Practice gce model questions vol1 financial_accounting 2021 Past Questions

Question 1 View Details

The Purchases Ledger Control Account for the year ended 31 March shows an opening debit balance of \(£5,000\). During the year the following items were recorded: cash purchases \(£2,000\), purchase returns \(£500\), payments to suppliers \(£6,000\), and an unknown total of credit purchases. The closing balance is a debit of \(£3,000\). Determine the total amount of credit purchases for the period.

A. £3,000

B. £2,800

Correct C. £2,500

D. £2,000

Correct Answer: C

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Question 2 View Details

A company bought new equipment for \(£12,000\) cash and incurred a delivery charge of \(£800\) which was paid by cheque. Record the appropriate journal entry using double‑entry bookkeeping.

A. Debit Equipment £13,600; Credit Cash £12,000; Credit Bank £1,600

B. Debit Equipment £12,800; Credit Cash £12,800; Credit Bank £0

C. Debit Equipment £12,800; Credit Cash £11,200; Credit Bank £1,600

Correct D. Debit Equipment £12,800; Credit Cash £12,000; Credit Bank £800

Correct Answer: D

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Question 3 View Details

A business receives an advance payment of \(£4,000\) for services to be performed evenly over the next four months. At the end of the first month, how much revenue should be recognised and what adjusting journal entry is required?

Correct A. Revenue recognised £1,000; journal entry - Debit Unearned Revenue £1,000, Credit Revenue £1,000

B. Revenue recognised £1,200; journal entry - Debit Unearned Revenue £1,200, Credit Revenue £1,200

C. Revenue recognised £800; journal entry - Debit Unearned Revenue £800, Credit Revenue £800

D. Revenue recognised £1,500; journal entry - Debit Unearned Revenue £1,500, Credit Revenue £1,500

Correct Answer: A

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Question 4 View Details

Using the information below, prepare the Trading Account and calculate the gross profit for the year. Opening stock: \(£8,000\) Purchases: \(£25,000\) Purchase returns: \(£1,500\) Carriage inwards: \(£800\) Closing stock: \(£9,200\) Sales: \(£45,000\) What is the gross profit?

A. £20,700

B. £19,800

C. £22,400

Correct D. £21,900

Correct Answer: D

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Question 5 View Details

The cash book shows a balance of \(£12,500\). The bank statement balance is \(£13,200\). The following items must be taken into account: - Outstanding checks: \(£1,800\) - Deposits in transit: \(£2,300\) - Bank service fee of \(£120\) not yet recorded in the cash book - A cheque was recorded in the cash book as \(£5,000\) instead of the correct \(£500\) - The bank statement includes an erroneous credit of \(£5,820\) that should be deducted Prepare a bank reconciliation statement and state the adjusted cash book balance.

A. £12,380

B. £7,760

Correct C. £7,880

D. £8,000

Correct Answer: C

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Question 6 View Details

Company X uses absorption costing. At the start of the year the overhead absorption rate was \(£5\) per machine hour. During the first two months \(2{,}000\) machine hours were used. From March onward the rate was revised to \(£6\) per machine hour and a further \(1{,}500\) machine hours were used. Direct material cost per unit is \(£12\) and direct labour cost per unit is \(£8\). The company produced \(5{,}000\) units, of which \(4{,}200\) were sold. The actual overhead incurred for the year was \(£31{,}500\). Calculate (a) the closing inventory valuation under absorption costing and (b) the amount of under‑ or over‑applied overhead to be transferred to profit or loss.

A. Closing inventory = £19,560; Under‑applied overhead = £12,000

B. Closing inventory = £20,120; Under‑applied overhead = £11,800

C. Closing inventory = £18,560; Under‑applied overhead = £13,200

Correct D. Closing inventory = £19,040; Under‑applied overhead = £12,500

Correct Answer: D

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Question 7 View Details

On 1 January 2022 a machine was purchased for \(£48{,}000\). It was estimated to have a useful life of 6 years and a residual value of \(£6{,}000\). The company applied straight‑line depreciation for the first three years and then switched to the diminishing‑balance method at a rate of 40 % per annum on the reducing balance (excluding the residual value) from the start of year 4. Determine the depreciation charge for the year ended 31 December 2025 and the carrying amount of the machine on that date.

A. Depreciation charge for 2025 = £9,600; Carrying amount on 31 Dec 2025 = £17,200

B. Depreciation charge for 2025 = £7,200; Carrying amount on 31 Dec 2025 = £19,800

C. Depreciation charge for 2025 = £8,400; Carrying amount on 31 Dec 2025 = £20,000

Correct D. Depreciation charge for 2025 = £8,400; Carrying amount on 31 Dec 2025 = £18,600

Correct Answer: D

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Question 8 View Details

In the trial balance the Sales Ledger Control account shows a debit balance of \(£12{,}500\), whereas the total of the individual customer balances amounts to a credit of \(£13{,}200\). No other entries affect the control account. Identify the type of error, explain its effect on the trial balance, and state the correcting entry to be passed.

A. Error: debit entry omitted from Sales Ledger Control (omission). Effect: trial balance out of balance by £700 (credit side short). Correcting entry: Debit Sales Ledger Control £700, Credit Suspense £700

B. Error: credit entry posted twice to Sales Ledger Control (commission). Effect: trial balance out of balance by £700 (debit side short). Correcting entry: Debit Sales Ledger Control £700, Credit Suspense £700

C. Error: omission of debit entry to Sales Ledger Control (omission). Effect: trial balance out of balance by £700 (debit side short). Correcting entry: Debit Suspense £700, Credit Sales Ledger Control £700

Correct D. Error: credit entry omitted from Sales Ledger Control (omission). Effect: trial balance out of balance by £700 (debit side short). Correcting entry: Debit Suspense £700, Credit Sales Ledger Control £700

Correct Answer: D

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Question 9 View Details

A payment of \(£2{,}340\) to a supplier was recorded as \(£2{,}430\) in the cash book. The same amount was correctly entered in the purchases ledger. No other entries relate to this transaction. Determine the effect of this error on the trial balance, identify the type of error, and propose the adjusting entry to correct the cash book.

A. Error: transposition error (£2,340 recorded as £2,043). Effect: trial balance out of balance by £297 (debit side short). Adjusting entry: Debit Cash £297, Credit Suspense £297

Correct B. Error: transposition error (£2,340 recorded as £2,430). Effect: trial balance out of balance by £90 (debit side short). Adjusting entry: Debit Cash £90, Credit Suspense £90

C. Error: omission of cash receipt of £2,340 (omission). Effect: trial balance out of balance by £2,340 (debit side short). Adjusting entry: Debit Cash £2,340, Credit Suspense £2,340

D. Error: reversal error (£2,340 recorded as a credit). Effect: trial balance out of balance by £4,680 (debit side short). Adjusting entry: Debit Cash £4,680, Credit Suspense £4,680

Correct Answer: B

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Question 10 View Details

A local authority prepares its annual financial statements under IPSAS for the year ended 31 March 2025. The following information is given:\\ - Total revenue appropriated in the budget: \(£5{,}200{,}000\).\ - Actual revenue collected: \(£4{,}950{,}000\), with an additional \(£150{,}000\) of uncollected revenue expected to be collected next year and classified as a receivable.\ - Expenditure appropriated: \(£4{,}800{,}000\), of which \(£4{,}500{,}000\) has been incurred and paid, \(£300{,}000\) incurred but not yet paid (accrued), and an unbudgeted expenditure of \(£50{,}000\) was incurred and paid during the year.\ Prepare the statement of financial performance showing: (a) total revenue recognized, (b) total expense recognized, (c) surplus/deficit for the year, (d) the amount to be shown as a budgetary adjustment (difference between appropriated and actual amounts) in the notes.

A. Revenue recognized = £5,050,000; Expense recognized = £4,850,000; Surplus = £200,000; Budgetary adjustment = £150,000 (unfavourable)

B. Revenue recognized = £5,100,000; Expense recognized = £4,900,000; Surplus = £200,000; Budgetary adjustment = £150,000 (unfavourable)

C. Revenue recognized = £5,100,000; Expense recognized = £4,850,000; Surplus = £250,000; Budgetary adjustment = £100,000 (unfavourable)

Correct D. Revenue recognized = £5,100,000; Expense recognized = £4,850,000; Surplus = £250,000; Budgetary adjustment = £150,000 (unfavourable)

Correct Answer: D

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Question 11 View Details

A company records the following in its purchase book for June: - 5 June: Purchases of goods £2,400 cash. - 12 June: Purchases on credit £3,600, with a 2 % discount term if paid within 30 days. - 20 June: Purchase returns (goods returned to supplier) £500, recorded in the purchase returns book. - 28 June: Freight‑in £200, recorded in the freight‑in column of the purchase book. Later the accountant discovers that the purchase return of £500 was mistakenly entered as a purchase instead of being deducted. After correcting this error, what is the net total of purchases (excluding freight‑in) that should be posted to the Purchases account?

Correct A. 5500

B. 5400

C. 5600

D. 5300

Correct Answer: A

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Question 12 View Details

A local authority prepares its annual budget with the following expected figures (all amounts in £): - Revenue: council tax £12,000,000; government grant £5,000,000; service fees £3,000,000. - Expenditure: salaries £10,000,000; maintenance £2,500,000; capital projects £4,000,000. The authority also records a provision for doubtful debts equal to 2 % of total revenue and depreciation on capital assets equal to 5 % of the capital projects cost. Any surplus must be transferred to a statutory reserve fund, but the fund is required to retain at least 20 % of the surplus as a non‑spendable reserve. Assuming the authority transfers only the minimum required amount to satisfy this condition, what amount (in £) is transferred to the reserve fund?

A. 600000

B. 520000

C. 540000

Correct D. 580000

Correct Answer: D

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Question 13 View Details

A machine was purchased on 1 January 2022 for £48,000. It has an estimated residual value of £6,000 and a useful life of 6 years. The company uses the straight‑line method for depreciation. In the third year, the machine's expected residual value is revised to £4,000 and its remaining useful life is reassessed to 4 years (including the current year). What is the depreciation expense for the year ending 31 December 2024 (the third year) under the revised estimates?

Correct A. 7500

B. 6500

C. 8000

D. 7000

Correct Answer: A

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Question 14 View Details

The sales ledger control account shows a closing balance of £85,000 at 31 March. The subsidiary ledger contains the following outstanding customer balances: A £22,000, B £18,500, C £15,000, D £12,500 and E £17,200. A credit note of £2,300 issued to customer C was omitted from the control account but correctly recorded in the subsidiary ledger, reducing C's balance to £12,700. After adjusting for this omission, what should be the corrected balance of the sales ledger control account?

A. 82000

Correct B. 82700

C. 84700

D. 85300

Correct Answer: B

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Question 15 View Details

A manufacturing company produces a single product. The following data relate to the year (all amounts in £): - Opening stock of raw materials: £12,000 - Purchases of raw materials: £48,000 - Closing stock of raw materials: £10,000 - Direct labour cost: £30,000 - Manufacturing overhead applied at 120 % of direct labour cost - Opening work‑in‑progress (WIP): £8,000 - Closing WIP: £9,500 - Opening finished‑goods stock: £15,000 - Closing finished‑goods stock: £13,200 - Sales revenue: £120,000 - Selling and distribution expenses: £10,000 Calculate the gross profit for the year.

A. 2200

B. 11700

C. -9500

Correct D. 3700

Correct Answer: D

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Question 16 View Details

Extracts from the general ledger for March are as follows: Opening balance of Cash is (₦120,000\) (debit). During March the following cash transactions were recorded: (i) cash sales of (₦85,000\), (ii) cash received from a debtor of (₦20,000\), (iii) cash paid for salaries of (₦30,000\), (iv) cash paid for rent of (₦12,000\). At month‑end the trial balance shows total debits of (₦210,000\) and total credits of (₦210,000\), but the Cash account is shown as a credit balance of (₦5,000\). Assuming all other ledger balances are correct, what is the correct closing balance of the Cash account?

A. ₦175,000 (debit)

B. ₦188,000 (debit)

Correct C. ₦183,000 (debit)

D. ₦190,000 (debit)

Correct Answer: C

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Question 17 View Details

A partnership purchases equipment for \(₦50,000\) cash. Using the accounting equation \(\text{Assets}=\text{Liabilities}+\text{Equity}\), state the effect of this transaction on each component of the equation.

A. Assets: no net change (increase equipment ₦50,000, increase cash ₦50,000); Liabilities: no change; Equity: no change

Correct B. Assets: no net change (increase equipment ₦50,000, decrease cash ₦50,000); Liabilities: no change; Equity: no change

C. Assets: decrease ₦50,000 (cash); Liabilities: increase ₦50,000; Equity: no change

D. Assets: increase ₦50,000 (equipment); Liabilities: no change; Equity: decrease ₦50,000 (cash)

Correct Answer: B

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Question 18 View Details

Partners A and B currently share profit in the ratio 3:2. Their capital balances are \(A: ₦120,000\) and \(B: ₦80,000\). Before admitting a new partner C, the partnership revalues a building from its book value of \(₦150,000\) to a market value of \(₦210,000\). The revaluation surplus is shared in the existing profit‑sharing ratio. After the revaluation, C is admitted, contributing \(₦100,000\) for a 25 % interest in the partnership. The profit‑sharing ratio after admission becomes A:B:C = 2:1:1. Determine (a) the amount of goodwill recorded, and (b) the cash each existing partner (A and B) receives from C as part of the admission.

A. Goodwill ₦160,000; A receives ₦96,000; B receives ₦64,000

Correct B. Goodwill ₦140,000; A receives ₦84,000; B receives ₦56,000

C. Goodwill ₦120,000; A receives ₦72,000; B receives ₦48,000

D. Goodwill ₦140,000; A receives ₦70,000; B receives ₦70,000

Correct Answer: B

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Question 19 View Details

The Sales Ledger Control account shows an opening debit balance of \(₦250,000\). During the year total credit sales were \(₦720,000\) and cash received from debtors amounted to \(₦480,000\). At year‑end the control account shows a closing debit balance of \(₦?\). The subsidiary ledger lists outstanding balances as follows: Debtor X \(₦45,000\), Debtor Y \(₦38,000\), Debtor Z \(₦27,000\) and Debtor W \(₦?\). The total of the subsidiary ledger must equal the control account closing balance. Determine the closing balance of the Sales Ledger Control account and the outstanding balance of Debtor W.

A. Closing balance ₦520,000 (debit); Debtor W ₦350,000

B. Closing balance ₦460,000 (debit); Debtor W ₦410,000

C. Closing balance ₦490,000 (debit); Debtor W ₦350,000

Correct D. Closing balance ₦490,000 (debit); Debtor W ₦380,000

Correct Answer: D

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Question 20 View Details

A partnership of three partners, A, B and C, is being dissolved. Their capital balances at the date of dissolution are: A \(₦150,000\), B \(₦120,000\), C \(₦90,000\). The partnership has outstanding liabilities of \(₦80,000\). Assets consist of cash \(₦200,000\), inventory costing \(₦150,000\) (to be sold at 80 % of cost) and equipment with a book value of \(₦100,000\) (to be sold for its market value of \(₦120,000\)). After settling the liabilities, the remaining cash is to be distributed among the partners in the profit‑sharing ratio 2:1:1 (A:B:C). Any loss on the sale of inventory and equipment is to be shared equally among the partners. Determine (a) the amount of cash each partner receives on dissolution, and (b) the final capital balance of each partner after distribution.

A. A receives ₦160,000; B receives ₦60,000; C receives ₦60,000; final capital balances of all partners are ₦0

Correct B. A receives ₦155,000; B receives ₦72,500; C receives ₦72,500; final capital balances of all partners are ₦0

C. A receives ₦155,000; B receives ₦70,000; C receives ₦70,000; final capital balances of all partners are ₦0

D. A receives ₦150,000; B receives ₦75,000; C receives ₦75,000; final capital balances of all partners are ₦0

Correct Answer: B

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Question 21 View Details

On 15 March, XYZ Ltd purchased a computer for \(\text{₦}150,000\) cash. The price includes a recoverable VAT of 5 %. Record the appropriate journal entry, showing the amounts to be debited to the Computer Equipment account and the Input VAT account, and the amount credited to Cash.

Correct A. Debit Computer Equipment \(\text{₦}142,857.14\)\nDebit Input VAT \(\text{₦}7,142.86\)\nCredit Cash \(\text{₦}150,000\)

B. Debit Computer Equipment (₦142,500.00) Debit Input VAT (₦7,500.00) Credit Cash (₦150,000)

C. Debit Computer Equipment (₦143,000.00) Debit Input VAT (₦7,000.00) Credit Cash (₦150,000)

D. Debit Computer Equipment (₦140,000.00) Debit Input VAT (₦10,000.00) Credit Cash (₦150,000)

Correct Answer: A

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Question 22 View Details

At the end of the financial year, XYZ Ltd's machinery has a carrying amount of \(\text{₦}500,000\). The estimated residual value is \(\text{₦}50,000\) and the useful life remaining is 5 years on a straight‑line basis. No depreciation has yet been charged for the year. Record the adjusting journal entry required to recognise depreciation for the year.

Correct A. Debit Depreciation Expense \(\text{₦}90,000\)\nCredit Accumulated Depreciation - Machinery \(\text{₦}90,000\)

B. Debit Depreciation Expense (₦100,000) Credit Accumulated Depreciation - Machinery (₦100,000)

C. Debit Depreciation Expense (₦112,500) Credit Accumulated Depreciation - Machinery (₦112,500)

D. Debit Depreciation Expense (₦75,000) Credit Accumulated Depreciation - Machinery (₦75,000)

Correct Answer: A

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Question 23 View Details

The trial balance of ABC Ltd for the year ended 31 December 2021 (all figures in \(\text{₦}\)) is shown below.\n\nSales Revenue \(\text{₦}1,200,000\)\nOpening Stock \(\text{₦}80,000\)\nPurchases \(\text{₦}500,000\)\nPurchase Returns \(\text{₦}20,000\)\nCarriage Inwards \(\text{₦}10,000\)\nClosing Stock (physical count) \(\text{₦}70,000\)\nSalaries Expense \(\text{₦}150,000\)\nDepreciation Expense - Buildings \(\text{₦}30,000\)\nBad Debts Expense \(\text{₦}12,000\)\nBad Debts Recovered \(\text{₦}3,000\)\nAdministration Overheads \(\text{₦}40,000\)\nInterest Received \(\text{₦}5,000\)\nRent Received \(\text{₦}8,000\)\n\nUsing this information, prepare the Income Statement and calculate (a) Gross Profit and (b) Net Profit for the year.

A. Gross Profit = ₦680,000; Net Profit = ₦500,000

B. Gross Profit = ₦700,000; Net Profit = ₦460,000

Correct C. Gross Profit = ₦700,000; Net Profit = ₦484,000

D. Gross Profit = ₦720,000; Net Profit = ₦470,000

Correct Answer: C

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Question 24 View Details

The following credit transactions for Trade Receivables occurred in January:\n1. 1 Jan - Credit sales of \(\text{₦}200,000\).\n2. 5 Jan - Cash received from customers \(\text{₦}120,000\).\n3. 12 Jan - Bad debts written off \(\text{₦}8,000\).\n4. 20 Jan - Credit sales returns \(\text{₦}5,000\).\n5. 28 Jan - Discount allowed of 2 % on the outstanding balance after the 20 Jan entry.\nPost these transactions to a T‑account for Trade Receivables and state the closing balance on 31 Jan.

A. ₦64,500

B. ₦68,120

Correct C. ₦65,660

D. ₦66,000

Correct Answer: C

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Question 25 View Details

The cash book of DEF Ltd shows a balance of \(\text{₦}250,000\) as at 31 December 2021. The bank statement for the same date shows a balance of \(\text{₦}260,000\). The following items are known:\n- Outstanding checks: \(\text{₦}15,000\) (two checks of \(\text{₦}7,000\) and \(\text{₦}8,000\)).\n- Deposits in transit: \(\text{₦}9,800\).\n- Bank charge not yet recorded in the cash book: \(\text{₦}1,200\).\n- Interest earned on the bank balance not yet recorded in the cash book: \(\text{₦}2,500\).\n- The bank incorrectly credited a customer's cheque of \(\text{₦}3,500\); the correct amount should have been \(\text{₦}3,200\).\nPrepare a bank reconciliation statement and state the adjusted cash book balance after all necessary adjustments.

Correct A. ₦254,500

B. ₦255,500

C. ₦253,500

D. ₦254,800

Correct Answer: A

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