Practice gce model questions vol1 financial_accounting 2024 Past Questions

Question 1 View Details

A business purchases equipment on credit for \(\text{₦}150{,}000\). State how this transaction affects the accounting equation.

A. Assets increase by \(\text{₦}150{,}000\); Liabilities increase by \(\text{₦}150{,}000\); Equity increase by \(\text{₦}150{,}000\).

B. Assets increase by \(\text{₦}150{,}000\); Liabilities increase by \(\text{₦}75{,}000\); Equity increase by \(\text{₦}75{,}000\).

Correct C. Assets increase by \(\text{₦}150{,}000\); Liabilities increase by \(\text{₦}150{,}000\); Equity unchanged.

D. Assets increase by \(\text{₦}150{,}000\); Liabilities unchanged; Equity decrease by \(\text{₦}150{,}000\).

Correct Answer: C

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Question 2 View Details

The trial balance of Company Y shows the following items (all amounts in \(\text{₦}\)):\n\n- Trade receivables: 210,000\n- Credit sales for the year: 400,000\n- Bad‑debt write‑offs during the year: 20,000\n\nCompany policy requires a provision for doubtful debts equal to the greater of (i) 3% of credit sales or (ii) 5% of trade receivables after write‑offs. What amount should be shown as the provision for doubtful debts in the statement of financial position at year‑end?

Correct A. ₦12,000

B. ₦15,000

C. ₦9,500

D. ₦10,000

Correct Answer: A

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Question 3 View Details

A trial balance includes the following entries (all amounts in \(\text{₦}\)):\n\n- Sales: 500,000 (credit)\n- Purchases: 300,000 (debit)\n- Rent expense: 20,000 (debit)\n- Suspense Account: 5,000 (credit)\n\nAfter the trial balance is prepared, the following errors are discovered:\n1. A purchase invoice of \(12,000\) was omitted.\n2. A sales return of \(8,000\) was mistakenly recorded as a debit to Purchases instead of to Sales Returns.\n3. The Rent expense was entered both as a debit of \(20,000\) and a credit of \(20,000\).\n\nWhat is the corrected balance of the Suspense Account after all errors are rectified?

A. Debit ₦28,000

Correct B. Debit ₦27,000

C. Debit ₦26,000

D. Credit ₦27,000

Correct Answer: B

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Question 4 View Details

The combined cash and bank book for the month shows the following (all amounts in \(\text{₦}\)):\n\nOpening balances: Cash \(15,000\), Bank \(40,000\).\nReceipts: Cash sales \(25,000\), Cash received from debtors \(30,000\), Deposit of cash sales to bank \(30,000\).\nPayments: Cash purchases \(18,000\), Cash paid to creditors \(10,000\), Rent paid by bank \(12,000\).\nClosing balances recorded: Cash \(12,000\), Bank \(45,000\).\nThe bank statement for the month shows a closing balance of \(48,000\) and a bank charge of \(500\) that has not been entered in the cash book. Determine the amount of the missing receipt that should be recorded in the cash book.

Correct A. ₦3,500

B. ₦3,000

C. ₦4,000

D. ₦2,500

Correct Answer: A

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Question 5 View Details

During the current accounting period, a company receives \(\text{₦}20{,}000\) in cash from customers for services that will be performed next year, and it pays \(\text{₦}12{,}000\) in cash for an insurance policy that provides coverage for the next 12 months. Which of these transactions will affect the profit and loss account for the current period?

Correct A. Neither transaction affects the current period's profit and loss account.

B. Only the cash received from customers affects the current period's profit and loss account.

C. Both transactions affect the current period's profit and loss account.

D. Only the insurance payment affects the current period's profit and loss account.

Correct Answer: A

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Question 6 View Details

During January the following transactions occurred. The business uses a single cash book that records both cash and bank columns. Opening cash balance is \(£500\) and opening bank balance is \(£1,200\). 1. 5 Jan - Bought goods on credit from Supplier A, \(£2,400\). 2. 8 Jan - Sold goods for cash, \(£3,150\). 3. 12 Jan - Received cash from Customer B for a previous credit sale, \(£1,200\). 4. 15 Jan - Paid cash to Supplier A, \(£800\). 5. 20 Jan - Received a bank transfer from Customer C for goods sold on credit, \(£2,500\). Record each transaction in the appropriate column of the cash book and then calculate the closing cash balance at the end of January.

A. £5,250

B. £5,350

C. £2,850

Correct D. £4,050

Correct Answer: D

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Question 7 View Details

At 31 March the bank statement shows a balance of \(£12,340\). The cash book balance on the same date is \(£12,560\). Outstanding checks amount to \(£1,275\) (three checks of \(£400\), \(£500\) and \(£375\)). Deposits in transit total \(£850\). The bank has charged a fee of \(£45\) that has not been recorded in the cash book. A cheque deposited by the business was incorrectly credited by the bank as \(£1,200\) instead of the correct \(£1,800\). Prepare a bank reconciliation and state the adjusted cash‑book balance after all necessary adjustments.

A. £12,115

Correct B. £12,515

C. £11,915

D. £12,560

Correct Answer: B

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Question 8 View Details

The Purchases Ledger Control (PLC) account has an opening credit balance of \(£5,200\). During the month credit purchases recorded in the PLC total \(£12,800\) and payments to creditors recorded in the PLC total \(£9,400\). The trial balance shows the PLC balance as a credit of \(£8,500\). The total of the individual creditors' balances in the subsidiary ledger at month‑end is \(£8,200\). Using this information, determine by how much the PLC balance shown in the trial balance is understated.

A. £200

B. £150

C. £0

Correct D. £100

Correct Answer: D

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Question 9 View Details

The cash book for February has the following opening balances: cash \(£1,200\) and bank \(£3,500\). Cash column entries: - 3 Feb: Cash sales \(£2,400\) - 10 Feb: Received from debtor (amount not recorded) - 12 Feb: Paid rent cash \(£900\) - 18 Feb: Paid supplier cash \(£650\) Bank column entries: - 5 Feb: Bank receipt \(£3,200\) - 15 Feb: Interest received \(£120\) - 20 Feb: Paid loan instalment \(£1,500\) The closing cash balance is shown as \(£2,300\). What amount should be entered for the receipt from the debtor on 10 Feb?

A. £300

Correct B. £250

C. £150

D. £200

Correct Answer: B

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Question 10 View Details

During the month the following data relate to the manufacturing operations of a company (all figures in £): Opening raw‑materials stock 5,000 Purchases of raw materials 12,000 Closing raw‑materials stock 4,200 Opening work‑in‑process (WIP) 3,500 Closing WIP 2,800 Opening finished‑goods stock 6,000 Closing finished‑goods stock 5,400 Direct labour 8,500 Factory overhead is applied at 150 % of direct labour. Sales revenue 45,000 Selling and administrative expenses 6,200 Calculate the gross profit for the month.

A. £10,350

B. £4,250

Correct C. £9,650

D. £13,900

Correct Answer: C

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Question 11 View Details

The municipality acquired a building for \( \text{₦}10{,}000{,}000 \) with a statutory straight‑line depreciation period of 40 years. After 10 years the asset was revalued to \( \text{₦}12{,}000{,}000 \) and the remaining useful life was revised to 30 years. The General Fund had an opening balance of \( \text{₦}5{,}000{,}000 \). During the year the fund recorded revenue of \( \text{₦}3{,}200{,}000 \) and expenses (excluding depreciation) of \( \text{₦}2{,}600{,}000 \). Calculate the depreciation expense for the year and the closing balance of the General Fund at year‑end.

A. Depreciation expense = ₦333,333; Closing fund balance = ₦5,266,667

Correct B. Depreciation expense = ₦400,000; Closing fund balance = ₦5,200,000

C. Depreciation expense = ₦400,000; Closing fund balance = ₦5,600,000

D. Depreciation expense = ₦250,000; Closing fund balance = ₦5,350,000

Correct Answer: B

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Question 12 View Details

During the preparation of a trial balance the following figures were recorded: Sales \( \text{₦}150{,}000 \) (credit), Purchases \( \text{₦}80{,}000 \) (debit), Cash \( \text{₦}20{,}000 \) (debit) and a Suspense Account with a debit balance of \( \text{₦}5{,}000 \). It was later discovered that a purchase invoice of \( \text{₦}12{,}000 \) had been entered twice - once as a debit to Purchases and once as a credit to the Suspense Account. After correcting the error, what is the revised profit and what is the new balance of the Suspense Account?

A. Revised profit = ₦58,000; Suspense balance = debit ₦5,000

B. Revised profit = ₦82,000; Suspense balance = debit ₦5,000

C. Revised profit = ₦70,000; Suspense balance = debit ₦17,000

Correct D. Revised profit = ₦82,000; Suspense balance = debit ₦17,000

Correct Answer: D

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Question 13 View Details

Briefly explain the difference between the accruals concept and the cash basis of accounting, and give one example of a transaction that would be recorded under the accruals concept but not under the cash basis.

A. Accruals and cash basis are the same; both record transactions when cash moves. Example: Recording a purchase on credit is treated identically under both methods.

B. Accruals record cash flows only when cash is received or paid; cash basis records revenues when earned. Example: Recording a sales invoice when the customer pays (cash) but not when the invoice is issued (accrual).

C. Accruals recognise expenses only when cash is paid; cash basis recognises them when incurred. Example: Paying a utility bill is recorded under accruals but ignored under cash basis.

Correct D. Accruals recognise revenues/expenses when earned/incurred; cash basis records only when cash moves. Example: Recording an electricity bill when received (accrual) but not when paid (cash basis).

Correct Answer: D

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Question 14 View Details

The cash book (two‑column) shows an opening bank balance of \( \text{₦}8{,}000 \) (debit). Recorded receipts are cash sales of \( \text{₦}5{,}000 \) and a bank deposit of \( \text{₦}3{,}000 \) (the deposit was omitted from the cash book). Recorded payments are rent \( \text{₦}2{,}000 \), a supplier payment of \( \text{₦}1{,}500 \) that was entered twice, and bank charges of \( \text{₦}200 \). What is the corrected cash‑book closing balance after adjusting for the duplicate supplier payment and the omitted bank deposit?

A. ₦10,800

Correct B. ₦12,300

C. ₦13,300

D. ₦9,300

Correct Answer: B

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Question 15 View Details

The company bought office equipment for \( \text{₦}25{,}000 \) cash. Record the appropriate journal entry using the double‑entry system.

A. Debit Cash 25,000; Credit Office Equipment 25,000

B. Debit Office Equipment 20,000; Credit Cash 20,000

Correct C. Debit Office Equipment 25,000; Credit Cash 25,000

D. Debit Office Equipment 25,000; Credit Accounts Payable 25,000

Correct Answer: C

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Question 16 View Details

A company bought equipment with a list price of \(\text{₦}150,000\). The supplier gave a cash discount of 5% on the purchase price. Record the journal entry for this transaction, showing the amounts to be debited and credited.

A. Debit Equipment ₦150,000; Credit Cash ₦150,000; Credit Discount Received ₦0

B. Debit Equipment ₦150,000; Credit Cash ₦147,500; Credit Discount Received ₦2,500

Correct C. Debit Equipment ₦150,000; Credit Cash ₦142,500; Credit Discount Received ₦7,500

D. Debit Equipment ₦150,000; Credit Cash ₦140,000; Credit Discount Received ₦10,000

Correct Answer: C

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Question 17 View Details

A business records the purchase of inventory on credit but fails to record the corresponding liability. Which fundamental accounting concept is being violated?

A. Revenue recognition concept

B. Matching concept

Correct C. Accruals concept

D. Conservatism concept

Correct Answer: C

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Question 18 View Details

The following information is extracted from an incomplete set of records for the year ended 31 December: \n- Sales: \(\text{₦}500,000\)\n- Opening Stock: \(\text{₦}70,000\)\n- Closing Stock: \(\text{₦}80,000\)\n- Rent expense: \(\text{₦}30,000\)\n- Salaries expense: \(\text{₦}50,000\)\n- Equipment cost: \(\text{₦}120,000\) (depreciated at 10% per annum, not yet recorded)\n- Interest expense: \(\text{₦}5,000\)\n\nIt is known that the gross‑profit ratio is 30 % of sales. Determine the net profit for the year.

A. 58000

B. 65000

Correct C. 53000

D. 41000

Correct Answer: C

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Question 19 View Details

The cash book for the month shows a closing balance of \(\text{₦}12,000\). The bank statement for the same period shows a closing balance of \(\text{₦}28,000\). The following items are known: \n- Outstanding checks: \(\text{₦}6,000\)\n- Deposits in transit: \(\text{₦}4,000\)\n- Bank charges of \(\text{₦}1,500\) have not been recorded in the cash book.\n- An amount of cash received from a customer was omitted from the cash book (the amount is unknown).\n\nDetermine the amount of the omitted cash receipt that will reconcile the cash book with the bank statement.

A. 21500

B. 11500

C. 14000

Correct D. 15500

Correct Answer: D

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Question 20 View Details

The Trade Receivables ledger had an opening debit balance of \(\text{₦}45,000\). During the year the following journal entries were recorded: \n1. Sold goods on credit for \(\text{₦}80,000\) (cost of goods sold \(\text{₦}50,000\)).\n2. Received cash from a customer on account for \(\text{₦}30,000\).\n3. Allowed a sales return of \(\text{₦}5,000\) (cost of returned goods \(\text{₦}3,000\)).\n4. Bad debts written off amounting to \(\text{₦}2,000\).\n\nAfter posting all these entries, what is the closing debit balance of the Trade Receivables account?

Correct A. 88000

B. 95000

C. 89000

D. 87000

Correct Answer: A

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Question 21 View Details

The Purchases Returns Control Account shows a balance of \(£12,500\). The subsidiary ledger for individual suppliers totals \(£13,200\). Investigation reveals that a return of \(£300\) for one supplier was omitted from the control account and a return of \(£200\) for another supplier was overstated in the control account. What is the corrected balance of the Purchases Returns Control Account after these adjustments?

A. £12,400

B. £12,500

Correct C. £12,600

D. £12,700

Correct Answer: C

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Question 22 View Details

A company's equity balances at 31 December 2023 are: Share capital \(£150,000\), Share premium \(£30,000\), Revaluation reserve \(£20,000\), Retained earnings \(£45,000\). During the year the profit before tax was \(£60,000\); corporation tax paid was \(£12,000\). Ordinary dividends of \(£15,000\) and a special dividend of \(£5,000\) were paid from the revaluation reserve. A prior‑period error understated retained earnings by \(£8,000\). Calculate (a) the total comprehensive income for the year and (b) the closing balance of retained earnings.

A. Total comprehensive income = £48,000; Closing retained earnings = £81,000

B. Total comprehensive income = £48,000; Closing retained earnings = £91,000

C. Total comprehensive income = £50,000; Closing retained earnings = £86,000

Correct D. Total comprehensive income = £48,000; Closing retained earnings = £86,000

Correct Answer: D

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Question 23 View Details

The trial balance of XYZ Ltd shows total debits of \(£85,340\) and total credits of \(£85,250\). The accountant suspects a single transposition error where a figure of \(£2,340\) was entered as \(£2,430\). Assuming no other errors, determine the corrected total of debits after fixing the error and state whether the trial balance will then balance.

Correct A. Corrected debits = £85,250; the trial balance then balances

B. Corrected debits = £85,340; the trial balance then balances

C. Corrected debits = £85,260; the trial balance then balances

D. Corrected debits = £85,150; the trial balance does not balance

Correct Answer: A

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Question 24 View Details

The cash book shows a closing cash balance of \(£9,800\). The bank statement shows a closing balance of \(£10,200\). Outstanding checks total \(£1,200\) and deposits in transit total \(£800\). The bank also mistakenly charged a customer's cheque of \(£350\) to the company's account. What is the corrected cash‑book balance after reconciling these items?

A. £9,800

Correct B. £9,750

C. £9,900

D. £9,650

Correct Answer: B

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Question 25 View Details

Three partners A, B and C share profits in the ratio 3:2:1. Their capital balances are A \(£60,000\), B \(£40,000\) and C \(£20,000\). On 1 January 2024, partner C retires and is compensated for his share of goodwill, which is valued at \(£30,000\). The remaining partners agree to continue the business and admit a new partner D, who will contribute \(£50,000\) cash for a 25 % share of future profits. Goodwill is to be shared between the continuing partners (A and B) in their old profit‑sharing ratio. Determine: (a) the amount of goodwill credited to each of the continuing partners; (b) the new profit‑sharing ratio among A, B and D after the admission.

A. Goodwill - A: £20,000; B: £10,000. New profit‑sharing ratio A:B:D = 10:4:6

B. Goodwill - A: £15,000; B: £15,000. New profit‑sharing ratio A:B:D = 8:5:7

Correct C. Goodwill - A: £18,000; B: £12,000. New profit‑sharing ratio A:B:D = 9:6:5

D. Goodwill - A: £12,000; B: £18,000. New profit‑sharing ratio A:B:D = 7:8:5

Correct Answer: C

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