NABTEB 2023 FINANCIAL ACCOUNTING ESSAY AND OBJ ANSWERS

NABTEB 2023 FINANCIAL ACCOUNTING ESSAY AND OBJ ANSWERS – EXAMKING.NET
Monday, 26th June 2023
Financial Accounting (Objective & Essay) – 12:00noon – 3:30pm

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F/ACCOUNTING
01-10: DBCDCAACCC
11-20: BCDCBCDDCC
21-30: BBDCCCAACC
31-40: ACBDDABACB
41-50: BDADACDABB
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FINANCIAL ACCOUNTING-ESSAY- ANSWERS
INSTRUCTION: ANSWER FIVE QUESTIONS ONLY
(1)
(i) Account sales refer to the sales made by a consignee on behalf of the consignor. When a consignment of goods is sent to a consignee, the consignee sells the goods to customers and generates sales revenue.

(ii) Del credere commission is a special type of commission paid by the consignor to the consignee in addition to the regular commission. It is paid to compensate the consignee for undertaking the risk of bad debts from the customers

(iii) A consignment account is a special type of account used to record the transactions related to consignment sales. It is maintained by the consignor and shows the details of goods sent on consignment, expenses incurred, sales made, and the settlement of accounts with the consignee.

(iv) The consignment outwards account is maintained by the consignor to record the goods sent on consignment to the consignee. It is a nominal account and represents the cost of goods transferred from the consignor’s books to the consignee’s books.

(v) E and O.E stands for “Errors and Omissions Excepted.” It is a disclaimer commonly used in financial documents, including consignment accounts. This disclaimer implies that the account statement or document is subject to possible errors and omissions. It indicates that if any mistakes or omissions are found, they can be corrected without invalidating the entire document.

(2a)
Subscription in advance refers to a situation where a customer pays for a service or subscription before receiving it. The revenue is recognized as a liability or unearned revenue initially and is recorded as a liability on the balance sheet. As the service is provided over time, the revenue is gradually recognized as earned revenue on the income statement WHILE Subscription in arrears, on the other hand, refers to a situation where a customer pays for a service or subscription after receiving it. The revenue is recognized immediately as earned revenue on the income statement when the service is provided, even though the payment is received later.

(2b)
(PICK 4 ONLY)
(i) Net profit/loss
(ii) Expenses
(iii) Revenue
(iv) Gross profit
(v) Operating

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(4)
Sales ledger control account

TABULATE PLS
=DR=
Bal b/f 5900
Credit sales 75,200
Bal c/d 940
Total 82,040

=CR=
Bal b/f 780
Discount allowed 336
Returned inward 414
Cheque from debtors 44,300
Bal c/d 36210
Total 82,040

Sales ledger control account: Bal b/d 940
Purchase Ledger Control Account
TABULATE PLS
=DR=
Bal b/f 434
Discount received 1,366
Return outward 350
Cheque drawn for creditors 31,000
Bal c/d 2,624
Total 35,774
=CR=
Bal b/f 3,694
Credit purchase 31,600
Bal c/d 980
Total 35,774
Purchase Ledger Control Account: Bal b/d 480

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(6)
TABULATE
Trading Account
=DR=
Opening stock 20,000
Purchases 30,000
Less closing stock 30,000
Cost of goods sold 20,000
Gross profit 30,000
Expenses 10,000
Net profit 20,000
Total 30,000
=CR=
Sales 50,000
Gross profit 30,000
Total 30,000

(6a)
Cost of goods sold = Opening stock + Purchase – Closing stock
Opening stock = 20,000
Purchase = 30,000
Closing stock = 30,000
Cost of goods sold = 20,000 + 30,000 – 30,000
Cost of goods sold = 20,000

(6b)
Net profit percentage = (Net profit / Sales) ×100
Net profit = Sales – Cost of goods sold – Expenses
Net profit = 50,000 – 20,000 – 10,000
Net profit = 20,000
Net profit percentage = (20,000 / 50,000) * 100
Net profit percentage = 40%

(6c)
Acid-test ratio = (Current assets – Stock) / Current liabilities
Current assets = Debtors + Closing stock
Current liabilities = Creditors
Debtors = 10,000
Closing stock = 30,000
Creditors = 5,000
Acid-test ratio = (10,000 + 30,000 – 30,000) / 5,000
Acid-test ratio = 10,000 / 5,000
Acid-test ratio = 2:1

(6d)
Current ratio = Current assets / Current liabilities
Current assets = Debtors + Closing stock
Current liabilities = Creditors
Current ratio = (10,000 + 30,000) / 5,000
Current ratio = 40,000 / 5,000
Current ratio = 8:1

(6e)
Working capital = Current assets – Current liabilities
Current assets = Debtors + Closing stock
Current liabilities = Creditors
Working capital = (10,000 + 30,000) – 5,000
Working capital = 40,000 – 5,000
Working capital = 35,000

(6f)
Gross profit percentage = (Gross profit / Sales) ×100
Gross profit = Sales – Cost of goods sold
Gross profit = 50,000 – 20,000
Gross profit = 30,000
Gross profit percentage = (30,000 / 50,000) × 100
Gross profit percentage = 60%

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(7)
IN THE BOOK FAITH
=Joint Venture With Favour=
TABULATE PLS
=DR=
Purchases 3,000
Renovation expenses 1500
Profit 4,000
Balance due to Favour 3500
Total 12,000

=CR=
Cash to Favour 1,000
Cash from sales 8,000
Cash from debtors 3,000
Total 12,000

IN THE BOOK OF FAVOUR
=Joint Venture With Faith=
TABULATE PLS
=DR=
Purchases 4,000
Selling expenses 500
Cost from Faith 1,000
Profit 4,000
Total 9,500

=CR=
Sales(Credit) 5,000
Personal use 1,000
Balance due from Faith 3,500
Total 9,500
=JOINT VENTURE MEMORANDUM ACCOUNT=

TABULATE
=DR
Purchase (4 out of 3000) 7,000
Renovation expenses 1,500
Selling expenses 500
Cash from Faith 1,000
Share of profit
Faith (1/2×8000) 4,000
Favour (1/2×8000) 4,000
Total 18,000
=CR
Cash to Favour 1,000
Sales(Cash) 8,000
Credit 5,000
Cash from debtor 3,000
Personal drawing 1,000
Total 18,000.
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