Question Tag: Accruals

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  • 6 Marks

FR – Nov 2021 – L2 – Q3a – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss the three bases of accounting on which transactions are recognized and measured.

There are three bases of accounting on which transactions are recognized and measured.

Required:
Discuss these three bases of accounting.

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  • 1 Marks

FA – Nov 2012 – L1 – SA – Q24 – Accruals and Prepayments

Identifying revenue expenditure that provides benefit beyond the accounting period.

An expenditure of revenue nature that will give benefit for a period longer than the accounting period in which it was incurred is known as:

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  • 1 Marks

FA – May 2013 – L1 – SA – Q25 – Accruals and Prepayments

This question involves calculating the rent expense to be charged for the year.

A firm paid a rent of N9 million to cover the eighteen months period ending 30 June 2013. How much rent should be charged to the Statement of Profit or Loss as rent expense for the year ended 31 December 2012?

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  • 1 Marks

FA – May 2013 – L1 – SA – Q11 – Accruals and Prepayments

This question involves calculating the electricity expense from a ledger account.

The following transactions relate to Mahmud’s electricity expense ledger account for the year ended 30 June 2012:

  • Prepayment brought forward: N550
  • Cash paid: N5,400
  • Accrued carried forward: N650

What amount should be charged to the Statement of Profit or Loss in the year ended 30 June 2012 for electricity?

A. N5,400
B. N5,500
C. N5,800
D. N6,600
E. N7,500

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  • 20 Marks

FA – Nov 2015 – L1 – SB – Q1 – Financial Statements Preparation

Prepare financial statements for a company, including income and balance sheet, with adjustments for accruals and depreciation.

The following balances remained in the books of Lagbaja Plc at December 31, 2014 after determining the gross profit:

Item N’000
Share capital, authorised and issued 200,000
Cash at bank and in hand 500
Inventory at December 31, 2014 61,200
Trade receivables 18,005
Trade payables 15,009
Gross profit at December 31, 2014 128,942
Retained earnings 25,000
Salaries & Wages 28,430
Prepayments 600
Bad debts 500
Accrued expenses 526
Director’s account (credit) 2,500
Finance cost on loan note 600
Sundry expenses 4,100
Rates & insurance 1,520
6% Loan notes 20,000
Lighting & cooling 1,310
Postage, telephone and telegrams 800
Motor vehicle (cost N25 million) 15,000
Office fittings and equipment 42,350
Profit at January 1, 2014 22,300
Land and buildings at cost 239,362

The following additional information is relevant:

  1. Office fittings and equipment are to be depreciated at 15% of cost, and Motor vehicles at 20% of cost.
  2. Provisions are to be made for:
    • Directors’ Fees N6,000,000
    • Audit Fees N2,500,000
  3. The amount of insurance includes a premium of N600,000 paid in September 2014 to cover the company against fire for the period September 1, 2014, to August 31, 2015.
  4. A bill for N548,000 in respect of electricity consumed up to December 31, 2014, has not been posted to the ledger.

Required: a. Prepare the Statement of profit or loss for the year ended December 31, 2014; (10 Marks)
b. Prepare the Statement of financial position as at December 31, 2014. (10 Marks)

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  • 1 Marks

FA – Nov 2015 – L1 – SA – Q20 – Accounting Treatment for Accruals and Prepayments

This question calculates the total rent expense to be charged to the profit or loss statement for the year.

The information below relates to the accounting period ended December 31, 2013.
N
Prepaid rent brought forward: 22,000
Rent paid during the period: 216,000
Accrued rent carried forward: 26,000

In line with the accrual concept, what should be the amount of rent to be charged to the statement of profit or loss in the year ended December 31, 2013?
A. N264,000
B. N242,000
C. N238,000
D. N216,000
E. N48,000

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  • 1 Marks

FA – May 2018 – L1 – SA – Q4 – Accounting Concepts

Adjustment of electricity consumed but not paid for at year-end based on accounting concept.

At the end of the year, Chukwu makes a charge against the profit for electricity consumed but not yet paid, this adjustment is in accordance with the:
A. Consistency concept
B. Objectivity concept
C. Materiality concept
D. Accruals concept
E. Prudence concept

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  • 20 Marks

FA – Nov 2021 – L1 – SB – Q4 – Accounting Concepts

This question involves explaining different bases of accounting and the operation of a petty cash book.

a. Accounting concepts are the broad principles and general assumptions underlying the preparation of financial statements.

Required:
i. Explain cash, accrual, and break-up bases of accounting. (6 Marks)
ii. State FOUR limitations associated with the cash basis of accounting. (8 Marks)

b. Mallam Isa is considering setting up a petty cash book from which to pay small expenses, however, he is not sure of how a petty cash book operates.
Required:
Explain to Mallam Isa the operation of a petty cash book. (6 Marks)

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  • 1 Marks

FA – Nov 2022 – L1 – SA – Q18 – Accruals and Prepayments

Identify the accounting concept that applies to prepaid and accrued expenses.

In the process of drawing up financial statements, adjustments are made for prepaid and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Entity
E. Consistency

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  • 1 Marks

FA – May 2021 – L1 – SA – Q20 – Accounting Treatment for Accruals and Prepayments

Determine the classification of rent received in advance.

Rent received in advance is:

i. Credit balance in rent account
ii. Current asset in the statement of financial position
iii. Liability in the statement of financial position
iv. Debit balance in the rent account

A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV

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  • 6 Marks

FR – Nov 2021 – L2 – Q3a – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss the three bases of accounting on which transactions are recognized and measured.

There are three bases of accounting on which transactions are recognized and measured.

Required:
Discuss these three bases of accounting.

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  • 1 Marks

FA – Nov 2012 – L1 – SA – Q24 – Accruals and Prepayments

Identifying revenue expenditure that provides benefit beyond the accounting period.

An expenditure of revenue nature that will give benefit for a period longer than the accounting period in which it was incurred is known as:

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  • 1 Marks

FA – May 2013 – L1 – SA – Q25 – Accruals and Prepayments

This question involves calculating the rent expense to be charged for the year.

A firm paid a rent of N9 million to cover the eighteen months period ending 30 June 2013. How much rent should be charged to the Statement of Profit or Loss as rent expense for the year ended 31 December 2012?

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  • 1 Marks

FA – May 2013 – L1 – SA – Q11 – Accruals and Prepayments

This question involves calculating the electricity expense from a ledger account.

The following transactions relate to Mahmud’s electricity expense ledger account for the year ended 30 June 2012:

  • Prepayment brought forward: N550
  • Cash paid: N5,400
  • Accrued carried forward: N650

What amount should be charged to the Statement of Profit or Loss in the year ended 30 June 2012 for electricity?

A. N5,400
B. N5,500
C. N5,800
D. N6,600
E. N7,500

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  • 20 Marks

FA – Nov 2015 – L1 – SB – Q1 – Financial Statements Preparation

Prepare financial statements for a company, including income and balance sheet, with adjustments for accruals and depreciation.

The following balances remained in the books of Lagbaja Plc at December 31, 2014 after determining the gross profit:

Item N’000
Share capital, authorised and issued 200,000
Cash at bank and in hand 500
Inventory at December 31, 2014 61,200
Trade receivables 18,005
Trade payables 15,009
Gross profit at December 31, 2014 128,942
Retained earnings 25,000
Salaries & Wages 28,430
Prepayments 600
Bad debts 500
Accrued expenses 526
Director’s account (credit) 2,500
Finance cost on loan note 600
Sundry expenses 4,100
Rates & insurance 1,520
6% Loan notes 20,000
Lighting & cooling 1,310
Postage, telephone and telegrams 800
Motor vehicle (cost N25 million) 15,000
Office fittings and equipment 42,350
Profit at January 1, 2014 22,300
Land and buildings at cost 239,362

The following additional information is relevant:

  1. Office fittings and equipment are to be depreciated at 15% of cost, and Motor vehicles at 20% of cost.
  2. Provisions are to be made for:
    • Directors’ Fees N6,000,000
    • Audit Fees N2,500,000
  3. The amount of insurance includes a premium of N600,000 paid in September 2014 to cover the company against fire for the period September 1, 2014, to August 31, 2015.
  4. A bill for N548,000 in respect of electricity consumed up to December 31, 2014, has not been posted to the ledger.

Required: a. Prepare the Statement of profit or loss for the year ended December 31, 2014; (10 Marks)
b. Prepare the Statement of financial position as at December 31, 2014. (10 Marks)

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  • 1 Marks

FA – Nov 2015 – L1 – SA – Q20 – Accounting Treatment for Accruals and Prepayments

This question calculates the total rent expense to be charged to the profit or loss statement for the year.

The information below relates to the accounting period ended December 31, 2013.
N
Prepaid rent brought forward: 22,000
Rent paid during the period: 216,000
Accrued rent carried forward: 26,000

In line with the accrual concept, what should be the amount of rent to be charged to the statement of profit or loss in the year ended December 31, 2013?
A. N264,000
B. N242,000
C. N238,000
D. N216,000
E. N48,000

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  • 1 Marks

FA – May 2018 – L1 – SA – Q4 – Accounting Concepts

Adjustment of electricity consumed but not paid for at year-end based on accounting concept.

At the end of the year, Chukwu makes a charge against the profit for electricity consumed but not yet paid, this adjustment is in accordance with the:
A. Consistency concept
B. Objectivity concept
C. Materiality concept
D. Accruals concept
E. Prudence concept

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  • 20 Marks

FA – Nov 2021 – L1 – SB – Q4 – Accounting Concepts

This question involves explaining different bases of accounting and the operation of a petty cash book.

a. Accounting concepts are the broad principles and general assumptions underlying the preparation of financial statements.

Required:
i. Explain cash, accrual, and break-up bases of accounting. (6 Marks)
ii. State FOUR limitations associated with the cash basis of accounting. (8 Marks)

b. Mallam Isa is considering setting up a petty cash book from which to pay small expenses, however, he is not sure of how a petty cash book operates.
Required:
Explain to Mallam Isa the operation of a petty cash book. (6 Marks)

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  • 1 Marks

FA – Nov 2022 – L1 – SA – Q18 – Accruals and Prepayments

Identify the accounting concept that applies to prepaid and accrued expenses.

In the process of drawing up financial statements, adjustments are made for prepaid and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Entity
E. Consistency

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  • 1 Marks

FA – May 2021 – L1 – SA – Q20 – Accounting Treatment for Accruals and Prepayments

Determine the classification of rent received in advance.

Rent received in advance is:

i. Credit balance in rent account
ii. Current asset in the statement of financial position
iii. Liability in the statement of financial position
iv. Debit balance in the rent account

A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV

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