CAMPUSNINJA / THE STUDY DESK

JAMB Principles of AccountsStudy notes & practice

Build accounting entries, statements and calculations step by step, including specialist accounts and digital controls.

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Foundation revision notes and original practice. These notes explain accounting methods with selected entries and calculations. More complete statements and extended ledger cases are still needed.

What these revision notes cover
  • These notes explain accounting methods with selected entries and calculations. More complete statements and extended ledger cases are still needed.
  • Distinguish syllabus calculation methods from the reporting requirements stated in a question.

01 Foundations

Accounting purpose and concepts

Read this lesson

What you should be able to do

  • Distinguish bookkeeping and accounting
  • Apply basic concepts and identify users

Understand it

Bookkeeping records transactions systematically. Accounting also classifies, summarises, analyses and communicates information for decisions. Owners assess performance, lenders assess repayment capacity, managers plan operations, and public authorities use records for their responsibilities.

The business-entity concept separates business transactions from the owner’s personal affairs. Accrual accounting recognises income and expenses in the appropriate period rather than only when cash moves. Going concern assumes continued operation unless evidence indicates otherwise; consistency supports comparison but does not forbid justified changes.

Useful information should be relevant, faithfully represented and understandable, with comparability and timeliness. Financial accounting serves general reporting; management and cost accounting support internal decisions. Auditing evaluates information and controls, while forensic accounting investigates suspected irregularities. Good records are evidence, not a guarantee that no fraud exists.

Work through an example

The proprietor pays a personal school bill from business cash. Is it a business operating expense?

Explanation: No. Record it as drawings, reducing the owner’s interest, rather than as an expense of earning business revenue.

Watch out: Cash received is not always revenue: a loan or owner contribution is different.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Separating the owner’s personal affairs from business records applies the

  1. Liquidation principle
  2. Barter system
  3. Business-entity concept
  4. Matching of fingerprints
Show answer and explanation

Answer C: Business-entity concept

The business-entity concept treats the business as a separate accounting unit from its owner. The owner’s personal spending must not be recorded as an ordinary business expense merely because business cash was used. The other options do not express this separation.

Question 2

Which branch mainly supports internal budgeting and decisions?

  1. Financial accounting for external reporting
  2. External auditing
  3. Tax accounting
  4. Management accounting
Show answer and explanation

Answer D: Management accounting

Management accounting provides information for internal planning, budgeting and control. External auditing examines reported information, taxation concerns tax obligations, and forensic investigation addresses particular suspected irregularities. These may use accounting information, but they are not the main internal budgeting function.

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02 Recording transactions

Double entry, source documents and ledgers

Read this lesson

What you should be able to do

  • Apply the accounting equation
  • Connect documents, journals and ledger entries

Understand it

The accounting equation is assets = liabilities + capital. Every transaction keeps it balanced. Double entry records equal debit and credit amounts, but a debit is not automatically an increase: it increases assets and expenses, while a credit increases liabilities, capital and income.

Source documents provide evidence such as invoices, receipts and credit notes. Books of original entry collect transactions before ledger posting. A purchases day book normally records credit purchases of goods for resale, not every asset bought on credit; unusual transactions may require the general journal.

Ledgers group transactions into accounts. Personal accounts track people or organisations, while impersonal accounts include assets, expenses and income. A trial balance lists ledger balances to check debit-credit equality. Agreement does not prove that the accounts are correct, because some errors affect both sides equally.

Work through an example

A business buys goods on credit for ₦8,000. State the basic double entry.

Explanation: Debit purchases ₦8,000 and credit the supplier’s account ₦8,000 in a periodic-inventory teaching system.

Watch out: Debit and credit mean sides of an account, not simply good and bad or cash in and cash out.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Assets of ₦90,000 and liabilities of ₦35,000 imply capital of

  1. ₦35,000
  2. ₦90,000
  3. ₦55,000
  4. ₦125,000
Show answer and explanation

Answer C: ₦55,000

Capital = assets − liabilities = ₦55,000.

Question 2

Which error can leave a trial balance agreeing?

  1. A debit posted without its credit
  2. One account balance omitted from one column
  3. One ledger balance added wrongly on one side
  4. A transaction entirely omitted
Show answer and explanation

Answer D: A transaction entirely omitted

Complete omission excludes both equal entries, so equality remains.

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03 Recording transactions

Errors and suspense accounts

Read this lesson

What you should be able to do

  • Distinguish error types
  • Correct errors with and without suspense

Understand it

An error of omission leaves out a transaction. Commission records it in the wrong account of the same general class; principle uses the wrong class, such as expensing a non-current asset. Original-entry errors use the wrong amount on both sides; reversal swaps debit and credit.

A suspense account temporarily holds an unexplained trial-balance difference. Use it only for errors that disturb debit-credit equality. Correcting an error that leaves the trial balance balanced requires entries between the affected accounts, without suspense.

Work out the entry actually made, the entry required and the difference. If a required debit was incorrectly credited, correction needs twice the amount on the debit side: one amount cancels the wrong credit and the other creates the proper debit. Clear suspense only after all relevant differences are explained.

Work through an example

A ₦500 cash sale was recorded in cash but omitted from sales. What correction is needed?

Explanation: Debit suspense ₦500 and credit sales ₦500, assuming suspense was created to balance the trial balance. Cash is already correct.

Watch out: Do not place every accounting error in suspense.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Buying a machine for use in production but debiting purchases is an error of

  1. Original entry with the same wrong amount in both accounts
  2. Principle
  3. Complete omission
  4. Compensating error
Show answer and explanation

Answer B: Principle

A non-current asset has been treated as goods purchased for resale, crossing account classes.

Question 2

An account was credited ₦700 instead of debited ₦700. The correcting debit is

  1. ₦350
  2. ₦0
  3. ₦1,400
  4. ₦700
Show answer and explanation

Answer C: ₦1,400

₦700 removes the wrong credit and ₦700 establishes the required debit.

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04 Foundations

Ethics and accounting bodies

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What you should be able to do

  • Explain ethical qualities
  • Distinguish professional and regulatory functions

Understand it

Accountants should act with integrity, objectivity, competence, confidentiality and care. Integrity requires honest reporting; objectivity requires judgement free from improper bias. Confidentiality protects information but does not justify concealing matters where lawful disclosure is required.

Professional bodies develop members’ knowledge, qualifications and ethical expectations. ICAN and ANAN are examples in Nigeria. Regulatory bodies have legal or standard-setting responsibilities; CAC deals with corporate registration and related filings, while the Financial Reporting Council has financial-reporting responsibilities.

The IASB develops IFRS Accounting Standards internationally. A regulator, professional association and external auditor do not perform identical jobs. An accountant should keep evidence, disclose relevant conflicts and refuse deliberate misstatement rather than making numbers fit a manager’s target.

Work through an example

A manager asks an accountant to record a fictitious sale to improve profit. Which ethical issue arises?

Explanation: It would misrepresent performance and breach integrity. The accountant should not create unsupported revenue.

Watch out: A professional qualification does not remove the need for evidence and ethical judgement.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Reporting honestly despite pressure mainly demonstrates

  1. Personal ownership
  2. Speculation
  3. Price discrimination
  4. Integrity
Show answer and explanation

Answer D: Integrity

Integrity means being straightforward and truthful.

Question 2

Which body develops IFRS Accounting Standards?

  1. A local retailer
  2. A school sports council
  3. IASB
  4. A customs warehouse
Show answer and explanation

Answer C: IASB

The International Accounting Standards Board develops IFRS Accounting Standards.

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05 Recording transactions

Cash books, discounts and petty cash

Read this lesson

What you should be able to do

  • Use cash and bank columns
  • Calculate imprest reimbursement and discounts

Understand it

A single-column cash book records cash; a two-column form may record cash and bank or cash and discount, as specified. A three-column cash book records cash, bank and discount columns. Receipts appear on the debit side and payments on the credit side.

A transfer between cash and bank is a contra entry because both sides belong within the cash book. Trade discount reduces the invoice amount before entry; cash discount is recorded when earned or allowed under settlement terms. Discount columns are totalled for ledger posting rather than balanced like cash.

Petty cash handles small payments such as postage and local transport. Under the imprest system, reimbursement restores a fixed float after supported expenses. Vouchers and analysis columns strengthen control. Cash cannot normally have a credit balance, although a bank column can show an overdraft.

Work through an example

An imprest float is ₦10,000 and supported payments total ₦7,500. How much reimbursement restores it?

Explanation: ₦7,500. Cash remaining is ₦2,500, and adding ₦7,500 restores the ₦10,000 float.

Watch out: Trade discount is usually not posted separately as discount allowed or received.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Cash taken from the business cash till and deposited into its bank account is a

  1. Depreciation charge
  2. Contra entry
  3. Bad debt
  4. Credit sale
Show answer and explanation

Answer B: Contra entry

It moves value between the cash and bank columns of the same cash book.

Question 2

A ₦5,000 invoice less 20% trade discount is entered initially at

  1. ₦1,000
  2. ₦4,000
  3. ₦6,000
  4. ₦5,000
Show answer and explanation

Answer B: ₦4,000

Trade discount reduces the invoice value: ₦5,000 − ₦1,000 = ₦4,000.

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06 Recording transactions

Bank reconciliation

Read this lesson

What you should be able to do

  • Update the cash book
  • Reconcile timing differences without double counting

Understand it

A bank statement reflects the bank’s record, while the cash book reflects the business’s record. Their balances may differ because of timing, errors, charges, interest, direct debits, direct credits or dishonoured cheques. The bank and business describe balances from opposite perspectives.

First update the cash book for bank-originated items or business errors not yet recorded. Do not adjust the cash book again for valid outstanding cheques and deposits already entered there. Then reconcile the adjusted balance to the statement using the remaining timing differences.

For a positive adjusted cash-book balance, add unpresented cheques and subtract deposits not yet credited to reach a positive statement balance, assuming no other differences. Reverse signs when moving in the opposite direction and reason carefully with overdrafts. Label the starting balance and direction.

Work through an example

The cash book shows ₦20,000. Unrecorded bank charges are ₦500; unpresented cheques are ₦3,000; deposits not credited are ₦2,000. Find the statement balance.

Explanation: Adjusted cash book = ₦19,500. Statement balance = 19,500 + 3,000 − 2,000 = ₦20,500, assuming all balances are favourable and no other items.

Watch out: Unpresented cheques are already in the cash book; recording them again double counts them.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Which item usually requires updating the cash book?

  1. Bank charges not yet recorded
  2. A deposit in transit already recorded
  3. A valid unpresented cheque already recorded
  4. A correct statement opening balance
Show answer and explanation

Answer A: Bank charges not yet recorded

The business must record charges that the bank has already deducted.

Question 2

Starting with a favourable adjusted cash-book balance, unpresented cheques are normally

  1. Subtracted to reach the statement balance
  2. Entered as income in the cash book
  3. Added to reach the statement balance
  4. Entered as bank charges
Show answer and explanation

Answer C: Added to reach the statement balance

The bank has not yet deducted those payments, so its balance is higher by that amount.

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07 Financial statements

Sole-trader final accounts

Read this lesson

What you should be able to do

  • Calculate cost of sales and profit
  • Classify statement-of-position items

Understand it

The trading calculation finds gross profit: net sales minus cost of goods sold. Cost of goods sold usually equals opening inventory plus net purchases and carriage inward less closing inventory. Sales returns reduce sales; purchase returns reduce purchases.

The profit-or-loss statement deducts operating expenses from gross profit and includes relevant other income. Carriage outward is a selling expense rather than a cost of bringing purchases into the business. Owner drawings are not a business expense and do not reduce the period’s profit.

The statement of financial position reports assets, liabilities and capital at a date. Non-current assets support longer-term operations; current assets normally include inventory, receivables and cash. Closing capital equals opening capital plus introduced capital and profit less drawings, subject to other relevant adjustments.

Work through an example

Opening inventory ₦10,000, purchases ₦60,000, closing inventory ₦15,000 and sales ₦90,000. Find gross profit.

Explanation: Cost of sales = 10,000 + 60,000 − 15,000 = ₦55,000. Gross profit = 90,000 − 55,000 = ₦35,000.

Watch out: Closing inventory reduces cost of sales; it is not an extra expense.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Carriage inward on goods for resale is normally included in

  1. Cost of goods purchased
  2. Loan principal
  3. Owner drawings
  4. Sales returns
Show answer and explanation

Answer A: Cost of goods purchased

It helps bring inventory to the business and is included in its cost.

Question 2

Opening capital ₦40,000, profit ₦12,000 and drawings ₦5,000 give closing capital of

  1. ₦57,000
  2. ₦33,000
  3. ₦7,000
  4. ₦47,000
Show answer and explanation

Answer D: ₦47,000

Closing capital = 40,000 + 12,000 − 5,000 = ₦47,000.

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08 Financial statements

Accruals, depreciation and receivables

Read this lesson

What you should be able to do

  • Adjust expenses for time periods
  • Calculate depreciation and debt allowances

Understand it

An accrued expense belongs to the period but is unpaid; add it to the relevant expense and recognise a liability. A prepayment has been paid for a future period; remove it from the current expense and recognise an asset. Apply the same period-based reasoning to income.

Straight-line depreciation spreads depreciable cost over useful life: (cost minus residual value)/years. Reducing-balance depreciation applies a rate to the opening carrying amount. Depreciation allocates cost; it is not a cash fund and need not equal a market-value fall.

Write off a known bad debt against receivables and expense. A doubtful-debt allowance estimates likely non-collection from remaining receivables in the simplified syllabus model. Calculate changes carefully: increasing an existing allowance adds expense, while reducing it reverses expense. Any discount allowance must use the base specified after relevant debt adjustments.

Work through an example

A machine costs ₦100,000, has residual value ₦10,000 and a five-year life. Find annual straight-line depreciation.

Explanation: (100,000 − 10,000)/5 = ₦18,000 each year under these assumptions.

Watch out: Depreciation reduces carrying amount through allocation; it does not mean cash is paid every year.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Rent paid is ₦24,000, of which ₦4,000 relates to next year. Current expense is

  1. ₦20,000
  2. ₦4,000
  3. ₦24,000
  4. ₦28,000
Show answer and explanation

Answer A: ₦20,000

Remove the future-period prepayment: 24,000 − 4,000 = ₦20,000.

Question 2

A 10% reducing-balance charge on opening carrying amount ₦80,000 is

  1. ₦8,000
  2. ₦72,000
  3. ₦10,000
  4. ₦88,000
Show answer and explanation

Answer A: ₦8,000

Apply the rate to the carrying amount: 0.10 × 80,000 = ₦8,000.

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09 Financial statements

Inventory valuation

Read this lesson

What you should be able to do

  • Calculate FIFO, LIFO and average examples
  • Explain effects on profit and current standards

Understand it

FIFO assumes the earliest costs are issued first; LIFO assumes the latest costs are issued first. In rising prices, FIFO typically leaves higher closing inventory and lower cost of sales than LIFO for the same transactions. Cost-flow assumptions need not describe the physical movement of every item.

A simple average gives equal weight to the specified prices; a weighted average uses quantities as weights. Do not substitute one for the other. Track receipts, issues and remaining layers chronologically, and state whether an average is recalculated after each purchase or for the whole period.

The syllabus includes LIFO as a calculation topic. Current IAS 2 uses specific identification where appropriate and FIFO or weighted average for ordinarily interchangeable inventory; do not present LIFO as an allowed IAS 2 formula. IAS 2 measures inventory at the lower of cost and net realisable value.

Work through an example

Buy 10 units at ₦2 and 10 at ₦4, then issue 12. Calculate FIFO issue cost and closing inventory.

Explanation: Issue cost = 10 × 2 + 2 × 4 = ₦28. Closing inventory = 8 × 4 = ₦32. Total cost remains ₦60.

Watch out: A simple average of prices is not a quantity-weighted average.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Under FIFO, the first costs charged to issues are the

  1. Selling prices
  2. Oldest available costs
  3. Newest costs
  4. Highest costs regardless of date
Show answer and explanation

Answer B: Oldest available costs

FIFO means first in, first out for cost assignment.

Question 2

Buy 10 units at ₦2 each, then 10 at ₦4 each, and issue 12 units. Under LIFO, what is the issue cost?

  1. ₦32
  2. ₦28
  3. ₦44
  4. ₦60
Show answer and explanation

Answer C: ₦44

Ten latest units at ₦4 plus two earlier units at ₦2 cost ₦44.

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10 Recording transactions

Control accounts

Read this lesson

What you should be able to do

  • Use sales and purchases ledger controls
  • Reconstruct balances from summary entries

Understand it

A control account summarises a set of individual ledger accounts and helps check accuracy. The sales ledger control usually represents total customer receivables; the purchases ledger control usually represents total supplier payables. Individual balances should reconcile to the control total.

Credit sales and dishonoured customer payments increase receivables. Customer payments, sales returns, discounts allowed and bad-debt write-offs reduce them. A contra transfers a valid amount between a customer and supplier account when the same business is both debtor and creditor.

Credit purchases increase payables, while payments, purchase returns and discounts received reduce them. Control accounts support error investigation but cannot detect every error, particularly where the same mistake affects both the control and subsidiary record. Use independent totals where possible.

Work through an example

Opening receivables ₦10,000, credit sales ₦50,000, receipts ₦42,000 and sales returns ₦3,000. Find closing receivables.

Explanation: 10,000 + 50,000 − 42,000 − 3,000 = ₦15,000.

Watch out: Cash sales do not create credit-customer receivables and normally do not enter sales ledger control.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Which increases a sales ledger control balance?

  1. Credit sales
  2. Customer cash received
  3. Bad debts written off
  4. Discount allowed
Show answer and explanation

Answer A: Credit sales

Credit sales create amounts owed by customers.

Question 2

Which normally reduces purchases ledger control?

  1. Interest charged by suppliers
  2. Credit purchases
  3. Opening creditor balance
  4. Discount received from suppliers
Show answer and explanation

Answer D: Discount received from suppliers

A supplier’s discount reduces the amount the business owes.

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11 Financial statements

Incomplete records and single entry

Read this lesson

What you should be able to do

  • Derive profit from capital changes
  • Reconstruct missing sales and purchases

Understand it

Incomplete records lack information needed for a complete double-entry system. A statement of affairs lists estimated assets and liabilities to derive capital, but may be less reliable than a statement produced from full records. Check whether figures include omitted debts or asset values.

Profit can be reconstructed as closing capital minus opening capital minus additional capital plus drawings. This adjusts capital growth for money the owner put in or took out. A fall in cash alone does not establish a loss, because cash may have been invested in assets.

Control-account logic can recover credit sales or purchases. Profit ratios can recover cost of sales or revenue, but distinguish markup on cost from margin on selling price. A 25% markup means profit is 25% of cost; it gives a 20% sales margin, not 25%.

Work through an example

Opening capital is ₦80,000, closing capital ₦110,000, extra capital ₦20,000 and drawings ₦10,000. Find profit.

Explanation: Profit = 110,000 − 80,000 − 20,000 + 10,000 = ₦20,000.

Watch out: Subtract additional capital when deriving profit; owner contributions are not trading gains.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Cost is ₦80 and markup is 25% of cost. Selling price is

  1. ₦100
  2. ₦80
  3. ₦105
  4. ₦60
Show answer and explanation

Answer A: ₦100

Profit is 25% × ₦80 = ₦20; price is ₦100.

Question 2

Closing capital minus opening capital alone overstates profit when there is

  1. Drawings only
  2. A credit sale recorded correctly
  3. Additional capital introduced
  4. No capital introduced
Show answer and explanation

Answer C: Additional capital introduced

Capital introduced increases equity without being profit and must be removed.

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12 Specialised accounts

Manufacturing accounts and cost allocation

Read this lesson

What you should be able to do

  • Calculate prime cost and factory cost
  • Choose sensible overhead allocation bases

Understand it

Manufacturing accounts calculate the cost of goods produced. Direct materials consumed equals opening raw materials plus purchases and relevant inward costs less closing raw materials. Prime cost adds direct labour and direct expenses to direct materials.

Factory overhead includes indirect production costs such as factory rent, supervision and machine depreciation. Add it to prime cost, then add opening work in progress and subtract closing work in progress to find completed production cost. Finished-goods inventory is adjusted later when finding cost of sales.

Allocate costs directly where they belong to one activity. Apportion shared costs on a reasonable basis: floor area for rent, machine hours for machine-related costs, or another relevant measure. Selling and administration costs are not automatically manufacturing costs merely because the same company incurs them.

Work through an example

Direct materials ₦40,000, direct labour ₦30,000, direct expenses ₦5,000 and factory overhead ₦20,000. With no work in progress, find production cost.

Explanation: Prime cost = ₦75,000; production cost = 75,000 + 20,000 = ₦95,000.

Watch out: Do not deduct closing finished goods in the manufacturing calculation and then deduct them again in cost of sales.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Prime cost consists of

  1. Direct materials and all selling expenses
  2. All production costs including every overhead
  3. Direct materials, direct labour and direct expenses
  4. Factory rent and administrative salaries only
Show answer and explanation

Answer C: Direct materials, direct labour and direct expenses

Prime cost captures directly traceable production costs.

Question 2

Shared building rent is to be allocated according to the space used by each department. Which basis fits this policy?

  1. Floor area occupied
  2. Direct labour hours
  3. Sales value
  4. Number of invoices issued
Show answer and explanation

Answer A: Floor area occupied

Space occupied relates logically to use of the building.

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13 Specialised accounts

Not-for-profit accounts

Read this lesson

What you should be able to do

  • Distinguish cash records from period performance
  • Adjust subscriptions and accumulated funds

Understand it

A not-for-profit organisation pursues its stated purpose rather than distributing trading profit to owners. It still needs accounts and may earn a surplus. The accumulated fund plays a role similar to owners’ capital: assets less liabilities attributable to the organisation.

A receipts and payments account summarises cash movements regardless of the period to which they relate and may include capital items. An income and expenditure account uses accrual principles for the current period and reports surplus or deficit. Purchasing equipment is not treated wholly as a current expense merely because cash was paid.

Subscription income adjusts cash collected for amounts due and amounts received in advance at both opening and closing dates. Add closing arrears and opening advances; subtract opening arrears and closing advances, assuming no write-offs or other adjustments. Separate special-purpose funds when relevant.

Work through an example

Subscriptions received ₦50,000; opening arrears ₦5,000; closing arrears ₦8,000; no advances. Find income for the year.

Explanation: 50,000 − 5,000 + 8,000 = ₦53,000. Opening arrears belong to the previous period; closing arrears belong to this one.

Watch out: A cash surplus is not necessarily the same as the income-and-expenditure surplus.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Which account records all cash receipts and cash payments?

  1. Income and expenditure account
  2. Income statement
  3. Statement of financial position
  4. Receipts and payments account
Show answer and explanation

Answer D: Receipts and payments account

It is a cash summary rather than a period-based performance statement.

Question 2

Subscriptions received in advance for next year are normally

  1. A liability at year end
  2. Current-year income immediately
  3. Depreciation
  4. A bad debt
Show answer and explanation

Answer A: A liability at year end

The organisation has received money for a future period’s entitlement.

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14 Specialised accounts

Departmental and branch accounts

Read this lesson

What you should be able to do

  • Compare departmental and branch reporting
  • Adjust transfers and reconcile internal records

Understand it

Departmental accounts show how parts of one business perform. Direct income and costs belong to the relevant department, while shared expenses need a reasonable allocation basis. The purpose is useful comparison, not to make every department report the same profit.

Interdepartmental transfers may be recorded at cost or a marked-up price. Where transferred goods remain unsold externally, internal profit must be removed from the business’s overall inventory and profit. Otherwise the company appears to earn profit merely by moving goods inside itself.

Branches operate in different locations and may keep full records or depend on head-office records. Goods can be sent at cost or invoice price; remove any loading when calculating true profit or inventory. Reconcile head-office and branch current accounts for goods or cash in transit and errors before combining records.

Work through an example

Goods costing ₦10,000 are transferred internally at ₦12,500 and remain unsold. What internal profit must be removed from the business’s inventory?

Explanation: ₦2,500: transfer value less actual cost. No sale to an external customer has occurred.

Watch out: A markup percentage on cost is not the same percentage of transfer price.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

The main purpose of departmental accounts is to

  1. Eliminate shared costs
  2. Guarantee equal profits
  3. Replace all source documents
  4. Measure each department’s performance
Show answer and explanation

Answer D: Measure each department’s performance

Separate results help management compare activities and make decisions.

Question 2

Goods sent by head office but not yet received by a branch are

  1. A bank overdraft
  2. Sales returns from customers
  3. Bad debts
  4. Goods in transit
Show answer and explanation

Answer D: Goods in transit

Timing can cause the two internal accounts to differ until the transfer arrives.

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15 Specialised accounts

Joint venture accounts

Read this lesson

What you should be able to do

  • Recognise temporary joint ventures
  • Calculate venture profit and sharing

Understand it

A joint venture is an arrangement to undertake a specific business project together. It is often limited to that project rather than continuing indefinitely like an ordinary partnership. Participants agree contributions, responsibilities and how profit or loss will be shared.

The accounting method depends on whether separate books are kept. With a memorandum joint venture account, participants’ records are combined to determine the overall result without treating the memorandum as a normal ledger account in each participant’s books. Include all relevant sales, costs and unsold assets taken over.

Venture profit equals total venture proceeds and agreed asset takeovers less venture costs. Divide the result using the agreed ratio, then consider cash contributed, expenses paid and proceeds received to work out settlement. Profit share and final cash settlement are not always the same amount.

Work through an example

A venture buys goods for ₦60,000, incurs expenses ₦10,000 and sells everything for ₦90,000. Partners share profit 3:2. Find the shares.

Explanation: Profit = ₦20,000. Shares are ₦12,000 and ₦8,000. Cash settlement also depends on who paid and received the money.

Watch out: Do not confuse a partner’s profit entitlement with the net cash payable after contributions and receipts.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

A joint venture commonly differs from an ongoing partnership because it

  1. Must have unlimited duration
  2. Usually concerns a specific project
  3. Requires every participant to contribute an equal amount
  4. Cannot share losses
Show answer and explanation

Answer B: Usually concerns a specific project

Its purpose and duration are commonly tied to a particular undertaking.

Question 2

A venture has income of ₦120,000 and costs of ₦90,000. Two partners share its profit in the ratio 1:2. What is the larger profit share?

  1. ₦10,000
  2. ₦20,000
  3. ₦60,000
  4. ₦30,000
Show answer and explanation

Answer B: ₦20,000

Profit is ₦30,000; two-thirds is ₦20,000.

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16 Specialised accounts

Partnership accounts and goodwill

Read this lesson

What you should be able to do

  • Prepare appropriations and partner balances
  • Explain admission, retirement and dissolution

Understand it

A partnership agreement sets profit sharing, capital contributions, drawings and any salaries or interest. Partnership salary and interest on capital are normally appropriations of profit in elementary partnership accounts, not operating expenses. Interest on a genuine partner loan is treated differently.

With fixed capital accounts, routine profit shares, drawings and appropriations pass through current accounts. With fluctuating capital, they may pass through capital accounts. Calculate profit available for appropriation, apply the agreement, then divide the remaining balance in the agreed ratio.

Admission or retirement may require asset revaluation and goodwill adjustments so existing rights are treated fairly. Goodwill represents benefits such as reputation and customer relationships, with treatment depending on the question. On dissolution, realise assets, settle liabilities and expenses, and distribute the remaining amount after adjusting partners’ balances.

Work through an example

Profit is ₦60,000. A receives a ₦10,000 appropriation salary; the remaining profit is split equally with B. Find total allocations.

Explanation: Remaining profit = ₦50,000. Each receives ₦25,000; A’s total is ₦35,000 and B’s is ₦25,000.

Watch out: Do not subtract a partner’s appropriation salary twice: once as expense and again in appropriation.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Under fixed-capital accounting, routine drawings normally affect the partner’s

  1. Current account
  2. Purchases ledger control
  3. Factory overhead account
  4. Sales account
Show answer and explanation

Answer A: Current account

Current accounts track routine movements while agreed capital remains fixed.

Question 2

A revaluation gain before a new partner joins normally belongs to

  1. The old partners in the new ratio
  2. The old partners in their old ratio
  3. All partners in the new ratio
  4. The new partner alone
Show answer and explanation

Answer B: The old partners in their old ratio

It arose while the old partners owned the business, unless an agreement specifies otherwise.

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17 Financial statements

Company accounts and reserves

Read this lesson

What you should be able to do

  • Distinguish equity and debt issues
  • Interpret capital and revenue reserves

Understand it

A company is separate from its shareholders. Share issues raise equity; debenture or bond issues raise debt. Ordinary shareholders receive residual returns subject to performance and decisions; debt holders have contractual claims. Preference-share rights depend on their terms.

The statement of profit or loss reports income and expenses, while the statement of financial position reports assets, liabilities and equity. Dividends distribute earnings and are not a cost of producing revenue. Interest on borrowing is generally a finance expense under the relevant treatment.

Revenue reserves arise from retained profits; capital reserves arise from specified capital transactions such as share premium in the elementary classification. A reserve is an equity classification, not necessarily a separate pile of cash. Issuing shares above nominal value creates share premium rather than sales income.

Work through an example

A company issues 1,000 shares with ₦1 nominal value for ₦1.50 each. Find share capital and premium.

Explanation: Cash received ₦1,500; share capital ₦1,000; share premium ₦500. No sales revenue is created.

Watch out: A reserve is not automatically a liability owed to an outside creditor.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

A debenture holder is usually a

  1. Ordinary shareholder by that instrument alone
  2. Trade customer by that instrument alone
  3. Preference shareholder by that instrument alone
  4. Creditor
Show answer and explanation

Answer D: Creditor

A debenture represents a lending claim, not ordinary equity ownership.

Question 2

Share premium is the difference between issue proceeds and

  1. Closing stock
  2. Nominal share capital issued
  3. Bank charges
  4. Annual sales
Show answer and explanation

Answer B: Nominal share capital issued

Proceeds above nominal value are recorded separately in equity as premium.

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18 Financial statements

Accounting ratios and interpretation

Read this lesson

What you should be able to do

  • Calculate liquidity and turnover ratios
  • Explain what ratios can and cannot show

Understand it

The current ratio is current assets divided by current liabilities. The acid-test ratio usually removes inventory, and sometimes other less liquid items as specified, from current assets before division. A high ratio can indicate cover for short-term debts but may also reflect slow stock or unpaid receivables.

Inventory turnover is cost of sales divided by average inventory; average inventory commonly uses opening plus closing inventory divided by two. Gross margin is gross profit divided by sales. Markup uses cost as the denominator, so the same profit produces a different percentage.

Ratios are most useful against prior periods, comparable firms and business conditions. Seasonal balances, accounting methods and one-off events can distort comparisons. A ratio alone does not prove that a business is safe, efficient or profitable; explain the underlying figures and limitations.

Work through an example

Current assets ₦120,000 include inventory ₦40,000; current liabilities are ₦60,000. Calculate current and acid-test ratios.

Explanation: Current ratio = 120,000/60,000 = 2:1. Acid test = (120,000 − 40,000)/60,000 = 1.33:1, assuming no other exclusions.

Watch out: Use cost of sales, not sales revenue, for the standard inventory-turnover calculation.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Cost of sales ₦240,000 and average inventory ₦40,000 give turnover of

  1. 24%
  2. ₦280,000
  3. 6 times
  4. 0.167 times
Show answer and explanation

Answer C: 6 times

Inventory turnover = 240,000/40,000 = 6 times.

Question 2

Gross profit ₦20 on sales ₦100 gives a gross margin of

  1. 80%
  2. 20%
  3. 120%
  4. 25%
Show answer and explanation

Answer B: 20%

Margin uses sales as the denominator: 20/100 × 100 = 20%.

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19 Public and digital accounting

Public-sector accounting and control

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What you should be able to do

  • Distinguish capital and recurrent expenditure
  • Explain revenue funds and public accountability

Understand it

Public-sector accounting records and reports the use of public resources. Revenue can include taxes, fees, grants and other authorised receipts. Recurrent expenditure supports recurring operations such as salaries; capital expenditure creates or improves longer-lived assets, such as a public building.

Budgets authorise planned revenue and expenditure; votes identify approved spending allocations; warrants and other controls support release and use of funds. The Consolidated Revenue Fund is a central public-finance concept governed by applicable law, not a private bank account for an officeholder.

The Accountant-General’s functions concern government accounting and treasury records; the Auditor-General examines public accounts independently within the relevant mandate. A Treasury Single Account supports consolidated cash oversight. IPSAS provides public-sector reporting standards, while payroll information systems help manage personnel payments. Systems still need valid records, access controls and scrutiny.

Work through an example

Classify constructing a new classroom block and paying this month’s teachers’ salaries.

Explanation: The building is capital expenditure; salaries are recurrent expenditure. A repair may be recurrent unless it meets the relevant capitalisation criteria.

Watch out: The official who prepares accounts is not performing the same role as the independent auditor.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Which item is normally capital expenditure?

  1. Monthly office stationery
  2. Routine electricity bill
  3. Regular staff salary
  4. Construction of a new public hospital
Show answer and explanation

Answer D: Construction of a new public hospital

A new hospital provides service potential over several periods.

Question 2

A key purpose of a Treasury Single Account is

  1. Replacing the audit of public expenditure
  2. Replacing legislative appropriation
  3. Consolidated oversight of government cash
  4. Giving each ministry unrestricted cash control
Show answer and explanation

Answer C: Consolidated oversight of government cash

It improves visibility and management of public cash balances.

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20 Public and digital accounting

Computerised and digital accounting

Read this lesson

What you should be able to do

  • Trace data processing
  • Assess automation, blockchain and virtual accounting

Understand it

An accounting information system collects source data, validates it, processes entries and produces reports. Computerised systems can automate calculations and posting, but incorrect input or configuration can produce incorrect output quickly. An audit trail helps trace entries back to evidence.

Access controls, backups, authorisation and separation of duties protect records. Cloud or mobile accounting can support remote work, while virtual accountants provide services such as bookkeeping, payroll and reconciliation through digital channels. Reliable connectivity and confidentiality remain important.

Data analytics finds patterns and exceptions; AI can assist classification and review but requires checking. A blockchain is a shared ledger linked using cryptographic methods; it can make alteration detectable under its design, but does not prove that an original transaction was truthful. Automation changes tasks rather than removing the need for judgement.

Work through an example

A system posts an invoice entered as ₦50,000 instead of ₦5,000 without arithmetic errors. Are the accounts correct?

Explanation: No. Correct processing of incorrect input still produces a wrong result. Source-document checks and input validation are needed.

Watch out: A digital record can be tamper-resistant while still containing an originally false entry.

2 practice questions with answers

Try each question before opening its answer. These are original CampusNinja practice questions.

Question 1

Which control helps recover records after device failure?

  1. Tested backups
  2. Deleting source documents
  3. Disabling all logs
  4. Shared passwords
Show answer and explanation

Answer A: Tested backups

Backups support restoration when live data is damaged or lost.

Question 2

An audit trail primarily helps users

  1. Replace the original supporting documents
  2. Trace entries to their source and changes
  3. Remove the need to reconcile accounts
  4. Prove every transaction is lawful without investigation
Show answer and explanation

Answer B: Trace entries to their source and changes

It records the history needed to investigate and verify transactions.

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Syllabus source and learning material

Scope checked against JAMB’s IBASS source on 2026-10-16. Current IBASS file; not independently labelled 2027. Notes, examples and practice questions are original CampusNinja learning material, not authenticated JAMB past questions.

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