
You are required to prepare a trial balance as at
December, 2018.
SUGGESTED
SOLUTIONS:
(a) A trial balance is a list of all balances in
order to test the arithmetic accuracy of the records in books of accounts.
(b) FELEFEL LAYE
TRIAL BALANCE
As At 31ST DECEMBER, 2018
DR CR
N N
Capital 380,000
Insurance
235
Cash
311,515
Bank
81.750
Motor Van 100,000
Sales
8,150
Drawings
3,500
Purchases
6,250
Loan-Queen Aaliyat 120,000
Returns Inwards 150
Returns Outwards
300
Debtor-David 500
Creditors-Totland
1,200
Furniture
and fittings 5,750
509,650 509,650
ILLUSTRATION 8
The following information has been given to you
about factory plant and machinery of
Ajimatanraeje Nigeria Limited.
Cost N25
million
Scrap value
N1,250,000
Useful life 5years
You are required to calculate the annual
depreciation charges for each year using:
(a) Reducing Balance Method
(b) Sum of
the year Digit Method
SUGGESTED
SOLUTIONS:
(a) Reducing Balance Method
R = 1 - N√S/C
R= 1- 5√1,250,000
25,000,000
R = 1- 5√0.05
R= 1 – 0.55 =
0.45 or 45%
N
Cost 25,000,000
1st Year Depreciation (25,000,000 X 0.45) 11,250,000
Net Book Value 13,750,000
2nd Year Depreciation (13,750,000 X 0.45)
6,187,500
Net Book Value 7,562,500
3rd Year Depreciation (7,562,500 X 0.45)
3,403,125
Net Book Value 4,159,375
4th Year Depreciation (4,159,375 X 0.45)
1,871,719
Net Book Value 2,287,656
5th Year Depreciation (2,287,656 X 0.45)
1,029,445
Net Book Value
1,258,211
(b) Sum of the Year Digit Method
Year Allocation of sum of the year Depreciation Charged
Ratio X ( Cost- Scrap Value)
N
1 5 5/15 X ( 25,000,000-1,250,000) 7,916,667
2 4 4/15 X ( 25,000,000-1,250,000) 6,333,333
3 3 3/15 X ( 25,000,000-1,250,000) 4,750,000
4 2 2/15 X ( 25,000,000-1,250,000) 3,166,667
5 1 1/15 X ( 25,000,000-1,250,000) 1,583,333
ILLUSTRATION 9
(a) Sogbae
Nigeria limited provides the following data:
Year
|
Capital
N
|
Profit
N
|
Return on capital
%
|
2018
|
125,000
|
56,250
|
|
2017
|
100,000
|
20,000
|
Required: prepare the following:
i.
Capital increased by how much?
ii.
Calculate the return on capital for each of the year.
(b) Write short note with examples on each of the
following:
i. Personal
Accounts ii. Real Accounts iii. Nominal Accounts
SUGGESTED
SOLUTIONS:
(a) i. Capital increased by:
=
125,000 – 100,000 = N25,000
ii. Return on capital = Profit
X 100
Capital
For
2018, Return on
capital = 56,250 X 100
= 45%
125,000
For
2017, Return on
capital = 20,000 X 100
= 20%
100,000
(b) i. Personal
Accounts: These are accounts for recording names of individuals, firms or
business enterprises. The rule is to debit receiver and credit supplier.
Examples of personal accounts are Debtors Accounts, Creditors Accounts, T-Money
Account, Brain Drain Nigeria Limited and so on.
ii. Real Accounts: These are accounts in which
tangible things (such as cash, stock, building, machinery, fixtures and
fittings) are recorded. The rule is to debit what comes in and credit what goes
out.
iii. Nominal Accounts: These are accounts for
recording items of expenses incurred, income received, losses made and gains
effected. Examples are rent account, discount received account, discount
allowed account, interest account and so on.
ILLUSTRATION 10
(a) Classify the underlisted ledger accounts into
capital and recurrent.
i. Depreciation
Account vi. Interest
Paid Account
ii. Salaries and Wages Account vii. Discount Received
iii. Furniture and Fittings Account viii. Patent and Trade Marks Account
iv. Rent of Warehouse Account ix. Goodwill Account
v. Office Building Account x. Purchase Account
(b) List five subsidiary books.
SUGGESTED
SOLUTIONS:
.(a)
S/N
|
CAPITAL
|
RECURRENT
|
i.
|
Depreciation Account
|
|
ii.
|
Salaries and wages Account
|
|
iii.
|
Furniture and Fittings Account
|
|
iv.
|
Rent of Warehouse
|
|
v.
|
Office Building Account
|
|
vi.
|
Interest Paid Account
|
|
vii.
|
Discount Received
|
|
viii.
|
Patent and Trade Marks account
|
|
ix.
|
Goodwill Account
|
|
x.
|
Purchase Account
|
(b) Five subsidiary books are:
i. Sales Day Book ii.
Purchases Day Book iii. Cash
Book
iv. Sales Returns Day Book v. Purchases Returns Day Book
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