Third Term ss3 Financial Accounting

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SS 3 FIRST TERM: E-LEARNING NOTES
SUBJECT: FINANCIAL ACCOUNTING CLASS: SS3
SCHEME OF WORK
WEEK
1. Revision of last term’s work
2. Regulation of the Capital Market:
(a) Regulation of the Capital market (meaning, reasons for regulation)
(b) Types of regulation - Statutoryregulation; (i) The Law ISA No.45, 1999 (ii) Securities
and Exchange Commission (the Apex Regulatory body). (iii) Objectives of Statutory
regulation – protect investors. (iv)Develop the market tools of regulation – Registration,
Surveillance and monitoring, Investigations, Enforcement, Rule making
(c) Stock Exchange Market
3. Hire Purchase:
(a) System (b) preparation of Account: (i) in the Sellers Ledger and Hirers Ledger (ii)
Goods Account (iii) Hire Purchases Account and Interest Account
4. Contract Account:
(a) Terminologies: (i) Nominal and Notional Profit (ii) Retention Money (iii) Work
Certified (iv) Work in Progress (v) Percentage of Work Completed
(b) Preparation of Contract Account
5. Public Sector Accounting :

(i) Meaning (ii) Sources of Government Revenue (iii) Capital Expenditure (iii) Re-
current Expenditure (iv) Heads and SubHeads (v) Capital and Revenue Account
6-10 Revision
WEEK 1
SUBJECT: FINANCIAL ACCOUNTING

CLASS: SS3
TOPIC: Revision of last term’s work

CONTENT: Review the last promotion examination question paper.
WEEK 2
CLASS: SS DATE______________
TOPIC:REGULATION OF THE CAPITAL MARKET
CONTENTS:
 Meaning of capital market

 Reasons for capital market regulation
 Types of regulation
 Stock Exchange Market
SUB-TOPIC 1:
Capital Market
A capital market is a market for securities (debt or equity), where business enterprises and governments
can raise long –term funds.
It is defined as a market in which money is provided for periods longer than a year. The capital market
includes the stock market (equity securities) and the bond market (debt).
Capital Market Regulator:
Securities and Exchange Commission (SEC): This is the body that oversees the capital markets to ensure
that investors are protected against fraud, among other duties.
Regulation is the activities of government –established regulatory agencies to control monitor and
supervise the operations of the capital market. In Nigeria, SEC is directly vested with this power of
regulation.
Classification of Capital Market

 Primary market
 Secondary market
Primary market: This is where new stock or bond issues are sold to investors through a mechanism known
as underwriting.
Secondary Market: This is where existing securities are sold and bought among investors or traders,
usually on a security exchange, over the counter or elsewhere.
Securities and Exchange Capital Market

Regulatory
Commission Authority
SEC
Stock market Bond Market
Evaluation:
1. Define capital market
2. Mention two classes of capital market
SUB-TOPIC 2:
Reason For Capital Market Regulation
The purpose of capital market regulation in Nigeria is to engender market integrity and posturing for a
truly robust and well-regulated market. The following are other reasons for capital market regulation.
 To develop market economies

 To develop country’s economy
 To permit a much wider participation in the economy
 To increase the number of people who participates in investment opportunities
 To reduce as much as possible business and market risks
 To improves investors ‘confidence in the market
 To make sure that perfect information is available to all investors at all times
 To prevent cases of capital manipulation ,such as insider trading
 To ensure competence of providers of financial services
 To protect clients and investigate complaint
Evaluation:
1. Outline six reasons for capital market regulation
SUB-TOPIC 3:
TYPES OF CAPITAL MARKET REGULATION
 Statutory Regulation
 Self-regulation stock exchanges
STATUTORY REGULATION
These are sets of rules issued by some agency of government that an authority has been vested in.
Statutory refers to laws passed by the state or federal government .The following are statutory regulations
of the capital market:
The Law ISA N 45, 1999: Investment and Securities Act (ISA) is the principal legislation regulating
mergers and acquisitions in Nigeria. It repealed the specific provisions for the regulation of M &A’s in
CAMA and transferred the relevant sections to the ISA.
Securities and Exchange Commission: The Securities and Exchange Commission (SEC) is the main or
apex regulatory institution of the Nigerian Capital Market. It is supervised by the Federal Ministry of
Finance.
Objectives of statutory regulation
 To protect investors
 To maintain confidence in the Nigerian financial system
 To protect and enhance financial services
 To reduce financial crime
Principles of good regulation
 Efficiency and economy: The need to use our resources in the most efficient and economic way.
 Role of management: Responsibilities of those who manage the affair of authorized persons. This
principle is designed to secure an adequate but proportionate level of regulatory intervention by
holding senior management responsible for risk management and control within the firm.
 Proportionality: Burdens or restrictions that are imposed on the industry should be proportionate
to the benefits that are expected to result from those burdens or restrictions. It includes cost-
benefit analysis of proposed regulations.
 Innovations: This is associated with the desirability of facilitating innovation in connection with
regulated activities. It involves using different means of compliance so as not to unduly restrict
market participants from launching new financial products and services.
 International character: This is the character of financial services and desirability of maintaining
the competition .It involves cooperation with overseas regulators both to agree international
standards and to monitor global firms and markets effectively.
 Competition: Competition is the ability to minimize keen contest among firms that are regulated.
It is to avoid unnecessary regulatory barriers to entry or business expansion.
 Public awareness: The public must be aware of the regulations. This is to enhance understanding
and knowledge of members of public on financial matters.
Nigerian stock exchange
A stock exchange is a form of exchange which provides services for stock brokers and traders to trade
stocks, bonds and other securities. It also provides facilities for issue and redemption of securities and
other financial instruments and capital events including the payment of income and dividends.
Nigerian stock exchange is an organized market that uses electronic networks to buy and sell stocks.
Trading on Nigerian stock exchange increases speed of operation, reduces cost of transactions and less
emphasis is now on the physical place.
Classification of stock exchange
 Primary market
 Secondary market
Primary market: This is where initial offering of stocks and bonds exchange hand.
Secondary market: This is where second hand stocks are traded.
Roles of stock exchange
 Raising capital for business

 Mobilizing savings for investments
 Facilitating company growth
 Profit sharing
 Corporate governance
 Creating investment opportunities for small investors
 An avenue for government to borrow funds to finance projects
 Barometer of the economy
Evaluations:
1. Define stock exchange
2. Mention and explain two classes of stock exchange
3. Outline five roles of stock exchange

SUB-TOPIC 4
Operation of Nigeria stock exchange
Nigerian Stock Exchange is regulated by the SEC, which has the mandate of surveillance over the
exchange to forestall breaches of market rules and to deter and detect unfair manipulations and trading
practices.
The NSE has an automated trading system data on listed companies ‘performances that are published
daily,weekly,monthly,quarterly and annually. However,trading takes place every day, that is Monday to
Friday.NSE extended its trading hours by additional two hours, from five hours to seven hours by June
2011.
Nigerian stock exchange uses market indices, such as all shares index, and market capitalization to
measure the performance or growth of the market.
Operation of the Securities and Exchange Commission
In the process of regulating the market, the commission undertakes the following activities meant to
protect investors, market operations and also to maintain the integrity of the market.
1. Registration of securities and market intermediaries to ensure that only fit and proper
persons/institutions are allowed to operate in the market such as:
 Market places
 Securities/commodities exchange /capital trade profits
 Issuing houses
 Securities dealers/stock brokers/sub-brokers
 Registrars /transfer agents
 Trustees
 Capital market consultants
 Government bonds
2.Surveillance over the exchange and trading systems in order to forestall breaches of market rules
as well as to deter and detect unfair manipulations and trading practices to prevent market disruption.
3.Investigation of alleged breaches of the laws and regulations governing the capital market and
enforcement of sanctions where appropriate.
Evaluation:
1. Briefly explain the operation of the stock exchange
2. Enumerate three roles of Securities and Exchange Commission in regulating the stock exchange
SUB-TOPIC 3:
Tools of regulation
The tools of regulation focus on execution, i.e the processes and tools that are available to government
regulations to achieve their regulatory outcomes.
The following six approaches are always adopted to analyze and classify regulatory tools:
 Economic tools
 Transactional tools
 Authorization tools
 Structural tools
 Informational tools
 Legal tools
Reasons for regulation
Regulations, such as any other form of coercive action, have costs for some and benefits for others.
Regulations are justified using a variety of reasons and therefore can be classified in several broad
categories as follows:
 Market failures: These are regulations due to inefficiency

 Collective desires: Regulations about collective desires or judgments on the part of a significant
segment of society
 Diverse experiences: Regulation with a view of eliminating or enhancing opportunities for the
formation of diverse preferences and beliefs
 Social subordination:
 Endogenous preferences: Regulation’s purpose is to affect the development of certain preferences
on aggregate level.
 Irreversibility: Regulation that deals with the problem of irreversibility-the problem in which a
certain type of conduct from current generations results in outcome from which future
generations may not recover from at all.
 Professional conduct: Regulation of members of professional bodies, either acting under statutory
or contractual powers
 Interest group transfers: Regulation that results from effort by self-interest groups to redistribute
wealth in their favour, which may be disguised as one or more of the justification above.
Evaluation:
1. Mention and explain two types capital market regulation

2. List five principles of good regulation
GENERAL EVALUATION
Objective Test:
1. Capital market is made up of the following
A. money market and bond market
B.security market and stock market
C.stock market and bond market
D.stock market and security market
2. Capital market may be classified into one of the following categories:
a. financial market and instrument market
b.primary market and secondary market
c.primary market and tertiary market
d.secondary market and tertiary market
3. One of the following is not an example of regulation types
a.statutory regulation
b.SEC regulation
c.self-regulation
d. registration regulation
4. The following are examples of capital market operators except
a.issuing house
b.stock brokers
c.capital brokers
d.reporting accountants
1. A market where securities are bought and sold is called A. Securities and Exchange Commission
B.stock exchange C.foreign exchange market D.Onitsha market

2. The market where second hand securities are bought and sold is called
A. capital market B.money market C.primary market D.secondary market
3. The trading hour of Nigerian Stock Exchange is A. three hours B.five hours C.seven hours
D.ten hours
4. One of the following is not a tool for regulation A. legal tools B.economic tools C.vertical
tools
D.structural tools
5. The apex regulatory institution of government at the capital market is A.SEC B.EFCC C.CPC
D.NDLEA
Essay Test:
1. Define capital market
2. Mention and explain two classes of capital market
3. Briefly discuss the two types of capital market regulation
4. Highlight six reasons for capital market regulation
WEEKEND ASSIGNMENT
1. What do you understand by Nigerian Stock Exchange?
REFERENCES
1. Financial Accounting for Senior Secondary School 3 by M.A.Adesola: Melrose Publishing Ltd
Week 3 Date---------------------
CLASS: SS3
TOPIC:. Hire purchases and Installment payment accounts: (i) Hire purchase and
installment payment Accounts: -The system, Preparation of Accounts in the (a) seller’s ledger
and hirer’s ledger. (b) Goods account (c) Hire purchase Account and interest Account.
CONTENT: (i) Hire purchase and installment payment Accounts: -The system,
preparation of Accounts in the (a) seller’s ledger and hirer’s ledger.
(ii) Goods account (c) Hire purchase Account and interest Account.
Definition
Hire purchase is a system of installment payment whereby the buyer or hirer has possession and
use of the goods while the owner retains the ownership of goods until the final payment has been
made. The amount paid for the goods is called hire purchase price, which is normally higher
than the normal selling price of the item, this is as a result of the hire purchase interest which is
also referred to as finance charge.
A deposit i.e. the initial sum is paid by the hirer at the inception of the hire purchase transaction
after which other installments will be paid at regular intervals to liquidate the balance of hire
purchase price at the end of the hire period.
Accounting entries
The accounting entries shall be considered looking at the two parties to hire purchase transaction,
i.e. the seller and the hirer (buyer).
Buyer’s books
There are two basic methods of preparing hire purchase transactions in the buyer’s books:
i. Interest paid method
ii. Interest suspense method
Interest paid method
This is the commonest and simplest method of treating hire purchase transaction. Using this
method, the total amount to be paid on the asset is debited and then credited to the vendor
account.
a. Asset acquired on hire purchase terms:
DR: Hire purchase asset account

CR: Hire purchase creditor account
b. Payment of initial deposit
DR: Hire purchase creditor account
CR: Bank account
c. Interest due at the date of installment
DR: Hire purchase interest account
CR: Hire purchase creditor account
d. Installment cash payment made
DR: Hire purchase creditor account
CR: Bank account
e. Interest written to profit and loss
DR: Profit and loss account
CR: Hire purchase interest account
f. Depreciation on asset
DR: Profit and loss account
CR: Provision for depreciation account
FORMAT
DR. Asset account CR
N N
Hire purchase creditor xxx Balance c/d xxx
Balance b/d xxx

DR. Hire purchase creditor account CR
N N
Year 1 Bank(Deposit) xxx Year 1 Asset xxx
Bank (Installment) xxx Interest xxx
Balance c/d xxx xxx
Year 2 Bank (installment) xxx Year 2 Balance b/d xxx
Balance c/d xxx Interest xxx
xxx xxx
Year 3 Bank (installment) xxx Year 3 Balance b/d xxx
Interest xxx
xxx xxx
DR. Interest account CR

N N
Year 1 H P Creditor xxx Year 1 Profit and loss xxx
xxx xxx
DR. Provision for depreciation account CR
N N
Balance c/d xxx Profit and loss xxsx
Balance c/d xxx Balance b/d xxx
Profit and loss xxx
xxx xxx
Illustration 1.
MallamTanko purchased a trailer lorry on 1st January 2010 from IkehchukwuOkeke on hire
purchase terms, under which MallamTanko paid a deposit of N123,010 to be followed by four
annual installments of N100,000 each payable on 31st December. Interest is charged on
outstanding balance at 10% per annum. The cash price of the equipment is N440, 000.
Depreciation on the equipment is at 20% per annum on straight line basis. All the sums due were
paid on due dates.
Show the relevant ledger entries in the books of MallamTanko.
Solution
Workings (i)
Calculation of Hire purchase interest H P interest
N N
1/1/2010 Cash price 440,000
1/1/2010 Deposit (123,010)
316,990
31/12/2010 Interest (N316, 990 x 10%) 31,700 31,700
348,690
31/12/2010 1st installment (100,000)
248,690
31/12/2001 Interest (N248, 690 x 10%) 24, 870 24, 870
273, 560
31/12/2001 2nd Installment (100, 000)
173, 560
31/12/2002 Interest (N173, 560 x 10%) 17, 356 17, 356
190, 916
31/12/2002 3rd Installment (100, 000)
90, 916
31/12/2003 Interest (N90, 916 x 10%) 9,084* 9, 084
100, 000
31/12/2003 4th Installment (N100, 000)83, 010
* The figure is as a result of previous approximation.
Working 2. Calculation of Hire purchase price

N
Initial deposit paid on 1/1/2000 123, 010
Installments (N100, 000 x 4) 400, 000
523, 000
Ledger accounts
Hire purchase Creditor ( MallamTanko)
N N
1/1/2000 Bank (Deposit) 123, 010 1/1/2000 Hire purchase Lorry 440, 000
31/12/2000 Bank (1st Installment) 100, 000 31/12/2000 H P Interest 31, 700
31/12/2000 Balance c/d 248, 690

471, 700 471, 700
31/12/2001 Bank (2nd Installment) 100, 000 1/1/2001 Balance b/d 248,690
31/12/2001 Balance c/d 173, 560 31/12/ H P Interest 24, 870
273, 560 273, 560
31/12/2002 Bank (3rd Installment) 100, 000 1/1/2002 Balance b/d 173, 560
31/12/2002 Balance c/d 90, 916 31/12/2002 H P Interest 17, 356
190, 916 190, 916
31/12/2003 Bank (4th Installment) 100, 000 1/1/2003 Balance b/d 90, 916
31/12/2003 H P Interest 9, 084
100, 000 100, 000
Hire purchase Interest Account
N N
31/12/2000 H P Creditor 31, 700 31/12/2000 Profit & Loss a/c 31, 700
Hire purchase Lorry account
N N
1/1/2000 H P Creditor 440, 000 1/1/2000 Balance b/d 440, 000
1/1/2001 Balance b/d 440, 000 1/1/2001 Balance b/d 440, 000
1/1/2004 Balance b/d 400, 000
Provision for Depreciation account

N N
31/12/2000 Balance c/d 88, 000 31/12/2000 P & L a/c 88, 000
31/12/2001 Balance c/d 176, 000 1/1/2001 Balance b/d 88, 000
31/12/2001 P & L a/c 88, 000
176, 000 176, 000
31/12/2002 Balance c/d 264,000 1/1/2002 Balance b/d 176, 000
31/12/2002 P & L 88, 000
264, 000 264, 000
31/12/2003 P & L 88, 000
352, 000 352, 000
1/1/2004 Balance b/d 352, 000
Interest Suspense Method
This is the second method of treating hire purchase transactions. When this method is employed,
these are the accounting entries:
a. On acquiring the asset
DR. Asset account (with the Cash price)
DR. Hire purchase interest suspense (with the full H P Price)
CR. Creditors account (with the H P price)
b. Payment of initial deposit
DR. Creditors account

CR. Bank account
c. Payment of installments
DR. Creditors account
CR. Bank account
d. Interest element
DR. Interest account
CR. Hire purchase interest suspense account
e. Interest written off
DR. Profit and loss account
CR. Hire purchase interest account
f. Depreciation of assets
DR. Profit and Loss account
CR. Provision for depreciation account
Illustration 2.
Using illustration 1 above.
Hire purchase Creditor ( MalamTanko) account
N N
1/1/2000 Bank (Deposit) 123,010 1/1/2000 H P Lorry 440, 000
31/12/2000 Bank (1st Installment) 100, 000 1/1/2000 H P Interest suspense 83, 010
31/12/2000 Balance c/d 300, 000

523,010 523, 010
31/12/2001 Bank (2nd installment) 100, 000 1/1/2001 Balance b/d 300, 000
31/12/2001 Balance c/d 200, 000
300, 000 300, 000
31/12/2002 Bank (3rd Installment) 100, 000 1/1/2002 Balance b/d 200, 000
31/12/2002 Balance c/d 100, 000
200, 000 200, 000
31/12/2003 Bank (4th Installment) 100,000 1/1/2003 Balance b/d 100, 000
Hire Purchase Interest Suspense account
N N
1/1/12000 H P Creditor 83, 010 31/12/2000 H P Interest 31, 700
31/12/2000 Balance c/d 51, 310
83, 010 83, 010
1/1/2001 Balance b/d 51, 310 31/12/2001 H P Interest 24, 870
31/12/2001 Balance c/d 26, 440
51, 310 51, 310
31/12/2002 Balance 9, 084
26, 440 26, 440

Hire purchase Interest Account
N N
31/12/2000 H P Interest suspense 31, 700 31/12/2000 P & L A/c 31,700
31/12/2001 H P Interest suspense 24, 870 31/12/2000 P & L A/c 24, 870
1/12/2002H P Interest suspense 17, 356 31/12/2000 P & L A/c 17, 356
31/12/2003 H P Interest suspense 9, 084 31/12/2000 P & L A/c 9, 084
It is not necessary to prepare H P Lorry account and the provision for depreciation account,
because it remains the same as in the interest payable method.
EVALUATION
From Essential Financial Accounting For Senior Secondary Schools by O.A. Longe& R.A. Kazeem,
prepare solution to Question 5 on page 338 of Chapter 31.
GENERAL EVALUATION
Objective Test:
1. The amount expected to be paid by the hirer immediately under hire purchase is called A. Rent
B. installment C. cost price D. deposit
2. A finance company stands as---------------- under hire purchase transaction between the sellers
and the hirer. A. buyer B. guarantor C. seller D. owner
Use this information to answer questions 3 to 5. The cash price is 50% above the cost price while
financing charge is 15% on the cost price.

3. Calculate the hire purchase price percentage. A. 65% B. 150% C. 115% D. 165%
4. If the cost price is N10, 000, the hire purchase price is A. N10, 000 B. N16, 500 C. N15, 000.
D. N20, 000
5. The service charge is A. N1, 500 B. N5, 000 C.N2, 475 D.N2, 250
ESSAY: From Simplified and Amplified Book Keeping & Accounting for Senior Secondary Schools 1,
2, 3 by Femi Longe, solve Exercise 1x, 2 and 5x on pages 533 and 534.
WEEKEND ASSIGNMENT: From Essential Financial Accounting for Senior Secondary Schools 1, 2,
and 3 by Femi Longe
WEEK 4 DATE______________
TOPIC: CONTRACT ACCOUNTS
CONTENTS:
 Definition of contract account

 Reasons for contract account
 Types of construction contract
 Methods of recognizing revenue under contract account
 Preparation of contract accounts
SUB-TOPIC 1:
Meaning of contract account
This is a system of cost accounting used by contractors engaged in construction and building works
where it is common for a firm to be engaged in execution of many separate contracts at the same time an
which can continue over a long period of time (many years).
Features of contract
i.the cost that is direct and is large
ii.it is site based

iii.it is undertaken to customer’s special requirement
iv.it is of relatively of long duration
v.there is low indirect cost
Reasons for contract account
1. To find the profit on each contract
2. To ascertain the level of contract execution
3. To take care of such businesses whose nature of work does not conform to a financial year’s
calculation of profit.
Construction contract
Construction contract can be defined as the execution of building and civil engineering projects,
mechanical and electrical engineering installations and other fabrications usually evidenced by an
agreement between two or more parties (i.e. contractor and customer).
Types of construction contract
1. Short term construction contract
2. Long term construction contract
Short term construction contract: This refers to a contract which is expected to be started and
completed within an accounting period.
Long term contract: it is a contract entered into for manufacture or building of a single substantial entity
or the provision of a service where the time taken to manufacture, build or provide is such that a
substantial proportion of all such contract work will extend for a period exceeding one year.
Terminologies:
1. Revenue recognition: This is the process for accounting for revenue in the financial statements when it
has been earned.
2. Contract work in progress: This is the accumulated certifiable cost relating to contract that is yet to be
completed.
3. Mobilization fees: This is the amount advanced by employer to a contractor to enable construction
work to start.
4. Contract certification: This is a process by which the project’s architect or engineer issues a certificate
to evidence the value of work done on a construction contract as at a particular date.
5. Retention monies: There is frequently a contract clause that entitles the customer to withhold payment
of a proportion of the contract value (10%) for a specified period after the end of the contract.
SUB –TOPIC 2
Methods of revenue recognition
Revenue recognition means the process of accounting for and inclusion of revenue from a contract in
financial statement. In contract account, revenue is deemed realized at the point where the portion of the
work responsible for generating the revenue has been performed.
There are two main methods of recognizing revenue under contract account as follows
a. Completed contract method
b.Percentage of completion method
COMPLETED CONTRACT METHOD
This is a method used for short term contracts i.e a contract that will take more than 12 months to
complete.
Accounting entries
a. DR: contract account with all the expenses applicable to that particular contract
b.CR: contract account, debit personal account of customers with contract price
c.find profit or loss on contract and transfer to profit and loss account on contract account
d.when the customer pays ,credit his personal and debit bank
Example
On 1 July 2005, the consortium builders were engaged to construct a stretch of 2 km road at a contract
price of N100, 000.The contract was tagged contract No.6 by the company. During the year, the company
incurred the following expenditure on the contract:
Material issued from store 25,000
Materials purchased 24,000
Wages 24,750
Sub-contracting work on contract 6,000

Purchase of special equipment 45,000
On 30 June material on site amounted to 2,500
The equipment purchased has an estimated useful life of four years and the company adopts straight line
method of depreciation in providing for depreciation on all its assets.
You are required to prepare a Contract account for contract No 6 for the years ended June ,2006
CONSORTIUM OF BUILDERS
CONTRACT NO.6
N N
June 2006 June 2006

Materials issued from store 25,000 Contract price 100,000
Purchases 24,000 Materials issued 2,500
Wages 24,750
Subcontracting fees 6,000
Depreciation of equipment 11,250
Profit on contract 11,500
102,500 102,500
Depreciation calculation:
Cost of equipment =N45, 000
Estimated useful life =4 years

Scrap value =nil
Depreciation =45,000-0 =N11, 250
Evaluation:
1. Define contract account
2. Mention five features of contract
3. State two types of construction contract
4. What are two methods of revenue recognition in contract account?
Sub-topic 1:
Percentage of completion method
Under this method, profit is recognized based on the degree of work done. It is applicable where cost of
completion can be calculated with a degree of certainty.
Calculating profit under percentage of completion method
Contract value xx
Less cost incurred to date xx
Estimated cost to completion xx
Rectification cost xx xx
xx
Profit to be recognized by any of the following
a.cost incurred to date x estimated total profit
estimated total cost
b.value of work certified to date x estimated total profit
total contract price
The traditional method of calculating notional profit would be used as follow:

Profit to be taken =2/3 x cash received x notional profit
Value of work certified
Notional profit: value of work certified xx

Less cost of work certified:
Cost of work incurred to date xx
Cost of work not yet certified xx xx
Notional profit xx
Evaluation:
1. Define percentage of completion method of recognizing contract revenue
Sub- Topic 3
Example 1:
Contract 27 for Flats Ltd, value of architect certificate 12,000
Total cost to date 9,800
Expenditure since architect’s certificate were taken 800
Profit to date on contract 12,000
Less (9,800-800) 9,000
3,000
2/3 of N3, 000 =N2, 000
As a precaution this amount is further reduced according to the progress payments made. The only profit
taken is that obtained by taking a fraction.
Progress payment received
Value of architect’s certificates
Thus if N9, 000 had been received, the profit actually credited would be
9,000 x 2,000 =N1, 500
12,000
CONTRACT
₦ ₦
2005 2005
December 31 expenditure 9,800.00 December,31 balancec/f 11,300.00
Profit and loss contract
Estimated profit to date: 1,500.00
11,300.00 11,300.00
Jan 1, balance work in progress b/f11,300.00
FLATS LTD
₦ ₦
2005
December 31 bank 9,000.00
BALANCE SHEET (EXTRACTED) DECEMBER, 31 2005

₦ ₦
Current asset:
Work in progress 11,300.00
Less: work in progress payment 9,000.00
20,300.00
Evaluation: practice question 8 of the essential financial accounting page374
GENERAL EVALUATION
Objective Test:
Use the information below to answer the questions that follow:
If a contract that is worth N200, 000 is certified as 40 per cent complete. The total cost of the contract is
N150, 000.
1. What is the value of the completed work? A.N60, 000 B.N20, 000 C.N80, 000 D.N100, 000
2. The cost of the work completed is A.N60, 000 B.N20, 000 C.N80, 000 D.N100, 000
3. The profit made would be A.N20, 000 B.N80, 000 C.N60, 000 D.N100, 000
4. The part of the final price of a contract which are withheld when paying a contractor when a contract
has not been completed
a.kick back money b.contract price c.retention money d.mobilisation money
5. The justification for taking two-third off the profit on an uncompleted contract before payment is
effected is
a. to evidence a satisfactory performance of job on the part on which it is issued
b.done because it is required by the law
c.to calculate the portion of profit to be recognized on the contract
d.to delay payment of money to the contractor
6. The completed method of recognizing revenue is mostly adopted in situation
a.money involved in a contract is huge
b.where there are no dependable estimates of the amount of costs that will complete the contract
c.where the contract will be completed within a very short period
d.when it is agreed to by all the parties in a contract site
7. The purpose of issuance of certificate on the part of a contract before payment is effected is
a.to evidence a satisfactory performance of job on the part on which it is issued
b.done because it is required by the law
c.to calculate the portion of profit to be recognized on the contract
d.to delay payment of money to the contractor
Essay
1. Write short note on the following
a. Revenue recognition
b.contract work in progress
c.mobilization fees
d.contract certification
e.retention monies
Essay Test:
1. Practise question 6 of the Essential Financial Accounting for senior secondary schools pages 373-374
WEEKEND ASSIGNMENT
Practice exercise 26:2(Company Accounts) of the Essential Financial Accounting for senior secondary
schools page 276
REFERENCES
1. Essential Financial Accounting for senior secondary schools by O.A.Longe et al: Tonad Publishers
2. Financial Accounting for senior secondary school 3 by M.A.Adesola et al: Melrose Publishing Ltd
WEEK FOUR (5) DATE:……………………
CLASS: SS 3
TOPIC: GOVERNMENT ACCOUNTING
CONTENTS: Public Sector Accounting:
(a) Public sector accounting

(b) Sources of government revenue
(c) Capital expenditures.
(d) Recurrent expenditures.
(e) Head and sub-heads
(f) Capital and revenue account.
SUB-TOPIC 1: PUBLIC SECTOR ACCOUNTING:

Public sector can be defined as the government sector whose affairs or services are made known
to the public (people in general) in aggregate and in detail reflecting all transactions involving
the receipt, transfer and disposition of its fund and properties.
Public sector accounting can also be defined as the process of recording, analyzing and
interpreting the financial transactions of the government.
Government accounting shows the receipts and disbursement of public funds in all levels of
government. This is governed by the constitution of the Federal Republic of Nigeria 1979 as
amended in 1989.
PURPOSE OF PUBLIC SECTOR ACCOUNTING:
1. To serve as a basis for decision making

2. To depict the source of government revenue
3. To serve as a basis for appraisal of the performance of management.
4. To serve as the basis for planning and making budget. Etc.
EVALUATION:
1. What is public sector accounting?

2. Mention four purposes of public sector accounting
SUB-TOPIC 2: SOURCES OF GOVERNMENT REVENUE
1. Direct taxes:
 Personal income tax
 Company income tax
 Petroleum tax
 Capital gain tax
2. Indirect taxes:
 Import duties
 Export duties
 Tariffs
 Export duties
3. Mining:
 Royalties on mineral resources e.g. Tin, gold etc.
 Revenue from export of crude oil
 Quarrying licenses
 Mining fees
4. Fees:
 Court fees
 International passport fees
 Visa fees
 Advertisement fees (Bill board)
5. Earning and sales:
 Federal government investments
 Sales of government properties e.g land, building
 Proceeds from prison farms
6. Licenses and internal revenue:
 Arms and ammunition licenses fees
 Registration and licenses fees e.g company registration, club registration fees
 Churches registration fees
7. Interest and repayment:
 Interest and repayment of loans granted to state government and government
worker.
 General loan interest.
8. Rent on government properties:
 Income from rent of government quarters
 Rent of government offices
 Rent of government vehicles
 Federal government land fees.
9. Armed forces:
 Income from armed forces educational receipts
 Sales of small weapons
 Sales of armoured tanks, aircrafts
10. Miscellaneous:
Any other income not mentioned above e.g money recovered from drug pushers etc.
EVALUATION:
Essay:
1. Outline the major sources of revenue to:

 Federal government
 State government
 Local government
SUB-TOPIC 3: GOVERNMENT EXPENDITURE:government expenditure can be classified

into two such as:
 Capital Expenditure
 Recurrent Expenditure
Capital Expenditure: This is the expenditure incurred by government which adds to the value
of fixed asset. Such as: purchases of Buildings, plants machinery, motor vehicles, constructions
of bridges and roads, constructions of rails etc.
Recurrent Expenditure: These are day-to-day costs of running the activities of an organization
of government department and ministries. These are: wages and salaries,
Transportation, repairs of motor vehicle, maintenance of buildings, payment for services. Etc
ILLUSTRATION:
The Federal Ministry of Works and Housing incurred the following in 2013.
Construction of estates in Garki Central area 350,000,000.00
Bought wires 200,000,000.00
Purchase four site motors 35,000,000.00
Purchases Transformer 505,300,000.00
Construction of the roads 455,000,000.00
Paid civil engineers 12,000,000.00
Paid wages to the drivers 500,000.00
Renovate some buildings 32,000,000.00
Maintenance of the buildings 44,000,000.00
Constructions of General Hospital 205,000,000.00
Purchases of spare parts 17,000,000.00
You Are Required To Prepare Statement Of:
1. Capital Expenditure
2. Recurrent Expenditure
SUGGESTED SOLUTION:
STATEMENT OF CAPITAL EXPENDITURE

PARTICULARS AMOUNT
N
Purchases four site motor 35,000,000.00
Construction of estates in Garki Abuja 350,000,000.00
Purchases of transformer 505,000,000.00
Construction of roads 455,000,000.00
Construction of General Hospital 205,000,000.00
1,550,300,000.00
STATEMENT OF RECURRENT EXPENDITURE

PARTICULARS AMOUNT
N
Bought wires 200,000,000.00
Paid civil engineers 12,000,000.00
Paid wages to the drivers 500,000.00
Maintenance of the Building 44,000,000.00
Purchases of spare parts 17,000,000.00
273,500,00.00
EVALUATION:
1. List three types of Direct Tax.

2. Mention two types of Mining as a source of Revenue to government.
SUB-TOPIC 4: HEAD AND SUB-HEAD:
HEADS: A Head is a code in public sector account, giving as a number and

restricted to each items of the government revenue and expenditure for the purpose
control of the expenditure and the allocation of the revenue.
SUB-HEAD: sub-head is under the Head or code. It is relates to each account sub
allocated under each head. Examples:
HEAD ITEMS
42 personal emoluments
SUB-HEAD (under the Head)

01 Basic Salaries
02 Rent allowance
03 Responsibility allowance
04 Tax deduction
FUND ACCOUNT:
Fund is a separate fiscal and accounting entity in which resources are held, governed by special
regulations segregation from other funds and established for special purposes on which resources
of the fund may be expended.
CLASSIFICATION OF FUND:
Government fund: these are fund used to account for resources derived from the general taxing
and other revenue of government e.g.
 Consolidated Revenue Fund
 Development fund
 Contingency fund
Proprietary fund: these are fund used to account for resources meant for business like
operations of the government i.e. fund used for parastatals.
Fiduciary fund: these are fund used to account for resources held and managed by the
government in the capacity of custodian trustee e.g. Trust fund and Deposit fund.
TYPES OF FUNDS
1. General Fund: these are fund established to account for resources devoted to finance the
general administration or services of the government. It is usually called Consolidated
Revenue Fund/ Federal Government Account/ Current Fund.
2. Capital Project Funds: the receipts and disbursement of all money used for the
acquisition of capital assets are accounted for by Capital Project Fund. This is the Fund
which is also being called Development Fund.
3. Contingencies Fund that is specifically set aside for taking care of unforeseen
expenditures of unanticipated event. e.g. expenses ion national disasters.
4. Trust and Agency Fund: these are funds used to account for resources held by
government as trustee. It is used for the purpose stated in the trustee deed. E.g. police
Reward Fund, Armed Forces Comfort Fund, and Service Reward Fund.
5. Debt service Funds: this is created to account for the resources devoted to the payment
interest and principal on long-term general obligation debt.
6. Special Fund: it is created for a specific purpose or function e.g. Personal Advance
Fund, Treasury clearance Fund.
7. Revolving Fund: this is a fund created to financial services provided by a designated

Department to other designated department. e.g. reimbursement loan of N50m giving to
each university to take care of the car refurbishment. It is also called Working Capital
fund.
REASONS FOR FUND ACCOUNT IN PUBLIC SECTOR
 Financial control
 Future analysis and planning
 Meeting government target
 Diagnostic purposes
 Planning purpose
SUB-TOPIC 5: CAPITAL AND REVENUE ACCOUNT:
The government revenue is classified into two:
 Revenue receipt
 Capital receipt
1. Revenue Receipt: This is the total amount of revenue collected by the government of
a country from the major sources income.
2. Capital Receipt: These are the total revenue received from proceeds of sales of
assets and loans tied to projects. E.g. sales of assets, loans from institution tied to
project etc.
ILLUSTRATION
The following balances have been extracted from the book of YOYO local government for the
year ended 31st December 2013
HEAD ITEMS ₦
General revenue balance 500,000.00

201 Salaries and wages 300,000.00
202 Maintenance of road 230,000.00
204 Telephone and postages 120,000.00
205 License 210,000.00
301 Lines 342,000.00
302 Repairs of motor vehicles 111,000.00
303 Statutory Allocation 56,000.00
304 Renovations of halls 23,000.00
305 VAT allocation 500,000.00
401 Interest on fixed deposit accounts 45,000.00
402 Rent from shops 230,000.00

404 Sanitation fees 332,000.00
503 Sinking of bore holes 200,000.00
504 Constructions of market 234,000.00
You are required to prepare a revenue and expenditure Statement for the YOYO local
government for the year ended 31st December, 2013
SUGGESTED SOLUTION
REVENUE AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31ST

DECEMBER 2013
HEAD EXPENDITURE AMOUNT HEAD REVENUE AMOUNT
N N
201 Salaries 300,000.00 Balance 5000,000.00
202 Maintenance of roads 230,000.00 205 Licenses 210,000.00
204 Telephones & postage 120,000.00 301 Fines statutory alloc. 342,000.00
302 Repairs of vehicle 111,000.00 401 Interest on depot. 45,000.00
303 Stationery 56,000.00 305 VAT allocation 5000,000.00
304 Renovation of Halls 23,000.00 402 Rent from shops 230,000.00
503 Sinking of borehole 200,000.00 404 Sanitation 332,000.00
504 Construction of Market 234,000.00
EVALUATION:
Essay:
1. Essential financial Accounting page 391 Exercise 37. 3A

2. Essential Financial Accounting page 393 Exercise 37.5
GENERAL EVALUATION:
Objectives:
1. The two major government revenue are A. Capital and Receipt B. Capital and
Recurrent C. Capital and Expenditure D. Capital and Revenue.
2. Which of the following is NOT part of Re-current Expenditure? A. Purchase of
furniture B. Paid for remuneration of staff C. Bought plants and Machinery D.
Building
3. All the following are part of capital Expenditure EXCEPT……….. A. Salaries and
wages B. Sundry expenses C. Motor vehicles D. Spare parts of buildings
4. The following are sources of revenue to government on indirect taxes EXCEPT
A. Import duties B. Export duties C. company tax. D. Export duties
5. Which of the following is NOT the purpose of Public sector accounting? A. To
serve as a basis for decision making B. To depict the source of government revenue.
C. To serve as a basis for appraisal of the performance of management. D. To serve as
the basis for disputes and making budget.
6. Which of the following is revenue receipt? A. receipt from the sales of goods. B.
rents from promises sublet. C. interest on saving account. D. cash on sales of fixed
assets.
7. Which of these is NOT a capital expenditure to the government? A. beds B.
theatre equipment C. X-ray Machine D. drugs
8. Which of the following is the basis of accounting in the civil service?A.accrual B.
cash C. incomes D.Expenditure
9. Which of the following is the source of local government revenue? A. personal
income tax B. Market rate C. sale of Armed forces property D. Repayment (interest
and general)
Use the following information to answer questions 10 and 11.
The Education Department of DLHS local government incurred the following expenses in
2013.
Construction of classroom 500,000
Purchase of table and chairs 50,000
Purchase of textbooks for library 40,000
Annual inter-house sport competition 20,000
Payment of teachers salary 80,000
10. Capital expenditure for the year was? A. N690, 000 B.N590, 000 C N500, 000 D.
N140, 000.
11. Recurrent Expenditure of the year was A. N170,000 B.N120,000 C.N100,000
D.N180,000
WEEK END ASSIGNMENT: Prepare a slide for presentation on the sources of Revenue to
government. Group 1 to 5
PRE-READING ASSIGNMENT: Past question and Examination Revision
WEEK END ACTIVITY: Past Questions and preparation for Exams.
REFERENCE:
O.A. Longe, etal; Essential financial Accounting, tonad publisher, Lagos, Nigeria 2012.
Frank Wood, Business Accounting 1, Longman, Nigeria, 2008.
WEEK 6-10 Intensive Revision DATE------------------------------

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SS 3 FIRST TERM: E-LEARNING NOTES

SUBJECT: FINANCIAL ACCOUNTING CLASS: SS3

5. Public Sector Accounting :

SUBJECT: FINANCIAL ACCOUNTING

TOPIC: Revision of last term’s work

CONTENT: Review the last promotion examination question paper.

SUBJECT: FINANCIAL ACCOUNTING

 Meaning of capital market

Capital Market Regulator:

Classification of Capital Market

Securities and Exchange Capital Market

Stock market Bond Market

1. Define capital market

2. Mention two classes of capital market

 To develop market economies

1. Outline six reasons for capital market regulation

Objectives of statutory regulation

Principles of good regulation

Nigerian stock exchange

Classification of stock exchange

Secondary market: This is where second hand stocks are traded.

Roles of stock exchange

 Raising capital for business

1. Define stock exchange

2. Mention and explain two classes of stock exchange

3. Outline five roles of stock exchange

Operation of the Securities and Exchange Commission

1. Briefly explain the operation of the stock exchange

 Market failures: These are regulations due to inefficiency

1. Mention and explain two types capital market regulation

2. List five principles of good regulation

1. Capital market is made up of the following

A. money market and bond market

B.security market and stock market

C.stock market and bond market

D.stock market and security market

2. Capital market may be classified into one of the following categories:

a. financial market and instrument market

b.primary market and secondary market

c.primary market and tertiary market

d.secondary market and tertiary market

3. One of the following is not an example of regulation types

4. The following are examples of capital market operators except

B.stock exchange C.foreign exchange market D.Onitsha market

A. capital market B.money market C.primary market D.secondary market

1. Define capital market

2. Mention and explain two classes of capital market

3. Briefly discuss the two types of capital market regulation

4. Highlight six reasons for capital market regulation

1. What do you understand by Nigerian Stock Exchange?

SUBJECT: FINANCIAL ACCOUNTING

i. Interest paid method

ii. Interest suspense method

Interest paid method

a. Asset acquired on hire purchase terms:

DR: Hire purchase asset account

CR: Hire purchase creditor account