neco 2020 financial_accounting | Essay

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Question 1 View Details
A sole trader, Mrs. Okafor, started her boutique business on 1 January 2023 with a cash investment of ₦200,000. During the first month she carried out the following transactions: 1. Purchased inventory on credit for ₦120,000. 2. Sold goods costing ₦80,000 for cash ₦150,000. 3. Paid rent of ₦20,000 in cash. 4. Bought equipment for ₦50,000 cash, expected to be used for 5 years with no residual value. 5. Paid insurance premium of ₦12,000 for a 12‑month policy starting 1 January. 6. Received ₦30,000 from a customer for services that will be rendered in February. Using the information above, answer the questions that follow.
Question Parts
(a)
Explain the significance of the Going Concern concept and the Accrual (Revenue Recognition) concept in the preparation of the financial statements for Mrs. Okafor’s business.
(b)
Record the journal entries for the six transactions listed above, showing the appropriate debit and credit accounts.
(c)
Discuss the possible effect on the comparability of Mrs. Okafor’s financial statements for the next year if she were to change the method of inventory valuation from FIFO to weighted‑average without disclosing the change.
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Question 2 View Details
ABC Enterprises commenced operations on 1 January 2023 with an owner's capital of ₦200,000 cash. The following transactions occurred during January: 1. Purchased inventory on credit ₦120,000. 2. Sold goods costing ₦80,000 for cash ₦150,000. 3. Paid rent ₦20,000 cash. 4. Bought equipment for ₦50,000 cash (useful life 5 years, no residual value). 5. Paid insurance premium ₦12,000 for a 12‑month policy beginning 1 January. 6. Received ₦30,000 cash from a customer for services to be performed in February. 7. At month‑end, wages of ₦5,000 were incurred but not yet paid. Using the information above, perform the tasks listed below.
Question Parts
(a)
Prepare the journal entries for the seven transactions listed above.
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Question 3 View Details
A manufacturing company acquired a new machine on 1 January 2022. The total cost of the machine was ₦500,000. The company paid ₦200,000 in cash and the balance was purchased on credit. The supplier offered a 2% cash‑discount on the credit amount if paid within 30 days. The machine is expected to have a useful life of 5 years and a residual value of ₦50,000, and the company uses the straight‑line method of depreciation. During the year, the company incurred ₦30,000 of repair work that will extend the useful life of the machine and therefore must be capitalised. Prepare the necessary journal entries for the following and compute the carrying amount of the machine as at 31 December 2022. (a) Record the purchase of the machine, including the cash‑discount term. (b) Record the depreciation expense for the year. (c) Record the capitalisation of the repair work. (d) Record the receipt of the cash‑discount (assume the discount was taken within the period). (e) State the carrying amount of the machine on 31 December 2022.
Question Parts
(a)
Record the purchase of the machine, including the cash‑discount term.
(b)
Record the depreciation expense for the year.
(c)
Record the capitalisation of the repair work.
(d)
Record the receipt of the cash‑discount (assume the discount was taken within the period).
(e)
State the carrying amount of the machine on 31 December 2022.
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Question 4 View Details
A sole trader runs a small trading business. The following information relates to the business for the month of January 2022. Opening balances (01/01/2022): - Cash: ₦100,000 (debit) - Bank: ₦50,000 (debit) - Capital: ₦150,000 (credit) Transactions during January: 1. Sold goods for ₦80,000 cash. The cost of the goods sold was ₦50,000. 2. Purchased goods on credit for ₦60,000. Freight of ₦5,000 was paid in cash. 3. Paid wages of ₦12,000 in cash. 4. Received ₦30,000 from a debtor (Debtors account). 5. Paid rent of ₦10,000 in cash. Using the above information, answer the following: a) Post each transaction to the appropriate ledger accounts (Cash, Bank, Sales, Purchases, Freight‑In, Wages, Debtors, Creditors, Capital). b) Prepare a trial balance as at 31 January 2022. c) Compute the gross profit for the month. d) Determine the net profit after deducting wages and rent. e) State the closing balance of the Cash account.
Question Parts
(a)
Post each transaction to the appropriate ledger accounts (Cash, Bank, Sales, Purchases, Freight‑In, Wages, Debtors, Creditors, Capital).
(b)
Prepare a trial balance as at 31 January 2022.
(c)
Compute the gross profit for the month.
(d)
Determine the net profit after deducting wages and rent.
(e)
State the closing balance of the Cash account.
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Question 5 View Details
The following ledger account balances were extracted from the books of XYZ Ltd at the end of the financial year:
Question Parts
(a)
Prepare a trial balance using the balances given.
(b)
State the totals of the debit and credit sides and comment on whether the trial balance is balanced.
(c)
Suggest one plausible reason for the ₦2,500 excess on the debit side and indicate how the trial balance could be corrected.
(d)
Assuming the error identified in part (c) is a transposition error in the Advertising Expense account, adjust the trial balance and show the corrected totals for both sides.
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Question 6 View Details
The following cash transactions occurred during the month of January for ABC Enterprises. The cash book was opened with a balance of ₦20,000.
Question Parts
(a)
Record the transactions in a two‑column cash book (cash receipts and cash payments) and compute the totals for each column.
(b)
Determine the closing cash balance at the end of January.
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Question 7 View Details
Alpha Traders Ltd. maintains a cash book for its bank transactions. The following information is available for the month ended 31 March 2024: - Cash book (bank) balance on 31 March: ₦1,250,000 (debit). - Bank statement balance on 31 March: ₦1,180,000 (credit). - Outstanding cheques at 31 March: ₦45,000 (cheques dated 30 March not yet presented). - Deposits in transit at 31 March: ₦30,000 (cash received on 31 March but not reflected on the statement). - Bank charged ₦12,000 for a service fee which was not recorded in the cash book. - A customer’s cheque of ₦20,000 was dishonoured on 2 April; the bank deducted the amount from the statement balance. - The bank statement shows a credit of ₦5,000 for interest earned which was not recorded in the cash book. - An error on the bank side: a cheque of ₦8,000 paid to a supplier was recorded as ₦80,000 on the statement. Using the above information, answer the following: a) Prepare a Bank Reconciliation Statement for Alpha Traders Ltd. showing the adjusted cash book balance as at 31 March 2024. b) Identify two possible reasons (other than the items listed above) that could cause a difference between the cash book balance and the bank statement balance. c) Explain how unpresented cheques affect the cash flow statement of a company.
Question Parts
(a)
Prepare a Bank Reconciliation Statement for Alpha Traders Ltd. showing the adjusted cash book balance as at 31 March 2024.
(b)
Identify two possible reasons (other than the items listed above) that could cause a difference between the cash book balance and the bank statement balance.
(c)
Explain how unpresented cheques affect the cash flow statement of a company.
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Question 8 View Details
Beta Manufacturing Co. uses control accounts to summarise its subsidiary ledgers. The following information relates to the month of February 2024: - Opening balance of Sales Ledger Control Account (SLCA): ₦500,000 (debit). - Total credit sales recorded in the sales journal for February: ₦820,000. - Sales returns (goods returned by customers) recorded: ₦35,000 (debit). - Cash receipts from customers (as per cash receipts journal): ₦720,000 (debit). - An error was discovered: a cash receipt of ₦15,000 was posted twice in the cash receipts journal. - Closing balance of the Sales Ledger (as per subsidiary ledger) is reported as ₦65,000 (debit). Using the above data, answer the following: a) Prepare the Sales Ledger Control Account for February 2024, showing the corrected closing balance after adjusting for the double‑posted cash receipt. b) Identify the discrepancy (if any) between the control account balance and the subsidiary ledger balance and suggest the journal entry required to rectify it. c) Explain the purpose of maintaining a control account in the double‑entry bookkeeping system.
Question Parts
(a)
Prepare the Sales Ledger Control Account for February 2024, showing the corrected closing balance after adjusting for the double‑posted cash receipt.
(b)
Identify the discrepancy (if any) between the control account balance and the subsidiary ledger balance and suggest the journal entry required to rectify it.
(c)
Explain the purpose of maintaining a control account in the double‑entry bookkeeping system.
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