Practice gce model questions vol1 financial_accounting 2017 Past Questions

Question 1 View Details

Company XYZ prepared the following trial balance (amounts in £'000): Sales 1,200; Opening stock 150; Purchases 720; Closing stock 180; Operating expenses 210; Interest expense 30; Tax expense 45; Depreciation—building 40; Depreciation—machinery 35; Goodwill (carrying amount) 50; Provision for doubtful debts 20. Trade receivables at year‑end are 200. The company's policy is to amortise goodwill at \(10\%\) per year and to set the provision for doubtful debts at \(5\%\) of trade receivables. Share capital is 300 and retained earnings brought forward are 80. Calculate the amount of retained earnings to be shown in the statement of financial position (in £'000).

A. 250

B. 240

Correct C. 235

D. 225

Correct Answer: C

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Question 2 View Details

An authority's cash receipts for the year consist of revenue receipts of £2,500,000 and a capital grant of £300,000. Cash payments are £2,200,000 for expenditure (excluding depreciation) and £30,000 interest on borrowings. Accrued revenue income of £80,000 has not yet been received and accrued expenditure of £70,000 has not yet been paid. The authority started the year with borrowings of £400,000, repaid £120,000 during the year and incurred no other borrowing. Using an accrual basis, determine the net borrowing for the year (i.e., the change in borrowings, expressed in £'000).

Correct A. -120

B. -100

C. -130

D. -150

Correct Answer: A

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Question 3 View Details

A manufacturer uses process costing with two departments. Department 1 (Materials) started 10,000 units, transferred 9,000 units to Department 2 and has 1,000 units in ending work‑in‑process, 30 % complete for materials. The only cost in Department 1 is materials costing £120,000. Department 2 received the 9,000 units, completed 8,500 units and has 500 units in ending work‑in‑process, 40 % complete for conversion. In Department 2 the costs are: materials £30,000, labour £45,000 and overhead £25,000. Finished goods inventory at the start was nil. The company sold 8,000 units at £50 each and has 500 units remaining in finished goods. Using the weighted‑average method, calculate the profit per unit sold (rounded to two decimal places).

Correct A. 25.72

B. 27.10

C. 22.33

D. 24.58

Correct Answer: A

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Question 4 View Details

The following information relates to a sole trader for the year (amounts in £): Sales 500,000; Opening stock 60,000; Purchases 300,000; Closing stock 70,000; Operating expenses (excluding depreciation) 80,000; Depreciation of machinery 20,000; Interest expense 10,000; Tax expense 15,000. Compute the net profit margin as a percentage of sales (rounded to the nearest whole percent).

A. 19

Correct B. 17

C. 22

D. 15

Correct Answer: B

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Question 5 View Details

What is the fundamental accounting equation?

A. Liabilities = Assets + Equity

B. Equity = Assets - Liabilities

C. Assets + Liabilities = Equity

Correct D. Assets = Liabilities + Equity

Correct Answer: D

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Question 6 View Details

The Purchases Control Account for the year shows an opening creditors balance of \(£10{,}000\) (credit) and purchases on credit of \(£45{,}000\) (credit). The closing creditors balance is \(£9{,}500\) (credit). Using this information, determine the total amount of purchase returns that should be recorded in the Purchases Returns subsidiary ledger, given that a return of \(£2{,}300\) was omitted from the subsidiary ledger.

A. 45000

B. 45200

Correct C. 45500

D. 45800

Correct Answer: C

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Question 7 View Details

A trial balance shows total debits of \(£10{,}000\) and total credits of \(£10{,}072\), giving a difference of \(£72\). The only error is a transposition of digits in a single debit entry, where the amount was entered as \(£19\) instead of the correct amount. What is the correct amount that should have been recorded?

Correct A. 91

B. 27

C. 109

D. 19

Correct Answer: A

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Question 8 View Details

The following information is available for a company whose records for the year are incomplete: - Cash receipts from customers: \(£120{,}000\) - Cash payments to suppliers: \(£70{,}000\) - Cash payments for operating expenses (excluding salaries): \(£15{,}000\) - Salaries paid: \(£20{,}000\) - Depreciation on plant (straight‑line) for the year: \(£8{,}000\) - Opening stock of raw materials: \(£12{,}000\) - Closing stock of raw materials: \(£9{,}000\) - Purchases of raw materials on credit (not recorded in cash book): \(£30{,}000\) - Sales on credit (not recorded in cash book): \(£50{,}000\) - Bad debts written off: \(£2{,}000\) - Interest received (bank): \(£1{,}200\) - Interest paid on loan: \(£1{,}500\) Using the income‑statement approach, calculate the net profit for the year.

A. 23200

Correct B. 21700

C. 23700

D. 22000

Correct Answer: B

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Question 9 View Details

The Sales Ledger Control Account has an opening debit balance of \(£5{,}000\). During the year credit sales amounted to \(£48{,}000\) and cash received from customers recorded in the control account is \(£42{,}500\). The subsidiary ledger shows that Customer A owes \(£2{,}300\) (debit). What is the total balance of all other customers in the subsidiary ledger at year‑end?

A. 7200

Correct B. 8200

C. 10200

D. 9200

Correct Answer: B

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Question 10 View Details

A company receives \(£2{,}500\) from a customer for services that will be performed next month. How should this transaction be recorded in the journal?

A. Debit Unearned Revenue £2,500; Credit Bank £2,500

B. Debit Accounts Receivable £2,500; Credit Unearned Revenue £2,500

C. Debit Bank £2,500; Credit Service Revenue £2,500

Correct D. Debit Bank £2,500; Credit Unearned Revenue £2,500

Correct Answer: D

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Question 11 View Details

The trial balance of XYZ Ltd for the year ended 31 March 2017 shows the following items (all figures in Naira): Sales 500,000; Cost of goods sold 300,000; Salaries expense 80,000; Rent expense 20,000; Interest expense 10,000; Tax expense 15,000; Opening retained earnings 30,000; Plant and equipment (gross cost) 200,000. Depreciation is charged at 5% of the gross cost of plant and equipment. No other adjustments are required. Calculate the closing retained earnings at the end of the year.

A. 100,000

Correct B. 95,000

C. 85,000

D. 90,000

Correct Answer: B

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Question 12 View Details

On 1 June 2017, ABC Co purchased a piece of equipment for \(\text{₦}120,000\) cash. The supplier offered a 2% cash discount if payment is made within 10 days. The company paid within the discount period. Record the journal entry to reflect this transaction.

A. Debit Equipment 120,000; Credit Cash 120,000; Credit Purchase Discounts Received 0

B. Debit Equipment 117,600; Credit Cash 117,600; Credit Purchase Discounts Received 0

C. Debit Equipment 120,000; Credit Cash 118,800; Credit Purchase Discounts Received 1,200

Correct D. Debit Equipment 120,000; Credit Cash 117,600; Credit Purchase Discounts Received 2,400

Correct Answer: D

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Question 13 View Details

Three partners A, B and C share profits in the ratio 3:2:1. Their original capital balances are A \(\text{₦}150,000\), B \(\text{₦}100,000\) and C \(\text{₦}50,000\). A new partner D is admitted, paying \(\text{₦}84,000\) for a 20% share of the partnership. At the same time the partnership revalues a building whose original cost is \(\text{₦}200,000\) with accumulated depreciation \(\text{₦}50,000\); its market value is now \(\text{₦}240,000\). Goodwill of \(\text{₦}30,000\) is also recognised. Goodwill and the revaluation surplus are shared among the existing partners in the profit‑sharing ratio. The cash paid by D is less than the value of his 20% share, the difference being treated as a bonus to the existing partners, also shared in the profit‑sharing ratio. Determine (a) the bonus each existing partner receives and (b) the final capital balances of A, B, C and D after D's admission.

Correct A. Bonus - A: 8,400; B: 5,600; C: 2,800. Final capitals - A: 218,400; B: 145,600; C: 72,800; D: 84,000

B. Bonus - A: 8,400; B: 5,600; C: 2,800. Final capitals - A: 218,400; B: 145,600; C: 72,800; D: 90,000

C. Bonus - A: 9,000; B: 6,000; C: 3,000. Final capitals - A: 219,000; B: 146,000; C: 73,000; D: 84,000

D. Bonus - A: 7,200; B: 4,800; C: 2,400. Final capitals - A: 217,200; B: 144,800; C: 72,000; D: 84,000

Correct Answer: A

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Question 14 View Details

The trial balance of LMN Ltd for the year ended 31 December 2017 (figures in Naira) is as follows: Sales 150,000; Purchases 80,000; Rent expense 12,000; Salaries expense 30,000; Discount received 2,000; Discount allowed 1,500; Trade receivables 20,000; Trade payables 15,000; Capital 50,000; Drawings 5,000. The total of the debit side equals the total of the credit side. However, the following errors have been discovered: (i) a purchase of equipment for \(\text{₦}10,000\) was omitted from the books; (ii) a payment of \(\text{₦}3,000\) to a creditor was recorded twice as an expense; (iii) a sales return of \(\text{₦}4,000\) was omitted from sales and not recorded as a reduction in trade receivables. Determine the corrected profit for the year.

A. 10,500

B. 13,000

Correct C. 11,500

D. 12,500

Correct Answer: C

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Question 15 View Details

The following partial trial balance of PQR Ltd for the year ended 31 March 2017 (figures in Naira) is given: Sales 200,000; Purchases 120,000; Opening stock 30,000; Salaries expense 25,000; Rent expense 10,000; Discount allowed 2,000; Discount received 1,500; Interest expense - unknown; Opening capital 50,000; Drawings 15,000; Cash at bank 8,000; Trade receivables 20,000; Trade payables - unknown; Loan 5,000. The profit for the year is known to be \(\text{₦}30,000\). Using this information, determine the closing stock, the interest expense and the amount of trade payables. Give your answers to the nearest Naira.

Correct A. Closing stock 48,000; Interest expense 32,500; Trade payables 6,000

B. Closing stock 47,000; Interest expense 33,000; Trade payables 7,000

C. Closing stock 50,000; Interest expense 35,000; Trade payables 6,500

D. Closing stock 45,000; Interest expense 30,000; Trade payables 5,500

Correct Answer: A

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Question 16 View Details

A local government department had an original budget of \(12{,}000{,}000\) ₦. During the year it recorded actual receipts of \(13{,}500{,}000\) ₦ and actual payments of \(11{,}200{,}000\) ₦. At year‑end the following adjustments are required: (i) accrued expenses of \(450{,}000\) ₦ not yet paid, (ii) unearned revenue of \(300{,}000\) ₦ received but not earned, and (iii) depreciation of capital assets amounting to \(200{,}000\) ₦. Using the accrual basis, calculate the adjusted surplus (or deficit) to be reported in the Comprehensive Financial Report.

Correct A. 1350000

B. 1200000

C. 1500000

D. 1650000

Correct Answer: A

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Question 17 View Details

During a month a company records the following five transactions:\n1. Bought office supplies on credit for \(45{,}000\) ₦.\n2. Sold goods for cash \(120{,}000\) ₦.\n3. Paid the electricity bill by cheque \(15{,}000\) ₦.\n4. Purchased raw material for cash \(80{,}000\) ₦.\n5. Received a bank loan by cheque \(200{,}000\) ₦.\nFor each transaction, state the appropriate book of original entry (Cash Book, Sales Journal, Purchases Journal, etc.). Then calculate the total debit amount recorded in the Purchases Journal for cash purchases only.

A. 120000

B. 200000

C. 45000

Correct D. 80000

Correct Answer: D

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Question 18 View Details

A journal entry is made to record the purchase of equipment on credit. The entry includes a debit to Equipment of \(250{,}000\) ₦ and a credit to Cash of \(50{,}000\) ₦ for a partial payment made at the same time. What amount should be credited to Accounts Payable to balance the entry?

Correct A. 200000

B. 150000

C. 300000

D. 250000

Correct Answer: A

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Question 19 View Details

The cash book for a company shows an opening bank balance of \(500{,}000\) ₦. During the month the following cash transactions occurred:\n- Receipts: cash sales \(300{,}000\) ₦, loan received \(150{,}000\) ₦, interest received \(5{,}000\) ₦.\n- Payments: rent \(80{,}000\) ₦, supplier \(120{,}000\) ₦, salaries \(70{,}000\) ₦, electricity \(15{,}000\) ₦.\nThe bank statement at month‑end shows a closing balance of \(735{,}000\) ₦. However, there are outstanding checks totalling \(25{,}000\) ₦ and deposits in transit of \(10{,}000\) ₦. Calculate (a) the cash book closing balance, (b) the adjusted bank balance after reconciliation, and (c) the difference between the cash book balance and the adjusted bank balance.

A. -60000

Correct B. -50000

C. -45000

D. -55000

Correct Answer: B

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Question 20 View Details

A company receives \(100{,}000\) ₦ cash from a customer for services that will be performed next month. Identify the accounts involved and state the debit and credit entries required to record this transaction.

A. Debit Accounts Receivable 100000; Credit Service Revenue 100000

Correct B. Debit Cash 100000; Credit Unearned Revenue 100000

C. Debit Unearned Revenue 100000; Credit Cash 100000

D. Debit Cash 100000; Credit Service Revenue 100000

Correct Answer: B

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Question 21 View Details

A business's cash book shows a closing cash balance of \(\text{₦}45,000\). The bank statement balance at the same date is \(\text{₦}48,500\). The following discrepancies have been identified: - A cheque of \(\text{₦}5,200\) was recorded in the cash book but was later returned by the bank as dishonoured. - A cash receipt of \(\text{₦}3,600\) was omitted from the cash book but appears on the bank statement as a direct credit. - Bank charges of \(\text{₦}150\) were deducted by the bank and not recorded in the cash book. - A payment was entered as \(\text{₦}3,250\) instead of the correct amount \(\text{₦}2,350\). After adjusting the cash book for all of the above, what is the corrected cash‑book balance?

Correct A. ₦44,150

B. ₦43,150

C. ₦45,150

D. ₦44,250

Correct Answer: A

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Question 22 View Details

XYZ Ltd prepared its trial figures for the year ended 31 December 2022 (all figures in \(\text{₦}\) thousands).\n\n- Sales revenue: \(1,200\)\n- Opening stock: \(300\)\n- Purchases: \(500\)\n- Closing stock: \(350\)\n- Operating expenses (excluding depreciation): \(180\)\n- Depreciation on plant and equipment (straight‑line): \(40\)\n- Interest expense: \(20\)\n- Tax rate: \(30\%\)\n- Capital employed at year‑end: \(800\)\n\nAdditional adjustments:\n- An accrued utilities expense of \(15\) not recorded.\n- A doubtful‑debt provision of \(10\) created.\n\nPrepare the profit‑and‑loss account to determine the net profit after tax, then calculate the return on capital employed (ROCE) defined as \(\frac{\text{Net profit before interest and tax}}{\text{Capital employed}}\times 100\). Give the ROCE to one decimal place.

Correct A. 63.1 %

B. 61.8 %

C. 62.5 %

D. 64.0 %

Correct Answer: A

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Question 23 View Details

The trial balance of ABC Co. (amounts in \(\text{₦}\)) is shown below.\n\n| Account | Debit | Credit |\n|---|---|---|\n| Cash | 25,000 | |\n| Bank | 40,000 | |\n| Accounts Receivable | 30,000 | |\n| Inventory | 45,000 | |\n| Equipment | 80,000 | |\n| Accumulated Depreciation - Equipment | | 20,000 |\n| Accounts Payable | | 35,000 |\n| Capital | | 100,000 |\n| Sales Revenue | | 150,000 |\n| Purchases | 55,000 | |\n| Rent Expense | 12,000 | |\n| Interest Income | | 5,000 |\n\nThe debit column totals \(\text{₦}287,000\) and the credit column totals \(\text{₦}310,000\), a difference of \(\text{₦}23,000\). It is known that:\n- A purchase of \(\text{₦}12,000\) was omitted from the Purchases account.\n- The Rent Expense of \(\text{₦}2,000\) was mistakenly entered on the credit side.\n- The Interest Income entry is correct.\n\nAfter correcting these errors, will the trial balance balance? If not, state the amount by which the debit side will still differ from the credit side (indicate whether the debit side is short or in excess).

A. No - the debit side is short by ₦5,000

Correct B. No - the debit side is short by ₦7,000

C. No - the debit side is short by ₦9,000

D. No - the debit side is short by ₦12,000

Correct Answer: B

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Question 24 View Details

State the accounting concept that requires revenue to be recognised when it is earned rather than when cash is received, and briefly explain why this concept is important for financial reporting.

Correct A. Accruals (revenue‑recognition) concept - revenue is recorded when earned, ensuring that income and related expenses are matched in the correct period for reliable financial reporting.

B. Conservatism (revenue‑recognition) concept - revenue is recorded only when it is certain, ensuring that earnings are not overstated for reliable financial reporting.

C. Matching (revenue‑recognition) concept - revenue is recorded when expenses are incurred, ensuring that costs are matched with revenue for reliable financial reporting.

D. Cash (revenue‑recognition) concept - revenue is recorded when cash is received, ensuring cash flows are matched in the correct period for reliable financial reporting.

Correct Answer: A

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Question 25 View Details

The Sales Ledger Control Account shows a closing debit balance of \(\text{₦}120,000\). The subsidiary ledger lists the following customer balances (debit):\n- Customer A: \(\text{₦}45,000\)\n- Customer B: \(\text{₦}30,000\)\n- Customer C: \(\text{₦}25,000\)\n- Customer D: \(\text{₦}15,000\)\nDuring the year, a credit note of \(\text{₦}5,000\) was issued to Customer B but was recorded only in the subsidiary ledger, not in the control account. Additionally, a payment of \(\text{₦}10,000\) received from Customer C was posted to the control account but omitted from the subsidiary ledger. After incorporating the missing entries, what is the adjusted balance of the Sales Ledger Control Account, and does it agree with the total of the subsidiary ledger balances? State the difference, if any.

A. Adjusted control‑account balance = ₦115,000; it does not agree - the control account falls short of the subsidiary total by ₦5,000.

B. Adjusted control‑account balance = ₦120,000; it does not agree - the control account exceeds the subsidiary total by ₦20,000.

C. Adjusted control‑account balance = ₦110,000; it agrees - the control account matches the subsidiary total.

Correct D. Adjusted control‑account balance = ₦115,000; it does not agree - the control account exceeds the subsidiary total by ₦15,000.

Correct Answer: D

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