Neco 2020 Financial Accounting Question 1

Practice essay / theory question 1 from the 2020 Neco Financial Accounting examination. This question covers Accounting Concepts .

Neco 2020 Financial Accounting Essay / Theory
Topic: Accounting Concepts
Question 1 NECO • 2020 • FINANCIAL_ACCOUNTING • essay

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.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Neco 2020 Financial Accounting Question 1. It is one of the essay questions from the 2020 Neco Financial Accounting examination.

The question covers Accounting Concepts .

View More Neco 2020 Financial Accounting Questions More Neco Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support