THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA
OCTOBER 2012: TAXATION TECHNICIANS SCHEME
PART 1: ACCOUNTING
ATTEMPT ALL QUESTIONS. TIME: 3 HOURS
1. On 1st January 2009, Okosun, Ahmed and Bayo entered into a Joint Venture agreeing to deal in second hand machinery whereby Okosun will locate and value the machinery, Ahmed will provide the finance and Bayo will sell the machinery to various willing purchasers with whom he is in contact.
The transactions which occur are as follows:
Okosun:- N
March 1-25: Cost of Travelling 50,000.00
March 10-25: Cost of Collecting items to his yard and eventual
delivery to Bayo 150,000.00
Ahmed:-
March 10-25: Payment to various parties for purchase of machinery 500,000.00
March 21: Reimbursement to Okosun for collection and delivery costs 150,000.00
April 1: Part payment to Bayo for spares and labour 200,000.00
Bayo:-
March 26: Cost of unloading equipment 25,000.00
March 27-April 15: Labour and other costs for repairs to equipment,
cleaning, painting, etc 300,000.00
April 1-30: Sales receipts from various parties 3,000,000.00
Cost of delivery to purchasers 100,000.00
You are required to prepare:
a. The accounts of the Joint Venture in the books of each Venturer. (12 Marks)
b. The memorandum Joint Venture Account. (8 Marks)
(Total 20 marks)
Assessor’s Comment
Student’s performance is average. The question tested students understanding of Joint Venture. It ought to be a borrowed question but the poor performance of students is an indication of lack of adequate performance.
The number of students is very low, an implication of lack of popularity among students occasioned by non-recognition attached to the certificate. The Institute should work on this.
SOLUTION
TTS 1 ACCOUNTING SOLUTION
1. a. JOINT VENTURE ACCOUNT
IN THE BOOK OF OKOSUN
JOINT VENTURE WITH AHMED AND BAYO
N N
March 1-25 Travel costs 50,000.00 March 10-25 Ahmed 150,000.00
March 10-25 Delivery costs 150,000.00 April 30 Bayo 675,000.00
April 30 Profit & loss A/C 625,000.00
825,000.00 825,000.00
IN THE BOOK OF AHMED
JOINT VENTURE WITH OKOSUN AND BAYO
N N
March 10-25 Bank (various) 500,000.00 April 30 Bayo 1,475,000.00
March 25 Okosun 150,000.00
April 1 Bayo 200,000.00
April 30 P & L A/C 625,000.00
1,475,000.00 1,475,000.00
IN THE BOOK OF BAYO
JOINT VENTURE WITH OKOSUN AND AHMED
N N
March 26 Unloading costs 25,000.00 April 1 Ahmed 200,000.00
Mar 27-Apr 15 Labour & Spares 300,000.00 Apr 1-30 Sales (various) 3,000,000.00
April 1-30 Delivery costs 100,000.00
Apr. 30 Profit & loss A/C 625,000.00
Okosun 675,000.00
Ahmed 1,475,000.00
3,2000,000.00 3,200,000.00
b. MEMORANDUM OF JOINT VENTURE
OKOSUN, AHMED AND BAYO
N N
March 1-25 Travel Costs 50,000.00 April 1-30 Sales 3,000,000.00
“ 10-25 Delivery costs 150,000.00
“ 10-25 Purchases 500,000.00
“ 26 Unloading costs 25,000.00
“ 27-Apr 15 Labour & Spares 300,000.00
Apr. 30 Profit c/d 1,875,000.00
3,000,000.00 3,000,000.00
Apr. 30 Okosun 625,000.00 Profit b/d 1,875,000.00
Ahmed 625,000.00
Bayo 625,000.00
1,875,000.00 1,875,000.00
2 a. You are required to list the broad classification of accounts and write short notes on each
(8 marks)
b. Define subsidiary books (2 marks)
c. Itemise any five (5) subsidiary books normally used in financial accounting and state their uses. (10 marks)
(Total 20 marks)
Assessor’s Comment
The question tested the candidates’ knowledge of the basic accounting classification and books (subsidiary) normally used in financial accounting.
The candidates’ performance was average. While a servable numbers of candidates demonstrated good understanding of the questions, some candidate’s knowledge fell below expectation. It is importance that candidates should attend specialised centurial centers as it is importance to note that this level provides the much desired foundation
SOLUTION
2. a. There are two (2) broad classification of accounts. These are personal account and
impersonal account.
(2 Marks)
i. PERSONAL ACCOUNTS
These are accounts of persons, natural or corporate who have business dealings with the organization. The personal accounts comprise debtors’ accounts, creditors’ accounts, capital account and bank account.
(3 Marks)
ii. IMPERSONAL ACCOUNTS
These are the accounts of non-persons. Impersonal accounts are further sub-divided into real accounts and nominal accounts. Real accounts relate to tangible assets such as buildings, motor vehicles, furniture and stock. Nominal accounts relate to revenue/income, expenses and intangible assets. Among the accounts classified as nominal are sales account, discount received account, rent account, salaries account and goodwill account.
(3 Marks)
b. SUBSIDIARY BOOKS
Subsidiary books can be defined as the books into which transactions are recorded on a daily basis from the source documents and from which transfers are made at suitable periodic intervals to the relevant accounts in the ledger. The use of subsidiary books prevents the ledger from containing too much detail.
Other names for subsidiary books are: books of original entry and books of prime entry.
(2 Marks)
c. Subsidiary books normally used in financial accounting are listed below:
USES
- Sales Day Book For recording credit sales
- Purchases Day Book For recording credit purchases
- Returns Inward Day Book For recording returns from customers
- Returns Outward Day Book For recording returns to suppliers
- Cash Book For recording the receipt & payment of
Money.
- Journal Proper For recording other transactions
10 x 1 Mark
10 Marks
3. a. Mention five (5) vital information obtainable from a Plant and Machinery Register
(5 marks)
b. State five advantages of keeping a Plant Register (5 marks)
c i. Define depreciation and mention two (2) methods of depreciation that are very popular in application. (5 marks)
ii. State two (2) advantages of each of the methods mentioned above. (5 marks)
(Total 20 marks)
Assessor’s Comment
This question tested the knowledge of students on Depreciation which as attempted by almost all the candidates. It is expected to attract good attempt but was however poorly attempted by candidates. The reason could be traced to poor preparation by the students. It appears that account is strange to the candidates, may be due to their various non-accounting background.
I advice that candidates should be encouraged to attend Institutional houses to take lectures so as to arm themselves with adequate preparation.
SOLUTION
3. a. Information obtainable in a plant and Machinery register are
i. Original cost
ii. Date of Acquisition
iii. Date and cost of subsequent addition or improvement
iv. Basis upon which depreciation is charged and amount provided each year.
v. Disposal date to which price and profit or loss on sale are recorded
vi. Name of makers/suppliers.
5 Marks
b. ADVANTAGES OF KEEPING PLANT REGISTER
i. It keeps statistical record of individual items of plant and machinery.
ii. It prevents depreciation from being charged in respect of any individual item of plant after the entire cost has been written off.
iii. It facilitates easy computation of departmental depreciation charge where a business consists of several departments.
iv. Information relating to individual item of plant is readily available in case of any need for insurance claim arising from loss or damage by fire.
v. It discloses the profit or loss incurred on individual plant sold before the end of its estimated working life.
c. i. Depreciation is the permanent decrease in value of an asset through wear and
tear in use or passage of time.
Two methods of depreciation that are popular in application are
Straight line method and
Reducing Balance method
A straight Line Method of depreciation
It is easy calculate
It spreads the depreciation charge into profit and loss account equally over the period of the estimated life of the asset.
ii. Reducing Balance Method
It avoids complications of identifying individual asset to determine the expiration of its estimated useful life.
The method gives the asset a residual value at any point in time, because the rate is applied to the book value balance
10 Marks
Total 20 Marks.
4. The information listed below is available in reconciling the Bank Statement of DEGEMA Company
on August 30, 2009.
i. The Cashbook showed a balance of N77,660.00 at 30th August, 2009. It includes N1,000.00 meant for Petty Cashbook. The Bank Statetment as at August 30, 2009 indicated a balance of N97,340.00.
ii. The August 30 Cash receipt of N58,460.00 had been remitted to the bank on that date but did not appear on the Bank Statement. The bank received a cheque for N40,000.00 from a stock-broking firm for the sale of 150 shares of stock of Royal Ball Plc; neither the proceeds of the sale of stock nor the transfer of fund of N18,460 to DEGEMA from their clients was recorded in the Cashbook.
iii. Included with the August Bank Statement was an advice for charges of N2,200.00.
iv. Amongst the cheques issued in August, the following were not included in the cheques paid by the bank:
Cheque No. Amount (N)
924 3,210.00
943 8,260.00
946 8,710.00
v. A service charge for N3,400.00 by the bank made in error against DEGEMA Company’s Account.
vi. A bill receivable of N6,900.00 in favour of DEGEMA Company matured on 30th August, 2009. The bank included an advice indicating the receipt of the bill less N50.00 handling charges with the Statement of Account.
iv. An advice for N750.00 was enclosed being cost of cheque book bearing DEGEMA Company’s name and address.
Required:
a. Prepare the adjusted Cash Book (11 Marks)
b. Prepare a bank Reconciliation Statement as at 30th August, 2009. (9 Marks)
(Total 20 Marks)
The question tested the knowledge of the candidates on bank reconciliation.
The performance of the candidates was below average; as only 5 of them scored above 10 out of which one of them got the question correctly.
The most common pitfall in the question was that the candidates could not differentiate the items to be treated in adjusted cash book and the ones to be treated in the reconciliation statement.
Similar question should be tested in future to improve on the candidates’ performance.
SOLUTION
4. a. DEGEMA COMPANY
ADJUSTED CASH BOOK AUGUST 30TH, 2009
N N
Balance as per cash book 77,660.00
Add: Proceeds on sale of stock 40,000.00
Funds transfer 18,460.00
Bills receivable by bank 6,850.00 65,310.00
Less: Petty Cash reported separately 1,000.00
Bank charges 2,200.00
Cost of cheque book 750.00 3,950.00
Adjusted cash balance 139,020.00
BANK RECONCILIATION STATEMENT
Balance per bank statement 97,340.00
Add: Uncredited deposit of August 30 58,460.00
Service charge made by bank in error 3,400.00 61,860.00
159,200.00
Less: Unpresented cheques
cheque no. 924 3,210.00
cheque no. 943 8,260.00
cheque no. 940 8,710.00 20,180.00
Balance as per adjusted cashbook 139,020.00
20 Marks
5. Mr. Braimoh commenced business on 1st January 2008 by transferring N720,000 from his private
current account into a bank account which he had opened for the business. His transactions for the
month of January 2008 were as follow:
N
Jan. 1 Bought goods on credit from Yinusa 120,000.00
Jan. 2 Withdrew cash from the bank for office use 18,000.00
“ 3 Sold goods on credit to Dauda 150,000.00
“ 4 Bought goods on credit from Bashiru 180,000.00
“ 6 Sold goods to Oke on credit 220,000.00
“ 7 Paid rent by cash 2,500.00
Jan. 9 Withdrew cash from office till for personal use 3,000.00
“ 10 Bought goods from Bemigho on credit 100,000.00
“ 11 Goods returned by Dauda 17,000.00
“ 12 Sold goods on credit to Anao 140,000.00
“ 14 Purchases from Ewulom paid by cheque 40,000.00
“ 15 Goods returned to Yinusa 8,200.00
“ 15 Cost of goods taken for private use 5,000.00
“ 16 Goods returned by Oke 20,000.00
“ 17 Sold goods (normal selling price N20,000) to Akin given trade
discount of 10%) 0
Jan. 18 Received cheque of N95,000 from Oke after he had deducted cash
discount of 5% 0
Jan 20 Purchased second-hand car from Mazamaza Motors by cheque 100,000.00
“ 21 Paid cheque to Yakubu in full settlement of his account 110,000.00
“ 22 Cash sales to Taribo received by cash 25,000.00
“ 25 Goods returned to Bemigho 5,000.00
“ 26 Purchased goods worth N70,000 on credit from Aminu at a trade
discount of 10% 0
Jan. 27 Paid cash N18,000.00 to Bemigho after deducting discount of 10% 0
“ 29 Received cash from Dauda in full settlement of his account 130,000.00
“ 29 Cheque received from Anthony 50,000.00
“ 30 Deposited cash into bank account 80,000.00
“ 30 Paid salaries by Cash 5,000.00
“ 31 Withdrew cash from bank to pay his son’s school fees 3,000.00
“ 31 Paid Bashiru by cheque 80,000.00
You are required to write up the 3-column Cashbook. (20 marks).
Assessor’s Comment
Candidates’ showed average understanding of the topic; many posted even non-monetary transactions into the cash book.
SOLUTION
5. THE PRINCIPLE OF DOUBLE ENTRY BOOKKEEPING
3-COLUMN CASH BOOK
DATE PARTICULARS DISC CASH BANK DATE PARTICULARS DISC CASH BANK
N N N N N N
1/1/08 Capital - - 720,000 2/1/08 Cash (Contra) - - 18,000
2/1/08 Bank (Contra) - 18,000 - 7/1/08 Rent - 2,500 -
18/1/08 Oke 5,000 - 95,000 9/1/08 Drawings - 3,000 -
22/1/08 Sales - 25,000 - 14/1/08Purchases - - 40,000
20/1/08Motor Vehicles - - 100,000
29/1/08 Dauda 3,000 130,000 - 21/1/08 Yakubu 1,800 - 110,000
27/1/08 Bemigho 2,000 18,000 -
29/1/08 Anthony - - 50,000 30/1/08 Bank (Contra) - 80,000 -
30/1/08 Cash(Contra) - - 80,000 30/1/08 Salaries - 5,000 -
31/8/08 Drawings - - 3,000
31/8/08 Bashiru - - 80,000
31/8/08 Balance c/d - 64,500 594,000
8,000 173,000 945,000 3,800 173,000 945,000
64,500 594,000
THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA
OCTOBER 2012 TAXATION TECHNICIANS SCHEME
PART 1: ECONOMICS
ATTEMPT ALL QUESTIONS. SHOW ALL WORKINGS TIME: 3 HOURS
1. i. What do you understand by the term “Monopoly”? (2 ½ Marks)
ii. What are the sources of monopolies? (7 ½ Marks)
iii. Compare and contrast the characteristics of Perfect Competition and Monopolistic Competition. (10 Marks)
(Total 20 Marks)
Assessor’s Comment
About 98% of the candidates attempted this question. The question is in three parts and intended to test the candidates’ understanding of market structure. One of the major topics in fundamental Economics. About 90% of the candidates’ exhibited clear understanding of this question. Candidates are advised to spend more time in studying related texts.