Babatunde and Rasheed have been in partnership for several years, sharing profits and losses in the ratio 2:1 respectively. Their statement of financial position as at December 31, 2019, is shown below:
Required:
Prepare the following accounts:
a. Revaluation account
b. Capital accounts
c. Bank account
The following balances were extracted from the books of Judexco Limited on December 31, 2018:
Required:
a. Prepare the receivables ledger control account. (7 Marks)
b. Prepare the purchases ledger control account. (6 Marks)
c. List FOUR uses of control accounts. (4 Marks)
d. Outline SIX accounting errors that cannot be discovered by means of a trial balance. (3 Marks)
c) The following are four uses of control accounts:
(i) To verify the arithmetical accuracy of the accounts in the ledger
(ii) To make the location of errors easier in personal accounts
(iii) The balance on the control accounts can be used in the preparation of final accounts
(iv) It is useful in checking and monitoring account officers, who may be engaging in fraudulent acts
d) The following six accounting errors cannot be discovered by means of a trial balance:
(i) Errors of omission
(ii) Errors of commission
(iii) Errors of principle
(iv) Errors of original entry
(v) Compensating errors
(vi) Errors of complete reversal
Bravado Limited has an authorised share capital of 10M of N0.50 per share. On November 1, 2019, the company issued the entire shares for public subscription at N0.75 per share.
As at November 10, 12M applications were received through Klassic Bank PLC, the company’s banker. The shares were allotted on a pro rata basis, and the company refunded the excess application money.
You are required to prepare:
i. Share application account
ii. Bank account
iii. Share premium account
iv. Ordinary share capital account
v. Application money refund account
Explain briefly share premium and outline its FIVE uses.
Share premium arises when a company issues shares at a price higher than the nominal (par) value of the shares. It is the excess amount over the nominal value, credited to a separate account called the “share premium account.” The share premium account is part of equity but cannot be distributed as dividends.
Uses of Share Premium Account: (i) To issue fully paid bonus shares to existing shareholders
(ii) To write off preliminary expenses of the company
(iii) To write off the expenses or commissions paid on any issue of shares
(iv) To provide for the premium payable on the redemption of redeemable preference shares or debentures
(v) To buy back the company’s own shares or other types of securities (subject to statutory restrictions)
Williams is a petty trader in Idumota market in Lagos. His transactions are carried out both on cash and through the bank. Daily cash payments are made from cash sales, and any surplus cash thereafter is paid into the bank either on the same day or days after.
The following transactions were extracted from the books of Williams during the period under review:
Required:
Prepare a three-column cash book to record the above transactions.
State SIX steps necessary for converting from single entry and incomplete records to double entry. (6 Marks)
The following steps are necessary for converting single entry and incomplete records to double entry:
(i) Preparation of an opening statement of financial position
(ii) Preparation of the organisation’s cash book
(iii) Preparation of trade receivables control account, where goods are being sold on credit
(iv) Preparation of trade payables control account, where goods are being purchased on credit
(v) Preparation of expenses control accounts
(vi) Preparation of the statement of comprehensive income
(vii) Preparation of the statement of financial position
List SIX uses of the journal.
The journal can be used for the following purposes:
(i) Correction of errors
(ii) Recording of opening entries
(iii) Recording of closing entries
(iv) Making end-of-period adjustments
(v) Recording purchases and sales of non-current assets on credit
(vi) Making transfers from one ledger to another
Define books of prime entry and list FOUR books of prime entry that could be maintained by an entity. (4 Marks)
Books of prime entry are the books in which day-to-day transactions of an entity are recorded before they are posted to the ledger accounts. Examples of books of prime entry include:
(i) Sales day book
(ii) Purchases day book
(iii) Sales returns/returns inwards book
(iv) Petty cash book
Explain what is meant by source documents and outline FOUR source documents used in commercial transactions. (4 Marks)
Source documents are the original documents that contain the details of a business transaction. They serve as evidence and data for the accounting system, together with their content and purpose. Examples of source documents include:
(i) Quotations
(ii) Purchase orders
(iii) Sales orders
(iv) Goods received notes
(v) Purchases invoice.
(vi) Credit note.
(vii) Debit note.
(viii) Receipt.
(ix) Remittance advice.
(x) Bank statement.
The following balances were extracted from the books of Walling Enterprises as at October 31, 2019:
| Item | N’000 |
|---|---|
| Capital at November 1, 2018 | 90,428 |
| Purchases | 776,400 |
| Revenue | 1,045,800 |
| Salaries and wages | 66,880 |
| Rent and rates | 28,004 |
| Receivables | 144,600 |
| Bad debts | 3,768 |
| Drawings | 19,004 |
| Allowances for receivables | 7,404 |
| Bank | 5,632 |
| Payables | 68,616 |
| Cash | 668 |
| Inventories at November 1, 2018 | 164,218 |
| Motorcycle at cost | 14,400 |
| Accumulated depreciation on motorcycle | 4,200 |
| Bank interest received | 1,756 |
| Commission received | 5,370 |
Additional Information:
(i) Inventory at October 31, 2019 was valued at N198,712,000
(ii) Rent prepaid at October 31, 2019 amounted to N3,200,000
(iii) Depreciation is to be provided on the motorcycle at the rate of 20% on cost per annum
(iv) Accrued salary at October 31, 2019 amounted to N6,024,000
(v) Commission received in advance is N800,000
(vi) Additional amount of irrecoverable debts of N2,840,000 is to be written off
(vii) Bank interest of N100,000 has fallen due but is yet to be received
(viii) Allowances for receivables are to be adjusted to 5% of accounts receivables
(ix) Goods taken by the owner for own use and cheque withdrawals amounting to N1,600,000 and N2,400,000 respectively are yet to be recorded.
Required:
Using the extended trial balance, prepare:
a. Statement of profit or loss of Walling Enterprises for the year ended October 31, 2019.
b. Statement of financial position of Walling Enterprises as at October 31, 2019.
Walling Enterprises
Extended trial balance as at October 31, 2019
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