Practice gce model questions vol1 financial_accounting 2023 Past Questions

Question 1 View Details

At 31 March, the cash book shows a debit balance of \(85,000\). The bank statement shows a credit balance of \(84,500\). The following items affect reconciliation:\n\n- Outstanding cheques: \(7,000\) and \(2,500\).\n- Deposits in transit: \(4,200\) and a cash deposit of \(1,800\) posted on 2 April.\n- Bank error: a customer's cheque for \(3,000\) was mistakenly credited as a deposit of \(3,600\).\n\nNo other items are outstanding. Compute the adjusted cash‑book balance after reconciliation.

Correct A. 82100

B. 81500

C. 80900

D. 84500

Correct Answer: A

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Question 2 View Details

A company's trial figures for the year are as follows:\n\n- Opening stock: \(30,000\)\n- Purchases: \(120,000\)\n- Closing stock recorded on the trial balance: \(25,000\)\n- Physical count shows actual closing stock of \(22,000\) (indicating shrinkage).\n- Sales: \(200,000\)\n- Operating expenses: \(40,000\)\n- Depreciation on plant: \(10,000\)\n- Tax rate: 30% on profit before tax.\n\nUsing the above information, calculate the net profit after tax for the year.

A. 22000

B. 22400

C. 17500

Correct D. 15400

Correct Answer: D

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Question 3 View Details

A business purchases equipment for \(50,000\) cash. If the supplier offers a 5% cash discount for payment within 10 days, and the payment is made within the period, the discount is taken. In addition, freight‑in of \(2,000\) is incurred and paid by cheque. Record the journal entries for these transactions and state the total amount debited in the journal.

A. 49500

Correct B. 51500

C. 50500

D. 51700

Correct Answer: B

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Question 4 View Details

A company sells goods with a list price of \(80,000\). A trade discount of 10% is allowed. After the trade discount, VAT at 5% is applied. The customer pays within the cash‑discount period and receives a 2% cash discount on the amount inclusive of VAT. Determine the amount that should be debited to Accounts Receivable.

Correct A. 74088

B. 82320

C. 74160

D. 70560

Correct Answer: A

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Question 5 View Details

The Purchases Ledger for the month shows the following entries:\n\n- Opening balance (debit) \(15,000\)\n- Purchases on credit \(40,000\)\n- Returns outwards \(5,000\) (credit)\n- Payments made \(30,000\) (credit)\n- Freight‑in added to purchases \(2,000\) (debit)\n\nCalculate the closing balance of the Purchases Ledger and indicate whether it is a debit or credit balance.

A. 20000

B. 27000

C. 25000

Correct D. 22000

Correct Answer: D

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Question 6 View Details

A machine was purchased for \(\text{₦}500{,}000\) with an estimated residual value of \(\text{₦}50{,}000\) and a useful life of 5 years. The entity depreciates the asset using the straight‑line method for the first two years and then switches to the diminishing‑balance method at a rate of 40% per annum on the remaining book value. What is the book value of the machine at the end of year 4?

A. 140000

Correct B. 115200

C. 156800

D. 100000

Correct Answer: B

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Question 7 View Details

A local authority reports the following figures for the financial year:\n\n- Cash revenue receipts: \(\text{₦}1{,}200{,}000\)\n- Accrued revenue receivable: \(\text{₦}300{,}000\)\n- Cash expense payments: \(\text{₦}950{,}000\)\n- Accrued expense payable: \(\text{₦}120{,}000\)\n- Capital grant received in cash: \(\text{₦}200{,}000\)\n- Capital grant receivable: \(\text{₦}80{,}000\)\n- Depreciation expense: \(\text{₦}50{,}000\)\n- Interest payable accrued: \(\text{₦}30{,}000\)\n\nUsing the accrual basis of accounting, calculate the change in net assets for the year. Then, using the cash basis, calculate the cash surplus (or deficit) for the same period.

A. 680000, 450000

Correct B. 630000, 450000

C. 330000, 450000

D. 630000, 250000

Correct Answer: B

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Question 8 View Details

A government department reports a tax expense of \(\text{₦}240{,}000\) in its statement of financial activities. The taxable profit before tax for the year is \(\text{₦}800{,}000\) and the statutory tax rate is 30%. A temporary difference of \(\text{₦}120{,}000\) gives rise to a deferred tax liability. During the year the department receives a cash tax refund of \(\text{₦}20{,}000\). What amount of cash tax was actually paid during the year?

A. 200000

B. 240000

C. 220000

Correct D. 184000

Correct Answer: D

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Question 9 View Details

An entity records a prepaid insurance policy costing \(\text{₦}15{,}000\) covering the next 12 months. At the reporting date, three months of the policy have elapsed. Classify the \(\text{₦}15{,}000\) prepaid insurance on the balance sheet.

Correct A. Asset

B. Equity

C. Expense

D. Liability

Correct Answer: A

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Question 10 View Details

A company purchases equipment for \(\text{₦}25{,}000\) and pays the amount in cash. State the effect of this transaction on the accounting equation \(\text{Assets} = \text{Liabilities} + \text{Equity}\).

A. Increase in total assets with no change to liabilities or equity

B. Increase in assets, liabilities, and equity

Correct C. No change to total assets, liabilities or equity

D. Decrease in total assets and increase in equity

Correct Answer: C

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Question 11 View Details

During preparation of the trial balance, the totals of the debit and credit columns are not equal. The debit total is \(100,700\) and the credit total is \(101,800\). It is known that (i) a transaction of amount \(550\) was recorded on the wrong side (as a credit instead of a debit), and (ii) a single transaction of amount X was omitted entirely. After correcting both errors, the trial balance should balance at a total of \(102,000\). What is the amount X of the omitted transaction?

A. 550

B. 800

C. 1000

Correct D. 750

Correct Answer: D

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Question 12 View Details

Three partners A, B and C run a business. Their capital contributions are \(30,000\), \(20,000\) and \(10,000\) respectively. The partnership agreement provides: (i) interest on capital at 5% per annum, (ii) a salary to partner A of \(4,000\) per year, and (iii) profit sharing in the ratio 3:2:1 after the above adjustments. During the year, partner C lent \(2,000\) to the partnership; interest on this loan is charged at 6% per annum and is to be treated as an expense. The profit before any adjustments is \(31,120\). Determine the amount of profit allocated to partner B.

Correct A. 8,000

B. 7,000

C. 9,000

D. 6,500

Correct Answer: A

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Question 13 View Details

The cash book shows the following for the bank column: opening balance \(10,000\), total receipts \(5,800\) and total payments \(3,500\). The cash book therefore records a closing bank balance of \(12,300\). The bank statement at the same date shows a balance of \(13,800\). Outstanding checks amount to \(3,200\) and deposits in transit amount to \(1,500\). Bank charges of \(45\) and interest earned of \(30\) have not been entered in the cash book. After reconciling, a payment of \(200\) is discovered to have been recorded twice in the cash book. What should be the corrected cash‑at‑bank balance in the cash book after all adjustments?

A. 12,285

B. 12,055

C. 12,040

Correct D. 12,085

Correct Answer: D

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Question 14 View Details

At year‑end the trial balance of XYZ Ltd shows the following figures (in \(\)₦): Fixed‑asset cost \(150,000\), accumulated depreciation \(45,000\), inventory \(30,000\), debtors \(25,000\), cash \(5,000\); credit‑side items: creditors \(20,000\), loan \(40,000\), provisions \(5,000\), capital \(80,000\), retained earnings \(20,000\). The following adjustments are required: (i) fixed assets are revalued upward by \(20,000\); (ii) depreciation on the revaluation surplus is charged at 10% per annum; (iii) goodwill of \(15,000\) is to be amortised straight‑line over 5 years; (iv) a deferred tax liability of \(8,000\) arises on the revaluation surplus. The profit for the year before these adjustments is \(25,000\). Compute the revised retained earnings at year‑end after incorporating all adjustments.

A. 37,000

B. 40,000

Correct C. 32,000

D. 45,000

Correct Answer: C

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Question 15 View Details

A business purchases equipment costing \(18,000\). It pays \(5,000\) in cash and the balance on credit. Record the journal entry using the double‑entry system.

A. Debit Equipment 5,000; Credit Cash 5,000; Credit Accounts Payable 13,000

Correct B. Debit Equipment 18,000; Credit Cash 5,000; Credit Accounts Payable 13,000

C. Debit Equipment 18,000; Credit Cash 13,000; Credit Accounts Payable 5,000

D. Debit Equipment 18,000; Credit Cash 5,000; Credit Notes Payable 13,000

Correct Answer: B

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Question 16 View Details

In the trial balance of XYZ Ltd, the total of the debit column is £(68,400) and the total of the credit column is £(65,200). It is known that the only error is that a single transaction has been posted to the wrong side of the trial balance. Determine the amount of that transaction.

A. 1800

Correct B. 1600

C. 1400

D. 2000

Correct Answer: B

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Question 17 View Details

After posting all entries, the trial balance of ABC Co shows a difference of £(720), which has been recorded in a suspense account. Later the accountant discovers that a purchase invoice of £(2,400) was mistakenly recorded as £(2,040) due to a transposition error. After correcting this error, what will be the balance remaining in the suspense account?

A. 300

B. 540

Correct C. 360

D. 420

Correct Answer: C

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Question 18 View Details

A machine was purchased for £(48,000). Its estimated useful life is 5 years with a residual value of £(3,000). The company depreciates the machine using straight‑line method for the first two years and then switches to the reducing‑balance method at a rate of 40 % per annum on the remaining book value. Calculate the depreciation charge for the third year and the book value at the end of the fourth year.

A. £9,600; £9,600

B. £14,400; £8,400

Correct C. £12,000; £10,800

D. £13,200; £9,600

Correct Answer: C

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Question 19 View Details

The unadjusted trial balance of a partnership firm balances. The accountant makes two adjusting entries: an accrued expense (debit expense, credit accrued expense) and a prepaid expense (credit expense, debit prepaid expense). The total of the debit side of the adjusting entries is £(6,000), and the amount of the accrued expense is twice the amount of the prepaid expense. Determine the amount of each adjusting entry.

A. Accrued expense £5,000; Prepaid expense £1,000

B. Accrued expense £2,000; Prepaid expense £4,000

C. Accrued expense £3,000; Prepaid expense £3,000

Correct D. Accrued expense £4,000; Prepaid expense £2,000

Correct Answer: D

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Question 20 View Details

The following information relates to the financial year of a sole trader: - Sales: £(120,000) - Sales returns: £(5,000) - Opening stock: £(20,000) - Purchases: £(55,000) - Purchase returns: £(2,000) - Carriage inwards: £(1,500) - Closing stock: £(18,000) - Salaries: £(12,000) - Rent: £(5,000) - Depreciation on equipment: £(3,000) - Discount allowed: £(1,200) - Discount received: £(500) - Interest received: £(800) - Provision for doubtful debts created: £(2,000) Prepare the trading account to find the gross profit and then the profit and loss account to find the net profit for the year.

A. Gross profit £60,000; Net profit £38,200

B. Gross profit £55,500; Net profit £34,600

C. Gross profit £57,000; Net profit £35,500

Correct D. Gross profit £58,500; Net profit £36,600

Correct Answer: D

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Question 21 View Details

A company's cash book shows a balance of \(150,000\) naira, while the bank statement shows a balance of \(145,000\) naira. Outstanding checks total 20% of the cash‑book balance; two of these checks are \(12,000\) naira and \(8,000\) naira, the third amount is unknown. Deposits in transit total 3% of the bank‑statement balance; one deposit of \(2,000\) naira is known, the other is unknown. The bank has charged a fee of \(1,200\) naira that is not recorded in the cash book. Calculate the adjusted cash‑book balance after completing the bank reconciliation.

A. 119,800

B. 123,300

C. 124,350

Correct D. 123,150

Correct Answer: D

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Question 22 View Details

A business purchases equipment with a list price of \(5,000\) naira. The supplier offers a trade discount of 5% and the business pays cash equal to 10% of the net price, the balance being placed on credit. Record the journal entry for this transaction.

A. Debit Equipment 4,750; Credit Cash 500; Credit Trade Payables 4,250

B. Debit Equipment 4,750; Credit Cash 475; Credit Trade Payables 4,525

Correct C. Debit Equipment 4,750; Credit Cash 475; Credit Trade Payables 4,275

D. Debit Equipment 5,000; Credit Cash 500; Credit Trade Payables 4,500

Correct Answer: C

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Question 23 View Details

An asset is purchased for \(200,000\) naira, has a residual value of \(20,000\) naira and a useful life of 5 years. The company uses straight‑line depreciation for the first two years and then switches to the reducing‑balance method at a rate of 40% per year. Calculate the depreciation expense for the third year and the book value at the end of the third year.

Correct A. Depreciation year 3 = 51,200; Book value end of year 3 = 76,800

B. Depreciation year 3 = 43,200; Book value end of year 3 = 84,800

C. Depreciation year 3 = 36,000; Book value end of year 3 = 92,000

D. Depreciation year 3 = 80,000; Book value end of year 3 = 48,000

Correct Answer: A

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Question 24 View Details

Which fundamental accounting concept requires that expenses be recognised in the same period as the revenues they help generate?

A. Revenue recognition concept

B. Conservatism concept

C. Historical cost concept

Correct D. Matching concept

Correct Answer: D

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Question 25 View Details

The Sales Ledger Control Account opened with a debit balance of \(80,000\) naira. During the month the following items were recorded: credit sales of \(120,000\) naira, cash receipts from customers of \(70,000\) naira, and sales returns (debits) of \(5,000\) naira. A credit sale of \(3,000\) naira was omitted from the control account but appears correctly in the subsidiary ledger. Determine the corrected balance of the Sales Ledger Control Account at month‑end.

A. 123,000

Correct B. 128,000

C. 115,000

D. 130,000

Correct Answer: B

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