Neco 2021 Financial Accounting Question 47

Practice objective / multiple choice question 47 from the 2021 Neco Financial Accounting examination.

Neco 2021 Financial Accounting Objective / Multiple Choice Medium Difficulty
Question 47 NECO • 2021 • FINANCIAL_ACCOUNTING • objective

The trial balance of a public entity after posting transactions is shown below (amounts in ₦):\nDebits: Cash 180,000; Accounts receivable 70,000; Inventory 110,000; Equipment 260,000; Salary expense 115,000; Depreciation expense 45,000; Suspense account 10,000 (debit).\nCredits: Accumulated depreciation - Equipment 50,000; Accounts payable 80,000; Accrued expenses 20,000; Revenue 640,000.\nThe trial balance balances. Identify the error that gave rise to the suspense balance, prepare the correcting journal entry, and state the effect of the correction on net profit.

Answer Options

Correct Answer A. Omitted Utility expense of 10,000. Correcting entry: Debit Utility expense 10,000; Credit Suspense account 10,000. Net profit decreases by 10,000.
B. Omitted Advertising expense of 10,000. Correcting entry: Debit Advertising expense 10,000; Credit Suspense account 10,000. Net profit decreases by 10,000.
C. Omitted Salary expense of 10,000. Correcting entry: Debit Salary expense 10,000; Credit Suspense account 10,000. Net profit decreases by 10,000.
D. Omitted Utility expense of 10,000. Correcting entry: Debit Utility expense 10,000; Credit Suspense account 10,000. Net profit increases by 10,000.
Correct Answer
A
Correct Option:
Omitted Utility expense of 10,000. Correcting entry: Debit Utility expense 10,000; Credit Suspense account 10,000. Net profit decreases by 10,000.

About This Question

This is Neco 2021 Financial Accounting Question 47. It is one of the objective questions from the 2021 Neco Financial Accounting examination.

Difficulty level: Medium .

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