neco 2025 financial_accounting | Essay

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Question 1 View Details
ABC Trading Ltd. is a small wholesale business that has just started operations. The owner, Mr. Ade, wants to understand the underlying principles that guide the preparation of financial statements.
Question Parts
(a)
Define the going concern concept and explain why it is relevant to ABC Trading Ltd.
(b)
Distinguish between the accrual basis of accounting and the cash basis of accounting. Illustrate the difference by describing how a sale made on credit on 15 March would be recorded under each basis.
(c)
The entity uses the historical cost principle for its fixed assets. Discuss two advantages and two limitations of this principle in the context of a developing economy like Nigeria.
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Question 2 View Details
During the month of June, XYZ Manufacturing Co. recorded the following transactions:
Question Parts
(a)
Record each transaction in the journal. Show the date, accounts affected, and the debit and credit amounts.
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Question 3 View Details
The following transactions were recorded for XYZ Trading Ltd. during the month of March. 1. 1 March – Purchased goods on credit from ABC Suppliers for ₦150,000. 2. 3 March – Sold goods on credit to DEF Retailers for ₦200,000. 3. 5 March – Paid cash ₦50,000 to ABC Suppliers for part of the March purchase. 4. 7 March – Received cash ₦120,000 from DEF Retailers for goods sold. 5. 10 March – Returned defective goods worth ₦20,000 to ABC Suppliers. 6. 12 March – Received goods worth ₦15,000 as returns from a customer (goods previously sold on credit). 7. 15 March – Purchased office supplies for ₦5,000 cash. 8. 20 March – Sold goods for cash amounting to ₦30,000. 9. 22 March – Paid cash ₦10,000 for electricity expenses. 10. 28 March – Received a cash discount of ₦2,000 from ABC Suppliers for early payment.
Question Parts
(a)
Record each of the above transactions in the appropriate book of original entry.
(b)
Calculate the total of the debit side of the Purchases Book and the credit side of the Sales Book for the month.
(c)
Explain briefly why a trading business maintains separate Purchases and Sales Books.
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Question 4 View Details
The journal entries for XYZ Trading Ltd. for the month of March are given below. 1. Dr Purchases ₦150,000 Cr ABC Suppliers ₦150,000 2. Dr Cash ₦120,000 Cr DEF Retailers ₦120,000 3. Dr ABC Suppliers ₦50,000 Cr Cash ₦50,000 4. Dr Cash ₦30,000 Cr Sales ₦30,000 5. Dr Returns Inwards ₦15,000 Cr DEF Retailers ₦15,000 6. Dr Electricity Expense ₦10,000 Cr Cash ₦10,000 7. Dr ABC Suppliers ₦2,000 Cr Cash ₦2,000 (cash discount received) 8. Dr Office Supplies ₦5,000 Cr Cash ₦5,000 9. Dr Sales ₦200,000 Cr DEF Retailers ₦200,000 10. Dr Cash ₦50,000 Cr Returns Outwards ₦20,000 Cr ABC Suppliers ₦30,000 (payment of remaining balance after discount) Using these journal entries, answer the following:
Question Parts
(a)
Post the above entries to the Cash Account and state its closing balance (debit or credit).
(b)
Prepare the Purchases and Sales ledger accounts and give their closing balances.
(c)
Using the ledger balances obtained, prepare a trial balance for the month and state whether it balances.
(d)
If the net profit for the month is ₦45,000 and the owner withdraws ₦10,000 as drawings, explain the effect on the Capital Account.
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Question 5 View Details
The following ledger account balances were extracted at the end of the financial year for XYZ Ltd. All amounts are in Nigerian Naira (₦).
Question Parts
(a)
Prepare a trial balance showing the debit and credit columns for the accounts listed.
(b)
State the difference between the total debits and total credits.
(c)
Assuming the discrepancy is caused by a single mis‑posted amount, identify which account could be responsible and propose the correcting journal entry.
(d)
Explain why a trial balance does not guarantee that the ledger is free from errors.
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Question 6 View Details
The cash book of ABC Co. for the month of March is to be prepared. The following information is available:
Question Parts
(a)
Prepare a cash book (two‑column format with cash and bank columns) showing the opening balances, all receipts and payments, and the closing balances for both columns.
(b)
The bank statement for March shows a closing balance of ₦45,000. Reconcile the cash book bank balance with the bank statement, taking into account the outstanding cheque, deposits in transit and bank charges not yet recorded. State the adjusted cash book bank balance after reconciliation.
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Question 7 View Details
The cash book of XYZ Ltd shows a cash balance of ₦150,000 as at 31 March 2025. The bank statement for the same date shows a balance of ₦165,000. The following information is available: - Deposits in transit: ₦12,000 - Cheques issued but not yet presented: ₦8,500 - Bank service charge (recorded by bank only): ₦1,200 - Interest earned on the bank balance (recorded by bank only): ₦600 - An error in the cash book where a cheque of ₦3,000 was entered as ₦30,000. - An error in the bank statement where a credit of ₦2,500 was omitted. Prepare a bank reconciliation for XYZ Ltd as at 31 March 2025 and answer the subsequent questions.
Question Parts
(a)
Prepare a bank reconciliation statement showing the adjusted cash book balance.
(b)
State the corrected cash book balance after all adjustments.
(c)
Explain why the bank service charge and the interest earned are treated differently in the reconciliation process.
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Question 8 View Details
The sales ledger of ABC Trading for the six months ended 30 June 2025 contains the following subsidiary ledger balances at the beginning of the period and the transactions recorded during the period:
Question Parts
(a)
Prepare a Sales Ledger Control Account for the period, showing the opening balance, total sales, cash receipts, trade discounts allowed, sales returns, and the closing balance.
(b)
Calculate the total amount of trade receivables outstanding at 30 June 2025.
(c)
Discuss two advantages of maintaining a Sales Ledger Control Account in the general ledger.
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