neco 2018 financial_accounting | Essay

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Question 1 View Details
A manufacturing company prepares its financial statements for the year ended 31 December 2025. The company adopts the accrual basis of accounting and the going‑concern concept in its reporting. Answer the following:
Question Parts
(a)
Define the accrual basis of accounting and explain how it influences the timing of revenue and expense recognition.
(b)
Discuss the going‑concern concept and its implications for the measurement of assets and liabilities in the statement of financial position.
(c)
If the same entity were to adopt the cash basis of accounting and simultaneously decided to cease operations, describe how the presentation of the financial statements would change.
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Question 2 View Details
A small trading business recorded the following transactions for the month of March 2025. 1. Opening stock of goods: ₦120,000. 2. Purchases of goods: ₦250,000, paid cash. 3. Sales revenue: ₦500,000, of which ₦80,000 were on credit; the balance was cash. 4. Sales returns: ₦20,000 (cash refund). 5. Purchase returns: ₦10,000 (cash received). 6. Freight‑in charges: ₦5,000, paid cash. 7. Salaries expense: ₦30,000, paid cash. 8. Depreciation on equipment (cost ₦60,000, straight‑line over 5 years, no residual value) for the month. 9. Closing stock determined by physical count: ₦100,000. 10. Opening cash balance on 1 March: ₦50,000. Using the double‑entry system, answer the following:
Question Parts
(a)
Record the journal entries for each of the transactions listed above (i) to (viii).
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Question 3 View Details
A sole trader, Ade Enterprises, operates a small trading business. The following transactions occurred during the month of June: 1. 1 June – Ade started business with ₦150,000 cash and ₦200,000 capital introduced. 2. 3 June – Purchased inventory on credit from XYZ Suppliers for ₦80,000. 3. 5 June – Sold goods costing ₦45,000 for ₦70,000 cash. 4. 8 June – Paid ₦30,000 cash for rent. 5. 10 June – Received ₦50,000 from customers on account. 6. 12 June – Paid ₦20,000 cash to XYZ Suppliers as part‑payment of the credit purchase. 7. 15 June – Purchased equipment for ₦60,000 cash. 8. 20 June – Paid salaries of ₦25,000 cash. 9. 25 June – Sold goods on credit to ABC Traders for ₦90,000 (cost of goods sold ₦55,000). 10. 28 June – Paid ₦15,000 cash for utilities. Using the information above, answer the following:
Question Parts
(a)
Record each of the above transactions in the appropriate book of original entry (journal). Show the date, account titles, debit and credit amounts for each entry.
(b)
From the journal entries, prepare a double‑column cash book (Cash and Bank columns) for the month and determine the closing cash balance at 30 June.
(c)
Explain why the sales of goods on 5 June and 25 June are posted to the Sales Ledger, whereas the purchase on 3 June is posted to the Purchases Ledger.
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Question 4 View Details
Musa Ltd is a sole‑proprietorship that trades in electronic goods. The following information relates to the month of July: - Opening balances (1 July): * Cash – ₦40,000 (debit) * Bank – ₦60,000 (debit) * Inventory – ₦120,000 (debit) * Equipment – ₦80,000 (debit) * Capital – ₦250,000 (credit) * Creditors – ₦30,000 (credit) * Debtors – ₦45,000 (debit) - Transactions during July: 1. 4 July – Purchased inventory on credit for ₦70,000. 2. 6 July – Sold goods costing ₦50,000 for ₦85,000 cash. 3. 10 July – Paid ₦20,000 cash to creditors. 4. 12 July – Received ₦30,000 from debtors. 5. 15 July – Paid salaries of ₦18,000 cash. 6. 18 July – Bought a delivery van for ₦45,000 cash. 7. 22 July – Sold goods on credit for ₦90,000 (cost of goods sold ₦55,000). 8. 25 July – Paid electricity expenses of ₦5,000 cash. 9. 28 July – Adjusting entry: depreciation on equipment at 10% per month. 10. 30 July – Adjusting entry: outstanding salaries of ₦2,000 (not yet paid). Using the above data, answer the following:
Question Parts
(a)
Post the above transactions to the appropriate ledger accounts. Show T‑accounts for Cash, Bank, Inventory, Equipment, Debtors, Creditors, Capital, Sales, Cost of Goods Sold, Salaries Expense and Depreciation Expense. Include opening balances.
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Question 5 View Details
The following balances were extracted from the ledgers of XYZ Trading at the end of the fiscal year. All amounts are in Nigerian Naira (₦).
Question Parts
(a)
Prepare a trial balance showing separate Debit and Credit columns. List the accounts in the order given and compute the total of each column.
(b)
If the totals of the two columns are not equal, state the nature of the error and suggest one possible correction.
(c)
Assuming the trial balance you prepared in part (a) is correct, calculate the net profit or loss for the year. Show all working steps, including the computation of gross profit.
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Question 6 View Details
The cash book of ABC Services for the month of March is partially completed. The opening cash balance on 1 March was ₦50,000 and the opening bank balance was ₦120,000. The following transactions were recorded:
Question Parts
(a)
Complete the cash book (both cash and bank columns) for the month, showing all receipts and payments, and determine the closing balances of cash and bank on 31 March.
(b)
From the completed cash book, state the total cash receipts and the total cash payments for the month.
(c)
A bank statement for March shows a closing balance of ₦150,000, whereas the cash book (after your completion in part a) shows a different bank balance. Identify two possible reasons for this discrepancy and suggest one adjusting entry for each reason.
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Question 7 View Details
A manufacturing firm maintains a cash book that is periodically reconciled with its bank statement. The following information is available for the month ended 31 March 2026: - Cash book (bank column) balance on 31 March: ₦ 452,300 - Bank statement balance on 31 March: ₦ 468,750 - Deposits in transit at 31 March: ₦ 23,400 - Outstanding cheques (not yet presented to the bank): Cheque No. 315 for ₦ 12,800 and Cheque No. 318 for ₦ 7,600 - Bank charged a monthly service fee of ₦ 1,250 which was not recorded in the cash book. - The bank collected a note receivable on behalf of the firm for ₦ 15,600 and credited the amount to the firm's account. - A customer’s cheque of ₦ 9,500 was returned unpaid (NSF) and the bank deducted it from the statement balance. - The bank made an error by crediting ₦ 4,200 to the firm's account that actually belongs to another customer. Using the above information, answer the following: a) Prepare a bank reconciliation statement showing the adjusted cash book balance. b) Compute the corrected cash book balance after all adjustments have been made. c) Briefly explain two reasons why regular bank reconciliation is essential for a business.
Question Parts
(a)
Prepare a bank reconciliation statement showing the adjusted cash book balance.
(b)
Compute the corrected cash book balance after all adjustments have been made.
(c)
Briefly explain two reasons why regular bank reconciliation is essential for a business.
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Question 8 View Details
Alpha Traders Ltd. maintains separate subsidiary ledgers for debtors and creditors and uses control accounts in the general ledger. The following information relates to the month of February 2026: Opening balances (1 Feb 2026): - Sales Ledger Control Account (debtors) – Debit ₦ 312,500 - Purchases Ledger Control Account (creditors) – Credit ₦ 198,000 Transactions during February: 1. Credit sales of ₦ 145,800 were made on account. 2. Cash sales of ₦ 27,400 were recorded (no effect on control accounts). 3. Collections from debtors amounted to ₦ 118,900 (cash received). 4. Returns from customers (sales returns) amounted to ₦ 6,200 and were credited to the sales ledger control account. 5. Purchases on credit amounted to ₦ 89,750. 6. Payments to creditors (cash) amounted to ₦ 73,600. 7. Purchase returns (goods returned to suppliers) amounted to ₦ 4,500 and were debited to the purchases ledger control account. 8. Discount received from a supplier amounted to ₦ 1,200 and was credited to the purchases ledger control account. 9. Discount allowed to a customer amounted to ₦ 900 and was debited to the sales ledger control account. Using the above data, answer the following: a) Prepare the Sales Ledger Control Account for February showing opening balance, all movements and the closing balance. b) Prepare the Purchases Ledger Control Account for February showing opening balance, all movements and the closing balance. c) State the closing balances of the Debtors Ledger and Creditors Ledger as reflected by the control accounts. d) Discuss two advantages of using control accounts in a double‑entry accounting system.
Question Parts
(a)
Prepare the Sales Ledger Control Account for February showing opening balance, all movements and the closing balance.
(b)
Prepare the Purchases Ledger Control Account for February showing opening balance, all movements and the closing balance.
(c)
State the closing balances of the Debtors Ledger and Creditors Ledger as reflected by the control accounts.
(d)
Discuss two advantages of using control accounts in a double‑entry accounting system.
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