Neco 2021 Financial Accounting Question 2

Practice essay / theory question 2 from the 2021 Neco Financial Accounting examination. This question covers Double Entry .

Neco 2021 Financial Accounting Essay / Theory
Topic: Double Entry
Question 2 NECO • 2021 • FINANCIAL_ACCOUNTING • essay

ABC Traders commenced business on 1 January 2023 with cash of ₦150,000 and capital of ₦150,000. During January the following transactions were recorded: 1. Purchased inventory on credit for ₦70,000. 2. Sold goods costing ₦45,000 for cash ₦80,000. 3. Paid rent cash ₦10,000. 4. Received ₦30,000 from a customer on account. 5. Paid ₦5,000 for advertising on credit. 6. At 31 January a physical count showed inventory on hand of ₦20,000, but the ledger shows ₦25,000. Answer the questions below.

Question Parts

( a )
Record the journal entries for transactions 1 to 5.
( b )
Post the entries to T‑accounts for Cash, Inventory, Accounts Payable, Sales Revenue, Cost of Goods Sold, Rent Expense, Advertising Expense, and Capital.
( c )
Prepare a trial balance as at 31 January 2023.
( d )
Explain the effect of the inventory discrepancy (physical count ₦20,000 vs ledger ₦25,000) on the trial balance and suggest the adjusting entry required.

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About This Question

This is Neco 2021 Financial Accounting Question 2. It is one of the essay questions from the 2021 Neco Financial Accounting examination.

The question covers Double Entry .

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