Practice neco financial_accounting 2024 Past Questions

Question 1 View Details

A company bought a delivery van for \( \text{₦}500{,}000 \) cash but mistakenly recorded the transaction as a repair expense. Assuming the van is a non‑current asset, state the effect of this error on (i) the reported profit for the period, and (ii) the total assets shown in the balance sheet.

A. Profit is overstated by ₦500,000 and total assets are understated by ₦500,000.

B. Profit is overstated by ₦500,000 and total assets are overstated by ₦500,000.

C. Profit is understated by ₦500,000 and total assets are overstated by ₦500,000.

Correct D. Profit is understated by ₦500,000 and total assets are understated by ₦500,000.

Correct Answer: D

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Question 2 View Details

The following incomplete records relate to a trading business for the year ended 31 December:\n\nOpening stock: \( \text{₦}120{,}000 \)\nSales: \( \text{₦}720{,}000 \)\nGross profit ratio: 30% of sales\nClosing stock: \( \text{₦}150{,}000 \)\nOperating expenses: salaries \( \text{₦}80{,}000 \), rent \( \text{₦}40{,}000 \), depreciation on plant \( \text{₦}25{,}000 \)\nA purchase return of \( \text{₦}10{,}000 \) was omitted from the records.\n\nUsing the gross‑profit method, determine the net profit for the year.

A. ₦61,000

B. ₦71,500

Correct C. ₦71,000

D. ₦81,000

Correct Answer: C

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Question 3 View Details

Bank statement balance at 31 March 2024: \( \text{₦}1{,}200{,}000 \)\nCash‑book balance at 31 March 2024: \( \text{₦}1{,}150{,}000 \)\nAdjustments:\n- Deposits in transit: \( \text{₦}80{,}000 \) (already recorded in cash book)\n- Outstanding checks: \( \text{₦}45{,}000 \) (already recorded in cash book)\n- Bank service fee not recorded in cash book: \( \text{₦}5{,}000 \)\n- A cheque of \( \text{₦}12{,}000 \) was recorded twice in the cash book\n- Bank erroneously credited the account with \( \text{₦}7{,}000 \) (should belong to another customer)\n\nDetermine the corrected cash‑book balance after reconciling all items.

Correct A. ₦1,126,000

B. ₦1,140,000

C. ₦1,131,000

D. ₦1,114,000

Correct Answer: A

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Question 4 View Details

Three partners A, B and C share profit and loss in the ratio 3:2:1. Their opening capital balances are A: \( \text{₦}300{,}000 \), B: \( \text{₦}200{,}000 \), C: \( \text{₦}100{,}000 \). During the year the partnership earned a net profit before interest and salary of \( \text{₦}180{,}000 \). Interest on capital is charged at 10% per annum on opening capitals. Partner B receives a salary of \( \text{₦}30{,}000 \). Partner C withdraws \( \text{₦}20{,}000 \) during the year. After charging interest and salary, 40% of the remaining profit is retained in the business and the rest is distributed according to the profit‑sharing ratio. Determine the closing capital balance of each partner at year‑end.

A. A: ₦351,000; B: ₦204,000; C: ₦97,000

B. A: ₦375,000; B: ₦220,000; C: ₦105,000

C. A: ₦357,000; B: ₦208,000; C: ₦119,000

Correct D. A: ₦357,000; B: ₦208,000; C: ₦99,000

Correct Answer: D

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Question 5 View Details

The equity of XYZ Ltd. as at 1 January 2024 is as follows:\n- Share capital: 1,000,000 ordinary shares of \( \text{₦}10 \) each, fully paid (\( \text{₦}10,000,000 \))\n- Share premium account: \( \text{₦}200,000 \)\n- Revaluation surplus on property: \( \text{₦}150,000 \)\n- Retained earnings (beginning): \( \text{₦}500,000 \)\n\nDuring 2024 the following events occurred:\n1. The company issued 200,000 new shares at \( \text{₦}15 \) each (including premium).\n2. An interim dividend of \( \text{₦}5 \) per share was declared and paid on the shares outstanding before the new issue.\n3. Another property was revalued, creating an additional revaluation surplus of \( \text{₦}80,000 \).\n4. The company incurred a loss before tax of \( \text{₦}120,000 \) and tax expense of \( \text{₦}30,000 \) (loss after tax = \( \text{₦}90,000 \)).\n5. The loss after tax was transferred to retained earnings.\n\nCalculate the total shareholders' equity of XYZ Ltd. as at 31 December 2024.

Correct A. ₦8,840,000

B. ₦6,840,000

C. ₦8,930,000

D. ₦8,760,000

Correct Answer: A

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Question 6 View Details

Given the following trial balance before adjustments (amounts in naira):\n\nDr:\n- Cash \(25,000\)\n- Accounts Receivable \(30,000\)\n- Inventory \(45,000\)\n- Equipment \(55,000\)\n- Expenses (excluding depreciation) \(12,000\)\n\nCr:\n- Accumulated Depreciation - Equipment \(9,000\)\n- Sundry Creditors \(X\)\n- Share Capital \(80,000\)\n- Revenue \(70,000\)\n\nThe adjusting entries are:\n1. Depreciation expense \(7,000\) Dr and Accumulated Depreciation - Equipment \(7,000\) Cr.\n2. Accrued revenue: Revenue \(5,000\) Cr and Accrued Receivable \(5,000\) Dr.\n\nAfter posting the adjustments, the trial balance must balance (total debits = total credits). Determine the amount of \(X\).

A. 7,000

B. 9,000

C. 10,000

Correct D. 8,000

Correct Answer: D

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Question 7 View Details

ABC Ltd. has the following information for the year ended 31 December:\n\n- Ordinary share capital: \(500,000\) naira.\n- Preference dividend rate: \(5\%\) per annum.\n- Total preference dividend paid during the year: \(15,000\) naira.\n- Profit before tax: \(180,000\) naira.\n- Tax rate: \(30\%\).\n- Ordinary dividend paid: \(25,000\) naira.\n- Retained earnings at the beginning of the year: \(90,000\) naira.\n\nNo other transactions occurred. Determine the total shareholders' equity at the end of the year.

A. 966,000

B. 986,000

Correct C. 976,000

D. 1,006,000

Correct Answer: C

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Question 8 View Details

During the year the following figures were recorded (naira):\n\n- Sales: \(500,000\)\n- Opening inventory: \(80,000\)\n- Purchases: \(250,000\)\n- Closing inventory: \(70,000\)\n- Salaries expense: \(90,000\)\n- Rent expense: \(30,000\)\n- Depreciation expense: \(15,000\)\n- Net profit: \(45,000\)\n\nThe only expense not listed is the advertising expense. Calculate the amount of advertising expense incurred during the year.

A. 50,000

B. 55,000

Correct C. 60,000

D. 65,000

Correct Answer: C

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Question 9 View Details

ABC Co. reported the following data (naira):\n\n- Sales: \(600,000\)\n- Opening inventory (same under both methods): \(50,000\)\n- Purchases: \(300,000\)\n- Closing inventory valued using the weighted‑average method: \(70,000\)\n- Reported profit using the weighted‑average method: \(130,000\)\n- Closing inventory valued using FIFO would be \(80,000\)\n\nAssuming all other expenses remain unchanged, what would be the profit if the FIFO inventory valuation method were used instead of the weighted‑average method?

A. 130,000

B. 150,000

C. 120,000

Correct D. 140,000

Correct Answer: D

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Question 10 View Details

State the accounting concept that requires expenses to be recognised in the same period as the revenues they help generate.

A. Revenue recognition principle

Correct B. Matching principle

C. Historical cost principle

D. Conservatism principle

Correct Answer: B

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Question 11 View Details

The Trade Receivables Control Account had an opening debit balance of ₠120,000. During the month the following transactions were recorded: credit sales of ₠250,000; cash receipts from debtors of ₠180,000; sales returns (credit) of ₠15,000; discount allowed on early payment of ₠5,000. At month‑end the aged analysis shows that \(5\%\) of the closing receivables are overdue more than 90 days. The company provides a provision for doubtful debts equal to \(5\%\) of the amount overdue more than 90 days. Determine the amount of the provision for doubtful debts.

A. 300

B. 8500

Correct C. 425

D. 850

Correct Answer: C

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Question 12 View Details

The trial balance of XYZ Ltd (figures in \u20a0 000) is as follows:\nCash \(50\)\tAccounts Receivable \(80\)\tInventory \(120\)\tPrepaid Insurance \(10\)\tEquipment \(200\)\tAccumulated Depreciation‑Equipment \(40\)\tAccounts Payable \(70\)\tBank Loan \(100\)\tShare Capital \(150\)\tRetained Earnings (b/f) \(30\)\tSales Revenue \(300\)\tCost of Goods Sold \(180\)\tSalary Expense \(40\)\tInsurance Expense \(12\)\tInterest Expense \(8\)\tDividend Declared \(20\).\nAdditional information:\n1. Equipment is depreciated straight‑line over 5 years with no residual value; one year of depreciation has not yet been recorded.\n2. Inventory at year‑end is overstated by \u20a05,000 and should be written down.\n3. Prepaid insurance of \u20a010,000 covers 12 months; one month has expired.\n4. An accrued salary of \u20a06,000 is outstanding at year‑end.\n5. The company has 10,000 ordinary shares outstanding.\nDetermine the earnings per share (EPS) for the year.

A. 0.90

B. 0.70

C. 0.78

Correct D. 0.82

Correct Answer: D

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Question 13 View Details

A machine was purchased for \u20a0500,000. Its estimated residual value is \u20a050,000 and its useful life is 5 years. The company applied the double‑declining‑balance method for the first two years and then switched to the straight‑line method for the remaining years. At the end of year 3 the machine was sold for \u20a0200,000. Determine the gain or loss on disposal.

A. 70000

B. 53333

C. 66667

Correct D. 63333

Correct Answer: D

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Question 14 View Details

A company purchased equipment costing \u20a0120,000 on credit. It paid cash of \u20a030,000 and issued a note payable for the balance. A cash discount of 5\% was received on the cash portion. Freight‑in of \u20a02,000 was paid in cash. Record the journal entry in the books of original entry and determine the balance of the Equipment ledger account after posting, assuming the Equipment account had an opening debit balance of \u20a050,000.

Correct A. 172000

B. 168000

C. 175000

D. 170000

Correct Answer: A

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Question 15 View Details

The cash book of ABC Ltd shows a balance of \u20a085,000. The bank statement balance at the same date is \u20a078,500. The following items are identified:\n- Outstanding checks total \u20a012,000.\n- Deposits in transit total \u20a05,500 (including a customer's cheque of \u20a02,300 not yet cleared).\n- The bank charged a service fee of \u20a0800 not yet recorded in the cash book.\n- The bank incorrectly credited the account with \u20a01,200.\nPrepare a bank reconciliation and state the corrected cash book balance after all adjustments.

A. 85000

B. 83000

C. 83800

Correct D. 84200

Correct Answer: D

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Question 16 View Details

A company reported sales of \( \text{₦}1,200,000 \) and a gross profit margin of \(30\%\). The opening inventory was \( \text{₦}80,000 \) and purchases during the year amounted to \( \text{₦}800,000 \). Depreciation expense recorded was \( \text{₦}48,000 \), which represents \(10\%\) of the equipment cost. Administrative expenses were \( \text{₦}60,000 \), selling expenses \( \text{₦}40,000 \) and interest expense \( \text{₦}12,000 \). Tax is charged at \(30\%\) of profit before tax. Determine the net profit for the year.

A. 160000

B. 200000

Correct C. 140000

D. 120000

Correct Answer: C

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Question 17 View Details

The trial balance of XYZ Ltd as at 31 December shows the following balances (in Naira):\n\nCash Dr 120,000\nAccounts Receivable Dr 85,000\nInventory Dr ?\nEquipment Dr 250,000\nAccumulated Depreciation - Equipment Cr 48,000\nAccounts Payable Cr 70,000\nBank Loan Cr 150,000\nCapital Cr 300,000\nSales Revenue Cr 560,000\nCost of Goods Sold Dr 340,000\nAdministrative Expenses Dr 45,000\nInterest Expense Dr ?\n\nThe total of Administrative Expenses and Interest Expense equals \(10\%\) of Sales Revenue. The trial balance must balance (total debits = total credits). Determine the missing amounts for Inventory and Interest Expense.

A. Inventory 280,000; Interest Expense 10,000

Correct B. Inventory 277,000; Interest Expense 11,000

C. Inventory 275,000; Interest Expense 12,000

D. Inventory 260,000; Interest Expense 13,000

Correct Answer: B

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Question 18 View Details

On 15 March, ABC Ltd purchased machinery costing \( \text{₦}250,000 \), paying \( \text{₦}100,000 \) in cash and the balance on credit. Record the journal entry.

Correct A. Machinery Dr 250,000; Cash Cr 100,000; Accounts Payable Cr 150,000

B. Machinery Dr 250,000; Cash Dr 100,000; Accounts Payable Cr 150,000

C. Machinery Dr 250,000; Cash Cr 100,000; Notes Payable Cr 150,000

D. Machinery Dr 250,000; Cash Cr 150,000; Accounts Payable Cr 100,000

Correct Answer: A

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Question 19 View Details

The Receivables Control Account for the year shows an opening balance of Dr \( \text{₦}80,000 \). During the year the following entries were posted:\n\n- Sales on credit: Dr \( \text{₦}500,000 \)\n- Returns inwards: Cr \( \text{₦}5,000 \)\n- Bad debts written off: Cr \( \text{₦}8,000 \)\n- Receipts from customers: Cr \( \text{₦}460,000 \)\n\nThe closing balance is shown as Dr ?. The subsidiary ledger indicates that the total of individual customer balances at year‑end is \( \text{₦}42,000 \). Assuming the discrepancy is due to an unrecorded credit adjustment (e.g., discount allowed), determine the amount of that adjustment.

A. 85000

B. 55000

C. 75000

Correct D. 65000

Correct Answer: D

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Question 20 View Details

The Purchases Account for the year contains the following entries (in Naira):\n\n1. Purchases on credit: Dr \( \text{₦}200,000 \)\n2. Purchase returns: Cr \( \text{₦}12,000 \)\n3. Freight‑in: Dr \( \text{₦}5,000 \)\n4. Discount received: Cr \( \text{₦}3,000 \)\n5. Purchases on credit: Dr \( \text{₦}150,000 \)\n6. Purchase returns: Cr \( \text{₦}8,000 \)\n7. Freight‑in: Dr \( \text{₦}4,000 \)\n8. Discount received: Cr \( \text{₦}2,500 \)\n\nPrepare the Purchases Ledger and state the net purchases for the year.

A. 341500

B. 324500

Correct C. 333500

D. 339000

Correct Answer: C

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Question 21 View Details

Municipality A reports total assets of ₦150,000,000 and total liabilities of ₦90,000,000. The reported total revenue for the year is ₦30,000,000. A provision for unclaimed property revenue equal to 5 % of total revenue must be recognised as a liability. In addition, a deferred tax liability equal to 12 % of temporary differences amounting to ₦8,000,000 must be recognised. What is the net financial position (assets minus liabilities) after these adjustments?

Correct A. 57,540,000

B. 54,900,000

C. 58,500,000

D. 59,040,000

Correct Answer: A

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Question 22 View Details

During the year a sole trader's trial balance shows total debits of ₦1,200,000 and total credits of ₦1,200,000. The only account not shown is Purchases. The other debit balances are Opening Stock ₦180,000, Expenses ₦140,000 and Closing Stock ₦120,000. The credit balances are Sales ₦900,000 and Capital ₦300,000. (a) Determine the amount of Purchases. (b) Compute the gross profit for the year.

A. Purchases 800,000; Gross profit 40,000

Correct B. Purchases 760,000; Gross profit 80,000

C. Purchases 760,000; Gross profit 100,000

D. Purchases 720,000; Gross profit 80,000

Correct Answer: B

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Question 23 View Details

After posting, the cash book shows the following balances (in ₦): Cash 120,000 Dr, Purchases 50,000 Dr, Expenses 30,000 Dr, Sales 150,000 Cr, Capital 35,000 Cr. The trial balance therefore has debits exceeding credits by ₦15,000. It is discovered that (i) a purchase invoice of ₦25,000 was recorded correctly in Purchases but the corresponding credit to Creditors was omitted, and (ii) a sales invoice of ₦10,000 was recorded correctly in Sales but the corresponding debit to Debtors was omitted. What amount should be transferred to the Suspense Account to balance the trial balance?

A. 10,000

Correct B. 15,000

C. 20,000

D. 5,000

Correct Answer: B

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Question 24 View Details

The cash book for the month starts with a balance of ₦80,000. Receipts during the month are cash sales of ₦45,000 and a bank loan received of ₦20,000. Payments are rent ₦12,000, salaries ₦18,000 and cash purchase of supplies ₦10,000. The bank statement at month‑end shows a closing balance of ₦95,000, with outstanding checks totalling ₦8,000 and deposits in transit of ₦5,000. What should be the corrected bank balance after reconciling the statement with the cash book?

A. 95,000

Correct B. 105,000

C. 92,000

D. 115,000

Correct Answer: B

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Question 25 View Details

The following balances appear in the trial balance after posting all journal entries for January (in ₦): Cash 115,000 Dr, Equipment 120,000 Dr, Cost of Goods Sold 50,000 Dr, Salaries 30,000 Dr, Sales 80,000 Cr, Bank Loan 100,000 Cr, Capital 150,000 Cr. The total debits equal ₦315,000 and total credits equal ₦330,000, giving a difference of ₦15,000 (credits exceed debits). It is suspected that a single transaction was omitted from the journal. Assuming the omitted transaction is a purchase of inventory on credit, what is the amount of that missing entry that would bring the trial balance into balance?

A. 5,000

B. 20,000

Correct C. 15,000

D. 10,000

Correct Answer: C

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