neco 2017 financial_accounting | Essay

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Question 1 View Details
Discuss the fundamental accounting concepts that underpin the preparation of financial statements. In your answer, define each concept and illustrate, with a practical example, how a breach of the concept could lead to a misstatement in the financial statements.
Question Parts
(a)
State and define the five fundamental accounting concepts.
(b)
For each concept, give a realistic example of a breach and explain the effect of that breach on the financial statements.
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Question 2 View Details
ABC Traders commenced business on 1 January with cash ₦200,000 and equipment purchased for ₦150,000 paid in cash. The following transactions occurred during January: 1. Purchased inventory on credit ₦120,000. 2. Sold goods costing ₦80,000 for ₦150,000; cash received ₦90,000 and the balance on credit. 3. Paid rent ₦20,000 cash. 4. Returned defective inventory worth ₦10,000 to the supplier and received a cash refund of ₦10,000. 5. Received cash from customers for credit sales amounting to ₦50,000. 6. Paid wages ₦15,000 cash. 7. Purchased equipment for ₦50,000, paying ₦30,000 cash and the remainder on credit. 8. The owner withdrew ₦25,000 cash for personal use. Using the information above, answer the following: (a) Record each transaction in the journal (include dates). (b) Post the journal entries to the appropriate ledger accounts and state the closing balance of each account. (c) Prepare a trial balance as at 31 January. (d) State whether the trial balance balances. If it does not, identify the error and suggest the correction.
Question Parts
(a)
Record each of the eight transactions in the journal with appropriate dates.
(b)
Post the journal entries to the ledger accounts and give the closing balance of each account.
(c)
Prepare a trial balance as at 31 January.
(d)
State whether the trial balance balances. If not, identify the error and propose a correction.
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Question 3 View Details
The following transactions were recorded by XYZ Trading Ltd. during the month of March. 1. 1 March – Purchased inventory costing ₦150,000 on credit from ABC Suppliers. 2. 5 March – Sold goods for cash at ₦120,000. The cost of the goods sold was ₦90,000. 3. 10 March – Returned defective goods to ABC Suppliers worth ₦20,000 and received a credit note. 4. 12 March – Paid the monthly rent of ₦15,000 by cheque. 5. 20 March – Received a bank loan of ₦200,000 which was deposited in the bank. Using the information above, answer the following:
Question Parts
(a)
Identify the most appropriate book of original entry for each of the five transactions (choose from Purchase Day Book, Sales Day Book, Cash Book, Returns Day Book, Journal).
(b)
Record the journal entry for each transaction. Include the date, accounts affected, and debit/credit amounts. Use the perpetual inventory system for the sale.
(c)
Using the journal entries prepared in part (b), prepare a trial balance as at 31 March. State whether the trial balance balances. If it does not, indicate the likely error.
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Question 4 View Details
Using the journal entries prepared in Question 3, post each entry to the appropriate ledger accounts and determine the closing balance of each account. Then, prepare a statement of profit or loss for the month of March.
Question Parts
(a)
Post the journal entries to the relevant ledger (T‑accounts). Show the debit and credit sides and write the closing balance of each account.
(b)
Prepare a statement of profit or loss for March using the ledger balances. Show gross profit, operating profit and net profit.
(c)
If the trial balance prepared in Question 3 had shown a shortfall of ₦5,000 on the debit side, suggest two possible reasons for this discrepancy.
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Question 5 View Details
The following ledger balances are extracted after posting all transactions for the year. Prepare a trial balance and comment on any imbalance. Ledger balances (₦): - Cash – Debit 45,000 - Trade Receivables – Debit 30,000 - Inventory – Debit 25,000 - Equipment – Debit 50,000 - Accumulated Depreciation – Equipment – Credit 15,000 - Trade Payables – Credit 20,000 - Loan Payable – Credit 40,000 - Capital – Credit 70,000 - Sales Revenue – Credit 80,000 - Cost of Goods Sold – Debit 45,000 - Rent Expense – Debit 12,000 - Salaries Expense – Debit 18,000 - Miscellaneous Expense – Debit 5,000
Question Parts
(a)
Prepare the trial balance showing the total of debit balances and the total of credit balances.
(b)
State the amount of difference and indicate whether the debit side exceeds the credit side or vice‑versa.
(c)
Suggest one plausible error that could have caused the imbalance and show the adjusting entry that would correct the trial balance.
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Question 6 View Details
The cash book of XYZ Ltd. for the month of June is partially shown below. All amounts are in ₦. | Date | Details | Ref | Cash Receipts (Dr) | Cash Payments (Cr) | |------|----------------------------|-----|--------------------|--------------------| | 1 | Opening balance | OB | 10,000 | | | 5 | Received from Customer A | | 8,000 | | | 7 | Paid rent | | | 2,500 | |10 | Received from Customer B | | 5,500 | | |12 | Paid salaries | | | 3,200 | |15 | Purchased supplies (cash) | | | 1,800 | |18 | Received loan from bank | |20,000 | | |20 | Paid electricity | | | 1,200 | |22 | Paid dividend to shareholders| | | 4,000 | |25 | Received interest on loan | | 500 | | |28 | Paid miscellaneous expenses| | | 900 | |30 | Closing balance | | | | It was later discovered that a cash receipt of ₦1,200 received on 20 June from a customer was omitted from the cash book. The bank statement for June shows a closing balance of ₦28,000. Outstanding cheques total ₦3,000 and deposits in transit total ₦2,500. Answer the following: a) Prepare the cash book for the month and determine the closing balance. b) State the difference between the cash book balance and the bank statement balance. c) Prepare a bank reconciliation statement to determine the amount of cash on hand.
Question Parts
(a)
Prepare the cash book for the month and determine the closing balance.
(b)
State the difference between the cash book balance and the bank statement balance.
(c)
Prepare a bank reconciliation statement to determine the amount of cash on hand.
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Question 7 View Details
A sole trader, Ade Enterprises, maintains a cash book for its bank transactions. The following information is extracted from the cash book and the bank statement for the month ended 31 March 2024. Cash book (bank column) balance as at 31 March 2024: ₦ 1,250,000 (debit). Bank statement balance as at 31 March 2024: ₦ 1,180,000 (debit). Outstanding checks (issued but not yet presented to the bank): - Cheque No. 102 for ₦ 45,000 - Cheque No. 103 for ₦ 30,000 Deposits in transit (deposited but not yet reflected on the statement): - Cash received from a customer on 30 March for ₦ 25,000 Bank charges shown on the statement but not recorded in the cash book: ₦ 5,500. Interest earned on the bank balance (credited by the bank) not recorded in the cash book: ₦ 2,200. A clerical error: a payment of ₦ 12,000 was recorded as ₦ 21,000 in the cash book. Using the above information, answer the following: a) Determine the corrected cash book balance after adjusting for the clerical error, bank charges and interest. b) Prepare a Bank Reconciliation Statement showing the adjustments required to reconcile the corrected cash book balance with the bank statement balance. c) Briefly explain two reasons why regular bank reconciliation is an essential internal control procedure for a business.
Question Parts
(a)
Determine the corrected cash book balance after adjusting for the clerical error, bank charges and interest.
(b)
Prepare a Bank Reconciliation Statement showing the adjustments required to reconcile the corrected cash book balance with the bank statement balance.
(c)
Briefly explain two reasons why regular bank reconciliation is an essential internal control procedure for a business.
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Question 8 View Details
During the month of April 2024, Greenfield Trading kept separate subsidiary ledgers for its debtors and creditors. The following summary information is available: **Sales Ledger (Debtors) Summary** - Opening balance (debit) ₦ 420,000 - Credit sales recorded in the sales journal ₦ 560,000 - Cash sales recorded in the cash book ₦ 140,000 - Sales returns (goods returned by customers) ₦ 32,000 (debit) - Trade discounts allowed ₦ 18,000 (debit) - Receipts from debtors (cash and bank) ₦ 460,000 (credit) - Closing balance (debit) ? **Purchases Ledger (Creditors) Summary** - Opening balance (credit) ₦ 210,000 - Credit purchases recorded in the purchases journal ₦ 380,000 - Cash purchases recorded in the cash book ₦ 90,000 (debit) - Purchase returns (goods returned to suppliers) ₦ 24,000 (credit) - Trade discounts received ₦ 12,000 (credit) - Payments to creditors (cash and bank) ₦ 340,000 (debit) - Closing balance (credit) ? Using the above data, answer the following: a) Prepare the Sales Ledger Control Account for April 2024 and state the closing balance. b) Prepare the Purchases Ledger Control Account for April 2024 and state the closing balance. c) Explain two advantages of maintaining control accounts in a double‑entry accounting system.
Question Parts
(a)
Prepare the Sales Ledger Control Account for April 2024 and state the closing balance.
(b)
Prepare the Purchases Ledger Control Account for April 2024 and state the closing balance.
(c)
Explain two advantages of maintaining control accounts in a double‑entry accounting system.
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