Observation

Candidates’ performance in this question was fairly attempted by majority of the candidates scoring average marks. The average performance depicts candidates’ lack of in-depth understanding on theunderlying principles guiding the topics in suspense account and accounting ratios.

Some of the suggested responses were:

 (a)       Suspense Account
Suspense account is a temporary accountin which a transaction whose source is unknown is held until sufficient information is available for it to be posted to the correct accounts.                                                                                                 

(b)Reasons for the creation of suspense account by a bookkeeper

• When the totals of a trial balance are not equal, the difference is placed in a suspense account;
• When the bookkeeper is not sure where to post one side of an entry he places the difference in a  suspense account and leave the entry there until its ultimate destination is clarified;
• Suspense account is created to enable an interim financial statement to be prepared before investigations are made.

(c)        Explanation of accounting ratios:

• Gross profit percentage:
• This is the percentage of gross profit made on sales during an accounting period;

OR

• This is the gross profit made on every N100 or D100 worth of sales.

This is calculated as:
Gross profit × 100
Sales

• Current ratio:
• This ratio measures the extent to which a firm’s current assets can be used to discharge its current liabilities.

It is calculated as:
Current assets      :   1
Current liabilities
OR
Current assets: Current liabilities

• Inventories turnover:

This ratio measures the number of times stock or inventories are bought and sold within a given period.

It is calculated as:

Cost of goods sold                             
Average inventory

.