FINANCIAL ACCOUNTING – SS3

First Term Lesson Note and Scheme of Work

Objective Questions

1. When a company can sue in its own name and right, we say it possesses:
   a) Legal entity
   b) Legal jargons
   c) Legal portfolio
   d) Legal value

2. The company whose liabilities of its owners are limited to the value of shares bought in the company is called:
   a) Company limited by share
   b) Company limited by guarantee
   c) Unlimited company
   d) Limited by decree

3. The amount of capital a company is allowed to raise in the capital market is called:
   a) Authorized capital
   b) Issued capital
   c) Called-up capital
   d) In-issued capital

4. The name of a private limited company ends with:
   a) Ltd
   b) Plc
   c) & Co
   d) Enterprise

5. The name of a public limited company ends with:
   a) Corporation
   b) Ltd
   c) Plc
   d) Authority

6. Which of the following is not a major account kept by companies?
   a) Trading, Profit, and Loss Account
   b) Appropriation Account
   c) Balance Sheet
   d) None of the above

7. The document that interacts between the company and the outside world is called:
   a) Articles of Association
   b) Memorandum of Association
   c) Prospectus
   d) Certificate of Incorporation

8. The document issued by limited companies inviting the public to subscribe to its shares is called:
   a) Prospectus
   b) Certificate of Incorporation
   c) Articles of Association
   d) Memorandum of Association

9. The certificate that gives a company legal authority to operate as a legal entity is called:
   a) Certificate of Operation
   b) Certificate of Incorporation
   c) Certificate of Certification
   d) Certificate of Association

10. The document that states the internal regulations of a limited company is called:
    a) Articles of Association
    b) Association
    c) Prospectus
    d) Certificate of Incorporation

11. A company whose owners’ liabilities are limited to the value of shares subscribed in the company in case of liquidation is called:
    a) Company limited by shares
    b) Company limited by guarantee
    c) Unlimited company
    d) Limited company

12. Capital employed is:
    a) Total assets – Current liabilities
    b) Total assets – Total liabilities
    c) Total liabilities + All assets
    d) Current assets + Current liabilities

13. The market that deals with long-term borrowing and lending of capital funds is called:
    a) Money market
    b) Capital market
    c) Commodity market
    d) Share market

14. An alternative name for debentures is:
    a) Capital employed
    b) Loan capital
    c) Capital reserve
    d) Working capital

15. The person that sends goods to another person for the purpose of selling is called:
    a) Collector
    b) Consigner
    c) Consignee
    d) All of the above

16. The person who receives the goods on behalf of another is called:
    a) Consigner
    b) Collector
    c) Consignee
    d) Del-Credere Agent

17. In a consignment account, advertisement expenses are classified as:
    a) Revenue
    b) Expenses
    c) Income
    d) None of the above

18. The major accounts in a joint venture are:
    a) Individual Joint Venture Account and Memorandum
    b) Profit and Loss Account and Balance Sheet
    c) Appropriation Account and Balance Sheet
    d) Cash Book and Ledger

19. In the Memorandum Joint Venture Account, revenue is:
    a) Debited
    b) Credited
    c) Averted
    d) Included

20. The parties to a hire purchase agreement include:
    a) Hirer or Buyer
    b) Dealer
    c) Finance Company
    d) All of the above

Theory Questions

Question 1

(a) Define the capital market.
(b) State the two (2) segments of the capital market.

Question 2

(a) What is a company?
(b) Mention three (3) types of companies.
(c) State the three (3) major accounts kept by a company.

Question 3

A motor vehicle bought for ₦16,000 was estimated to have a useful life span of 4 years and a scrap value of ₦2,000.

(a) What is the net book value of the motor vehicle at the end of the third year, using the straight-line method?
(b) Using the straight-line method, what is the amount of depreciation charged per annum?
(c) If the vehicle is sold for ₦6,000 at the end of the third year, what is the profit or loss on sale?

SS 3 FINANCIAL ACCOUNTING FIRST TERM LESSON NOTE SCHEME OF WORK

Answers to the Financial Accounting Questions

Objective Questions (Multiple Choice)

1. Legal entity → A company has a separate legal identity from its owners, meaning it can sue and be sued in its own name. (Answer: A)

2. Company limited by share → The liability of shareholders is limited to their shareholdings. (Answer: A)

3. Authorized capital → This is the maximum capital a company is legally allowed to raise. (Answer: A)

4. Ltd → The name of a private limited company ends with “Ltd.” (Answer: A)

5. Plc → Public limited companies (PLCs) must include “Plc” in their names. (Answer: C)

6. None of the above → All listed accounts are major company accounts. (Answer: D)

7. Memorandum of Association → This defines the relationship between the company and the outside world. (Answer: B)

8. Prospectus → A document inviting the public to subscribe to shares. (Answer: A)

9. Certificate of Incorporation → The legal document that authorizes the formation of a company. (Answer: B)

10. Articles of Association → This outlines internal rules and regulations. (Answer: A)

11. Company limited by shares → Shareholders’ liability is restricted to their share value. (Answer: A)

12. Total assets – Current liabilities → This formula calculates capital employed. (Answer: A)

13. Capital market → Deals with long-term funds. (Answer: B)

14. Loan capital → Another term for debentures. (Answer: B)

15. Consigner → The sender of goods for sale. (Answer: B)

16. Consignee → The receiver of goods on behalf of another. (Answer: C)

17. Expenses → Advertisement is considered a selling expense in consignment accounts. (Answer: B)

18. Individual Joint Venture Account and Memorandum → These are the main joint venture accounts. (Answer: A)

19. Credited → Revenue in a Memorandum Joint Venture Account is credited. (Answer: B)

20. All of the above → The parties to a hire purchase agreement include the hirer, dealer, and finance company. (Answer: D)

Theory Questions and Answers

Question 1: Capital Market

(a) Definition of Capital Market:
A capital market is a financial market where long-term debt and equity instruments are bought and sold. It enables businesses, governments, and individuals to raise long-term funds for investment.

(b) Two (2) Segments of Capital Market:

1. Primary Market – Where new securities are issued and sold directly to investors.

2. Secondary Market – Where existing securities are traded among investors (e.g., stock exchanges like the Nigerian Stock Exchange).

Question 2: Understanding a Company

(a) Definition of a Company:
A company is a legal entity formed by individuals, shareholders, or stakeholders to conduct business. It has legal rights and responsibilities, separate from its owners.

(b) Three (3) Types of Companies:

1. Private Limited Company (Ltd) – A company owned by private individuals with restricted share transfer.

2. Public Limited Company (Plc) – A company whose shares can be publicly traded on the stock exchange.

3. Company Limited by Guarantee – Usually non-profit organizations where members’ liability is limited to a pre-agreed amount.

(c) Three (3) Major Accounts Kept by a Company:

1. Trading, Profit, and Loss Account – Shows revenue, costs, and profit/loss.

2. Appropriation Account – Details how profit is distributed (e.g., dividends, reserves).

3. Balance Sheet – A statement showing assets, liabilities, and shareholders’ equity at a specific date.