NATIONAL OPEN UNIVERSITY OF NIGERIA
14/16, AHMADU BELLO WAY, VICTORIA ISLAND, LAGOS
SCHOOL OF MANAGEMENT SCIENCES
MARCH, 2014 EXAMINATIONS
Course Code: BHM 724 Credit Unit: 3
Course Title: Financial Accounting
Time Allowed: 2 1/2 Hours
Instructions:
1. Attempt question number one (1) and any other three (3).
2. Question number 1 is compulsory and carries 25 marks while the other 3 questions carry 15 marks
each.
3. Present all your points in coherent and orderly manner.
1(a) Island Sports Club was formally established on January 1, 2009, and was granted the free use of
a clubhouse at Greenland. The following are its financial transactions for the year ended
December 31, 2009 as recorded in the treasurer’s only financial record, the cash book:
Dr Receipts and Payments Account Cr
| Date | Particulars | Folio | Amount N | Date | Particulars | Folio | Amount N |
| Balance b/d Subscriptions Admission fees Proceeds from journal sales Subscriptions Donations Balance b/d | 16,500 800 1,500 2,000 4,000 2,300 27,100 19,300 | Wages Equipment Wages Wages Balance c/d | 1,300 4,000 1,300 1,200 19,300 27,100 |
You are required to prepare a statement of receipts and payments for the year ended December 31, 2009. (15 marks)
(b) Write short notes on the following:
(i) Manufacturing costs (5 marks)
(ii) Basic principles in valuing closing stock of manufacture (5 marks)
2(a) What is ‘financial statement’. (3 marks)
(b) Name and discuss the main components of the financial statement. (9 marks)
(c) Explain the double entry system of recording transactions. (3 marks)
3. The following are extracted from the trial balance of Nicgara Nigeria Limited, a manufacturing concern, in respect of the year ended 30th September, 2008:
N
Opening stock:
Raw materials 12,500
Work-in-progress 8,600
Finished goods 14,800
Purchase of raw materials 68,200
Carriage inwards 3,410
Factory wages 18,390
Rent of factory 4,800
Factory general expenses 8,360
Salaries of factory supervisors 8,740
Salaries of salesmen and office staff 22,570
Rent of office 5,400
Insurance of factory equipment 2,840
Bad debts 960
Office general expenses 12,930
Depreciation:
Factory equipment 16,280
Office and distribution equipment 14,880
Sales less returns 215,000
Power and lighting (factory) 5,610
Power and lighting (general) 3,200
Closing stocks were valued at the following amounts at year end:
Raw materials 14,480
Work-in-progress 10,250
Finished goods 18,390
Work-in-progress is normally valued in this firm at prime cost plus a portion of factory overheads.
Required:
Prepare the manufacturing, trading, and profit and loss accounts as at end of year.
(15 marks)
4(a) Why would a sole proprietor be interested in having an idea of profits earned? (5 marks)
(b) What are the tax implications for a sole proprietor? (4 marks)
(c) Explain ‘contra entry’. (3 marks)
(d) What do you understand by the Imprest system? (3 marks)
5(a) What is ‘goodwill’?. (3 marks)
(b) The estimated future accrued profits of the partnership (less partners’ remuneration of N25,000)
is N75,000. If the yield at 10% per annum is expected and the value of the tangible assets is
N500,000, what is the value of the goodwill? (5 marks)
(c) Discuss the features of non-profit organizations. (7 marks)
6. (a) Enumerate and explain five accounting concepts. (10 marks)
(b) Tunde and Haruna, being partners in business, share profits and losses in the ratio of 60:40.
The partners agreed to admit Eze to a 25% interest. What is the new profit sharing ratio of
the partners? (5 marks)
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