Practice ICAN financial accounting 2024 Past Questions

Question 1 View Details

In the process of drawing up financial statements, adjustments are made for prepaid expenses and accrued expenses in order to comply with which fundamental accounting concept?

A. Matching

B. Prudency

C. Aggregation

Correct D. Accrual

E. Consistency

Correct Answer: D

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Question 2 View Details

A business proprietor failed to maintain proper records, but you managed to ascertain that his opening capital, closing capital and drawings during the year were N225,000, N260,000 and N10,000 respectively. Determine the profit for the period.

A. N25,000

Correct B. N45,000

C. N55,000

D. N65,000

E. N75,000

Correct Answer: B

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Question 3 View Details

Which of the following statements correctly differentiates bad debt from doubtful debt?

A. Bad debt arises when a customer is in difficulty but might be able to recover from it, while doubtful debt is an amount owed by a customer that the business believes it will never be able to collect

Correct B. Bad debt is an amount owed by a customer that the business believes it will never be able to collect, while doubtful debt is an amount owed by a customer that the business hopes to collect despite the customer's difficulties.

C. Bad debt is an amount owed by a customer that the business believes it might be able to collect despite difficulties, while doubtful debt arises when a customer is dishonest and has no intention to pay

D. Bad debt occurs when a customer disputes whether a contract has been fulfilled or not, while doubtful debt arises when a customer is declared bankrupt or insolvent.

E. Bad debt refers to the dishonesty of a customer, while doubtful debt is an amount owed by a customer that the business believes it might not be able to collect, but still hopes to do so.

Correct Answer: B

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Question 4 View Details

Use the information below to answer questions 4 and 5:

A company has several motor cars that are accounted for as non-current
assets. As at April 1, Year 2, the cost of the cars was ₦300,000, and the
accumulated depreciation was ₦160,000.
During the month of April, the company bought a new car costing
₦77,500 and received a part-exchange allowance of ₦20,000 against an
old car. The old car originally cost ₦70,000 and its accumulated
depreciation is ₦45,000.

What is the carrying amount of the motor cars as at April 1, Year 2?

A. ₦120,000

Correct B. ₦140,000

C. ₦180,000

D. ₦220,000

E. ₦240,000

Correct Answer: B

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Question 5 View Details

What is the gain or loss on disposal of the old car?

A. ₦5,000

Correct B. ₦(5,000)

C. ₦7,000

D. ₦(7,000)

E. ₦10,000

Correct Answer: B

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Question 6 View Details

Which of the following about goodwill is true?

A. Goodwill is always recognised as an intangible asset in entity's financial statements

B. Goodwill represents the total value of a business assets and liabilities

C. The value of a business is solely based on the value of its net assets

Correct D. Goodwill reflects a business potential to generate future profits, making it an intangible asset

E. Successful businesses do not have goodwill as it is not considered a valuable aspect during acquisitions

Correct Answer: D

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Question 7 View Details

How much inventories did the owner of the shop withdraw during the period, if the opening and closing inventories for resale were ₦56,250 and ₦48,750, respectively, and there were no sales during the period?

A. ₦5,750

B. ₦6,500

C. ₦7,250

Correct D. ₦7,500

E. ₦8,000

Correct Answer: D

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Question 8 View Details

Which of the following best describes the concept of digitisation in accounting?

A. Digitisation is the process of converting digital files into physical formats for easier storage and retrieval

B. Digitisation refers to the use of digital technologies to create invoices and receipts

Correct C. Digitisation involves converting physical accounting records, such as invoices and receipts, into a computer-readable format using digital technologies

D. Digitisation is the practice of manually entering accounting data into a computer system to ensure accuracy

E. Accounting digitisation is solely focused on minimising human involvement in financial processes to increase efficiency

Correct Answer: C

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Question 9 View Details

Why is it important to record the substance of transactions rather than just their legal form in financial statements?

A. Legal principles are often complex and difficult to apply in accounting

B. Financial statements must comply with tax regulations, not legal principles

Correct C. The legal form of transactions does not accurately represent their financial impact

D. Recording transactions based on their legal form is easier and more straightforward

E. Accountants prefer to use financial substance rather than legal form for simplicity

Correct Answer: C

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Question 10 View Details

Which of the following correctly explains the links between the statement of financial position and the statement of profit or loss?

A. The statement of profit or loss shows the financial position of a business at a given point in time, while the statement of financial position shows the profit or loss for a period of time

B. The statement of financial position affects the statement of profit or loss, by adding to the owner's capital

Correct C. The statement of profit or loss affects the statement of financial position, by either adding to or reducing the owner's capital

D. The statement of profit or loss affects the statement of financial position, by adding to and reducing the owner's capital

E. The statement of financial position affects the statement of profit or loss, by reducing the owner's capital

Correct Answer: C

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Question 11 View Details

Which of the following correctly describes the accruals concept in accounting?

A. Expenses are recognised in the statement of profit or loss in the same period as the related sales

B. Income is recognised in the statement of profit or loss when cash is paid

C. Sales are recognised in the statement of profit or loss when the related expenses are paid

D. Expenses are recognised in the statement of profit or loss as they are paid

Correct E. Income and expenses are recognised in the statement of profit or loss as they arise

Correct Answer: E

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Question 12 View Details

Given the following information: Total assets at December 31, Year 2: ₦150,400 Total assets at December 31, Year 1: ₦125,000 Total liabilities at December 31, Year 2: ₦43,200 Total liabilities at December 31, Year 1: ₦34,800 Additional capital input on December 31, Year 2: ₦10,000 What was the profit of the business for the year ended December 31, year 2?

Correct A. ₦7,000

B. ₦17,000

C. ₦27,000

D. ₦90,200

E. ₦107,200

Correct Answer: A

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Question 13 View Details

Which of the following items is classified differently from others on the statement of financial position?

A. Inventories

Correct B. Intangible assets

C. Prepayments

D. Cash and cash equivalents

E. Trade receivables

Correct Answer: B

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Question 14 View Details

Which of the following best describes saving a PDF invoice in the cloud?

A. Data

B. Digitalisation

Correct C. Storage

D. Safekeeping

E. Documentation

Correct Answer: C

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Question 15 View Details

What is the journal entry required to record the amount due to a retired partner if he is not paid immediately in cash?

Correct A. Dr. the retired partner‟s capital account Cr. loan account in his name

B. Dr. loan account in his name Cr. the retired partner‟s capital account

C. Dr. the retired partner‟s capital account Cr. Statement of profit or loss

D. Dr. loan account in his name Cr. Statement of profit or loss

E. Dr. loan account in his name Cr. cash book

Correct Answer: A

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Question 16 View Details

The primary purpose of performing bank reconciliations in accounting is to

A. Ensure that the balance in the cash at bank account and the balance shown in the bank statement are always the same

Correct B. Identify and correct errors in accounting records related to cash transactions with the bank

C. Combine the cash book balance with the bank statement balance to get the total cash position

D. Reconcile the balances of other accounts in the general ledger with the bank statement

E. Verify the accuracy of non-cash transactions in the accounting Records

Correct Answer: B

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Question 17 View Details

Which of the following corresponding examples correctly match the data structure form?

Correct A. Linear - binary, heaps, space partitioning

B. Tree - arrays, lists, stack

C. Hash - decision, directed, acyclic

D. Graphs - distributed hash table, hash tree

E. Stack - arrays, lists, queue

Correct Answer: A

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Question 18 View Details

What does a receipt and payment account represent in accounting?

A. A summary of cash receipts and payments, including both accruals and cash transactions

Correct B. A summary of cash receipts and payments during the accounting period, without considering accruals

C. A record of all revenue transactions in the accounting period, irrespective of cash inflows or outflows

D. A record of all capital transactions, including cash receipts and payments, during the accounting period

E. A record of all non-cash transactions in the accounting period, excluding cash receipts and payments

Correct Answer: B

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Question 19 View Details

What role does the statement of changes in equity play in a company's financial reporting and decision-making?

A. It helps in assessing a company's non-current assets and depreciation methods

B. It provides a detailed breakdown of a company's cash flows from operating, investing and financing activities

Correct C. It presents a summary of a company's equity transactions, aiding stakeholders in understanding financial performance and ownership changes over time

D. It shows the company's income and expenses, enabling stakeholders to evaluate profitability and cash generation

E. It outlines a company's long-term debt obligations and interest expense, assisting stakeholders in assessing capital structure and financial stability

Correct Answer: C

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Question 20 View Details

The difference between the assets and liabilities of a not-for-profit organisation is called

A. Net asset

B. Net liability

Correct C. Accumulated fund

D. Working capital

E. Net capital

Correct Answer: C

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Question 1 View Details

Requirements

(a)

Explain the information needs of different stakeholders who use financial statements and how financial statements fulfill those needs.

(b)

Briefly explain the impact of digital technologies on accounting systems, focusing on machine learning and artificial intelligence, data analytics, mobile accounting, and specialised accounting software.

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Question 2 View Details

Requirements

(a)

Examine the internal control procedures over cash receipts in a business.

(b)

Ladu Limited has the following transactions related to sales and purchases in the month of July 2023: July 2 Purchases from Abe Limited: ₦300,000 5 Sales to Jide Limited: ₦150,000 9 Purchases returns to Abe Limited: ₦50,000 12 Sales returns from Jide Limited: ₦20,000 14 Purchases from Bola Limited (offering a trade discount of 5%): ₦400,000 15 Sales to Yau Limited: ₦200,000 22 Sales returns from Yau Limited: ₦30,000 25 Sales to Zeb Limited (cash discount of 2.5% granted): ₦250,000 26 Purchases from Cletus Limited: ₦250,000 31 Purchases returns to Cletus Limited: ₦30,000 Required: (i). Record the items in the relevant books of prime entry of Ladu Limited in July 2023.

(ii)

State how the postings will be done from the books of prime entries into the ledgers.

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Question 3 View Details

Requirements

(a)

List THREE possible reasons for differences between the suppliers‟ statement balance and the suppliers‟ account balance in the ledger and explain how these differences can be identified and resolved during the reconciliation process.

(ii)

Baba Enterprise receivables ledger control account on June 30, 2023 has a debit balance of ₦4,750,000 which did not agree with the net total of the list of receivables ledger balances as at that date. The following errors were discovered: (i) Sales returns of ₦175,000 by Uda have been recorded in Uda‟s account in the receivables ledger but the transaction was not posted to the general ledger; (ii) Credit sales of ₦200,000 to Chioma were not recorded in the control account but were recorded in the personal ledger of Chioma; (iii) An item of goods sold to Abe, ₦312,500, had been entered once in the sales day book but posted to his account twice; (iv) Baba Enterprise had expected Idowu to take advantage of a settlement discount of ₦32,750. Idowu did not settle the account on time to qualify for the discount. This has been recorded correctly in Idowu's own account but not entered in the general ledger; (v) A bad debt amounting to ₦500,000 had been written off in the receivables ledger but had not been posted to the bad debts expense account or entered in the control account; (vi) Debit balances in the receivables ledger, amounting to ₦128,750, had been omitted from the list of balances; (vii) Payment of ₦120,000 received from Kwali was posted to the cash book but not recorded in the control account; (viii) Credit sales was overstated by ₦250,000 in the control account; and (ix) No entry had been made in the control account in respect of the transfer of a debit of ₦89,000 from Taju's account in the receivables ledger to his account in the payables ledger. Required: i. Make the necessary adjustments in the receivables control account and bring down the adjusted balance.

(b)

Reconcile the adjusted balance with the total balance in the individual receivables ledger account.

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Question 4 View Details

Requirements

(a)

Describe how subsequent costs related to Property, Plant and Equipment (PPE) are treated in accordance with IAS 16 under the recognition principle.

(b)

Buma Limited recently acquired a piece of equipment for its operations. The equipment was purchased for ₦1,600,000, and it has an estimated useful life of 5 years with no residual value. The company estimates the rates of depreciation under the straight-line method to be 20% and the reducing balance method to be 30%. It is still considering which of the two depreciation methods to adopt and requires ledger records to make a final decision. Required: Present the ledger accounts to record the transaction for the first three years using: i. The straight-line method; and (6 Marks) ii. The reducing balance method. (6 Marks)

(c)

Show the extracts from the statement of financial position at the end of the third year for the two methods.

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Question 5 View Details

Requirements

(a)

Explain the essential components involved in measuring inventories in compliance with IAS 2-Inventories.

(b)

Bala PLC prepares its financial statements on December 31, 2023. At the end of the year, Bala PLC holds three different inventory items. The following information is available for each item: Item A: Cost as at December 31, 2023 ₦1,500,000 Estimated selling price ₦1,800,000 Estimated costs of completion, disposal and selling expenses ₦200,000 Item B: Cost as at December 31, 2023 ₦2,250,000 Estimated selling price ₦2,000,000 Estimated costs of completion, disposal, and selling expenses ₦300,000 Item C: Cost as at December 31, 2023 ₦3,000,000 Estimated selling price ₦3,200,000 Estimated costs of completion, disposal and selling expenses ₦400,000 Required: i. Calculate the net realisable value (NRV) for each inventory item. (6 Marks) Determine the lower of cost and NRV for each inventory item. (3 Marks)

(ii)

Calculate the total lower of cost and NRV adjustment required for inventory of Bala PLC's.

(iii)

Prepare the necessary journal entry to adjust the inventory to its lower of cost and NRV.

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ICAN 2024 Financial Accounting | Mixed

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Detailed Essay Solution & Marking Scheme Available

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Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

Detailed Essay Solution & Marking Scheme Available

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