Practice neco financial_accounting 2025 Past Questions

Question 1 View Details

The cash book balance as at 31 December is \(150,000\) naira. The bank statement balance for the same date is \(158,500\) naira. Outstanding checks total \(12,000\) naira and deposits in transit total \(5,500\) naira. The bank charged a service fee of \(800\) naira which the cash book has not recorded. In addition, the bank incorrectly credited a customer's cheque of unknown amount, causing the statement balance to be overstated. After preparing the bank reconciliation, the adjusted cash book balance equals the adjusted bank balance. Determine the amount of the incorrectly credited cheque.

A. 3600

B. 2000

Correct C. 2800

D. 3200

Correct Answer: C

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Question 2 View Details

A trading business has the following information for the year: Opening stock \(45,000\) naira, Purchases \(180,000\) naira, Sales \(210,000\) naira, Gross profit \(48,000\) naira, Salaries \(20,000\) naira, Rent \(12,000\) naira, Depreciation \(4,000\) naira, Net profit \(12,000\) naira. Using the given data, determine the value of the closing stock at year‑end.

Correct A. 63000

B. 27000

C. 72000

D. 60000

Correct Answer: A

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Question 3 View Details

Three partners A, B and C share profits in the ratio 3:2:1. Their capital balances are A \(120,000\) naira, B \(80,000\) naira and C \(50,000\) naira. A new partner D is admitted, bringing in cash \(70,000\) naira for a 20% share of future profits. Goodwill of the firm is valued at five times the average profit of the last three years, which were \(30,000\), \(36,000\) and \(42,000\) naira respectively. In addition, a piece of equipment is re‑valued upwards by \(15,000\) naira and the re‑valuation surplus is to be shared according to the old profit‑sharing ratios. Determine the amount of goodwill credit allocated to each existing partner (A, B and C) after D's admission.

A. A=28,000; B=18,666.67; C=9,333.33

B. A=23,333.33; B=23,333.33; C=23,333.33

C. A=90,000; B=60,000; C=30,000

Correct D. A=35,000; B=23,333.33; C=11,666.67

Correct Answer: D

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Question 4 View Details

A manufacturing firm produced 2,000 units of product X during the year. The following data are available: Opening raw‑material stock \(40,000\) naira, Purchases of raw materials \(120,000\) naira, Closing raw‑material stock \(30,000\) naira, Direct labour \(50,000\) naira, Manufacturing overhead is applied at 150% of direct labour, Opening work‑in‑process (WIP) \(20,000\) naira, Closing WIP \(25,000\) naira, Opening finished‑goods stock \(15,000\) naira, Closing finished‑goods stock \(10,000\) naira, Sales revenue \(350,000\) naira, Selling and distribution expenses \(30,000\) naira, Administrative expenses \(20,000\) naira. Calculate the gross profit for the period.

A. 145000

Correct B. 95000

C. 75000

D. 170000

Correct Answer: B

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Question 5 View Details

The trial balance of a sole trader for the year ended 31 December shows: Sales \(500,000\) naira, Purchases \(300,000\) naira, Opening stock \(70,000\) naira, Closing stock \(80,000\) naira, Salaries \(60,000\) naira, Rent \(30,000\) naira, Depreciation - building \(15,000\) naira, Depreciation - machinery \(20,000\) naira, Interest payable \(5,000\) naira, Capital (1 Jan) \(200,000\) naira, Drawings \(40,000\) naira, Trade receivables \(50,000\) naira. At year‑end a provision for doubtful debts equal to 2% of trade receivables is required. No other adjustments are needed. Determine the net profit for the year (before tax).

A. 85000

Correct B. 79000

C. 90000

D. 84000

Correct Answer: B

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Question 6 View Details

Partnership A and B have capital balances of ₦120,000 and ₦80,000 respectively and share profit in the ratio \(3:2\). Before admitting a new partner C, the partnership revalues its assets: the building value increases by ₦30,000 and inventory decreases by ₦10,000. Goodwill is then recognised at \(20\%\) of the revised total capital. Partner C is admitted for a cash contribution of ₦50,000 and is given a \(25\%\) share of future profits. Determine (i) the amount of goodwill credited to A and to B, and (ii) the new capital balances of A, B and C after admission.

Correct A. Goodwill - A: ₦26,400; B: ₦17,600. New capitals - A: ₦158,400; B: ₦105,600; C: ₦50,000.

B. Goodwill - A: ₦26,400; B: ₦17,600. New capitals - A: ₦146,400; B: ₦97,600; C: ₦50,000.

C. Goodwill - A: ₦22,000; B: ₦22,000. New capitals - A: ₦152,000; B: ₦112,000; C: ₦50,000.

D. Goodwill - A: ₦33,000; B: ₦22,000. New capitals - A: ₦165,000; B: ₦110,000; C: ₦50,000.

Correct Answer: A

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Question 7 View Details

On 1\(\) March, the business purchased equipment for \(150,000\) cash and incurred repair expenses of \(5,000\) on credit. Record the appropriate journal entries.

Correct A. Debit Equipment \(150,000\); Credit Cash \(150,000\). Debit Repairs Expense \(5,000\); Credit Accounts Payable \(5,000\).

B. Debit Equipment \(150,000\); Credit Accounts Payable \(150,000\). Debit Repairs Expense \(5,000\); Credit Cash \(5,000\).

C. Debit Equipment \(155,000\); Credit Cash \(155,000\). Debit Repairs Expense \(5,000\); Credit Accounts Payable \(5,000\).

D. Debit Equipment \(150,000\); Credit Cash \(150,000\). Debit Repairs Expense \(5,000\); Credit Cash \(5,000\).

Correct Answer: A

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Question 8 View Details

The Debtors (Sales Ledger) account of a sole trader shows an opening debit balance of \(80,000\). During the month the following transactions were recorded: credit sales of \(120,000\); cash receipts from debtors of \(90,000\); sales returns (returns inwards) of \(5,000\); and a discount allowed of \(2\%\) on the cash receipts. Determine the closing balance of the Debtors account and state whether it is a debit or credit balance.

A. Debit balance of \\(103,200\\).

Correct B. Debit balance of \(105,000\).

C. Debit balance of \\(106,800\\).

D. Credit balance of \\(5,000\\).

Correct Answer: B

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Question 9 View Details

The cash book (two‑column) for June shows the following entries (all amounts in \(₦\)): Opening balances - Cash: \(8,000\); Bank: \(20,000\). Receipts - Cash sales recorded as \(4,000\) (error, should be \(40,000\)); Received from debtors (bank) \(30,000\); Interest received (bank) \(2,000\). Payments - Rent paid (cash) \(10,000\); Paid to creditors (bank) \(15,000\); Drawings (cash) \(5,000\). Correct the error in cash sales and prepare the corrected cash book, stating the closing balances of cash and bank.

Correct A. Cash balance = \(33,000\); Bank balance = \(37,000\).

B. Cash balance = \\(30,000\\); Bank balance = \\(40,000\\).

C. Cash balance = \\(36,000\\); Bank balance = \\(34,000\\).

D. Cash balance = \\(33,000\\); Bank balance = \\(35,000\\).

Correct Answer: A

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Question 10 View Details

The trial balance of XYZ Ltd as at 31 December 2025 (all amounts in \(₦\)) is shown below. One figure is missing (indicated by "?") and the trial balance does not balance. Dr: Cash \(50,000\); Accounts Receivable \(70,000\); Inventory \(40,000\); Equipment \(120,000\); Drawings \(20,000\); Cost of Goods Sold \(130,000\); Rent Expense \(25,000\); ? Cr: Accumulated Depreciation - Equipment \(30,000\); Accounts Payable \(60,000\); Bank Loan \(80,000\); Capital \(150,000\); Sales Revenue \(200,000\). Identify the missing amount and the side (debit or credit) on which it should be entered to make the trial balance balance.

A. Missing amount = \\ (70,000\\) on the debit side.

Correct B. Missing amount = \(65,000\) on the debit side.

C. Missing amount = \\ (55,000\\) on the debit side.

D. Missing amount = \\ (65,000\\) on the credit side.

Correct Answer: B

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Question 11 View Details

A company's Sales Ledger Control account shows a credit balance of unknown. The subsidiary ledger of three major customers shows balances: Customer A owes \(45,000\), Customer B owes \(30,000\), Customer C owes \(25,000\). During the year the company recorded total credit sales of \(200,000\) and cash receipts from customers of \(150,000\). An audit revealed that a sales invoice of \(12,000\) to Customer B was omitted from the sales ledger, and a payment of \(5,000\) from Customer C was recorded twice in cash receipts. Determine the opening balance of the Sales Ledger Control account at the beginning of the year.

A. 50000

B. 55000

Correct C. 45000

D. 40000

Correct Answer: C

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Question 12 View Details

The following trial‑balance items (in \(\,\) thousands of naira) are given: Sales \(500\), Cost of Goods Sold \(300\), Opening Inventory \(80\), Closing Inventory \(70\), Purchases \(250\), Returns Inwards \(20\), Returns Outwards \(15\), Salaries Expense \(60\), Depreciation Expense - Building \(30\), Accumulated Depreciation - Building \(120\), Building cost \(500\), Interest Expense \(10\), Dividend Paid \(25\), Retained Earnings (beginning) \(100\), Share Capital \(400\). Additional information: (i) Building should be depreciated straight‑line over 20 years with a residual value of \(0.05\) million, giving a correct depreciation of \(22.5\) thousand. (ii) Bad‑debt expense of \(8\) thousand was incurred but only \(5\) thousand was written off. (iii) Interest income of \(12\) thousand was not recorded. (iv) Tax expense is 30 % of profit before tax. Prepare the statement of profit or loss and determine profit after tax.

A. 100.00

B. 108.50

C. 125.55

Correct D. 113.05

Correct Answer: D

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Question 13 View Details

At year‑end the company reports (in \(\,\) thousands of naira): Non‑current assets - Property, Plant & Equipment (net) \(800\), Intangible assets \(120\); Current assets - Inventory \(150\), Trade receivables \(200\), Cash \(50\). Liabilities - Non‑current borrowings \(300\), Current borrowings \(100\), Trade payables \(180\), Accrued expenses \(20\). Equity - Share capital \(500\), Retained earnings \(250\), Revaluation surplus \(30\). Additional information: (i) PPE depreciation for the year should have been \(110\) thousand instead of the \(90\) thousand used, (ii) an intangible asset of \(40\) thousand was omitted, (iii) trade receivables include a doubtful debt of \(25\) thousand that must be written off, (iv) a dividend of \(15\) thousand from an associate was recorded as a receivable but should be other income, (v) the revaluation surplus should be transferred to retained earnings because the related asset was sold. Determine the corrected total assets and the corrected total equity after incorporating all adjustments.

A. Total assets: 1275, Total equity: 780

B. Total assets: 1300, Total equity: 795

C. Total assets: 1300, Total equity: 750

Correct D. Total assets: 1275, Total equity: 750

Correct Answer: D

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Question 14 View Details

A customer who previously bought goods on credit for \(45,000\) pays the amount in cash. Record the journal entry using the double‑entry system.

A. Debit Cash 45,000; Credit Sales Revenue 45,000

B. Debit Trade Receivables 45,000; Credit Cash 45,000

C. Debit Cash 45,000; Credit Trade Receivables 40,000

Correct D. Debit Cash 45,000; Credit Trade Receivables 45,000

Correct Answer: D

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Question 15 View Details

The trial balance (in \(\,\) thousands of naira) shows:\nDebit - Purchases 150, Sales Returns 0, Salaries 60, Rent 30, Cash 40, Trade Receivables 80, Inventory 70 (total \(430\)).\nCredit - Sales 200, Purchase Returns 10, Trade Payables 50, Capital 150, Loan 70 (total \(480\)).\nThe following errors are discovered: (i) a purchase of \(12\) thousand was recorded on the debit side instead of credit, (ii) a sales return of \(5\) thousand was omitted, (iii) a bank overdraft of \(8\) thousand was not recorded, (iv) an expense of \(72\) thousand (Utilities) was omitted. After correcting all errors, what are the new debit and credit totals and does the trial balance now balance?

Correct A. Debit total: 495, Credit total: 495; the trial balance balances.

B. Debit total: 495, Credit total: 500; the trial balance does not balance.

C. Debit total: 490, Credit total: 490; the trial balance balances.

D. Debit total: 503, Credit total: 495; the trial balance does not balance.

Correct Answer: A

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Question 16 View Details

Alpha Ltd. recorded the following transactions in its purchases journal for March: - Purchased goods costing \(₦120,000\) on credit, terms \(2/10, n/30\). - Returned goods costing \(₦8,000\) within the discount period. - Received a cash discount of \(2\%\) on the remaining balance of the purchase. In the sales journal, the company recorded cash sales of \(₦200,000\) and credit sales of \(₦150,000\), terms \(3/15, n/45\). No returns were recorded. The cash book shows an opening cash balance of \(₦40,000\) and a closing cash balance of \(₦130,240\). Assuming that all cash receipts and payments during the month relate only to the above transactions, determine the amount of cash paid for the purchases in March.

Correct A. 109760

B. 112000

C. 106720

D. 108000

Correct Answer: A

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Question 17 View Details

Finishing Department data (weighted‑average method): - Beginning work‑in‑process: 5,000 units, 40\% complete for conversion, 100\% for materials. Costs in beginning WIP: Materials \(₦30,000\), Conversion \(₦20,000\). - Units started into finishing during the month: 20,000 units. - Units completed and transferred out: 22,000 units. - Ending work‑in‑process: 3,000 units, 60\% complete for conversion, 100\% for materials. - Costs added during the month: Materials \(₦150,000\), Conversion \(₦180,000\). Using the weighted‑average method, calculate the cost per equivalent unit for conversion and then determine the total cost assigned to the units transferred out.

A. 350000

B. 345000

Correct C. 343274

D. 340000

Correct Answer: C

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Question 18 View Details

An equipment was purchased for \(₦400,000\) with an estimated useful life of 4 years. The company applied straight‑line depreciation for the first two years and then switched to the sum‑of‑the‑years‑digits (SYD) method for the remaining years. At the end of year 3 the book value of the equipment was \(₦150,000\). Determine the estimated residual (salvage) value of the equipment.

A. 45000

B. 40000

C. 50000

Correct D. 42857

Correct Answer: D

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Question 19 View Details

Below is the trial balance of XYZ Co. as at 31 December 2025 (all figures in naira). Debit balances are shown first; credit balances are shown after the dash.\n- Sales Revenue - 500,000 (Cr)\n- Purchases - 300,000 (Dr)\n- Opening Stock - 80,000 (Dr)\n- Closing Stock - 70,000 (Cr)\n- Salaries Expense - 90,000 (Dr)\n- Rent Expense - 30,000 (Dr)\n- Depreciation Expense - 15,000 (Dr)\n- Accrued Interest Payable - 5,000 (Cr)\n- Interest Expense (paid) - 4,000 (Dr)\n- Capital - 200,000 (Cr)\n- Drawings - 20,000 (Dr)\nAt year‑end an accrued utilities expense of \(₦6,000\) (Cr) was not recorded. Determine the net profit for the year.

A. 35000

B. 45000

C. 50000

Correct D. 40000

Correct Answer: D

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Question 20 View Details

Machinery transactions for 2025:\n1. 1 January: Purchased new machinery for \(₦250,000\) cash.\n2. 30 June: Sold an old machine whose original cost was \(₦80,000\) and accumulated depreciation was \(₦50,000\) for \(₦35,000\) cash.\n3. Depreciation on the remaining machinery is charged at 10\% per annum on a straight‑line basis.\n4. At 31 December the remaining machinery was revalued upward by \(₦20,000\), the increase being recorded in revaluation surplus.\nNo other transactions occurred. Determine the carrying amount (net book value) of the remaining machinery as at 31 December 2025.

Correct A. 245000

B. 225000

C. 250000

D. 270000

Correct Answer: A

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Question 21 View Details

ABC partnership consists of partners A and B with profit‑sharing ratio 3:2. Their capital balances are A = \(\text{₦}120,000\) and B = \(\text{₦}80,000\). A new partner C is admitted, contributing \(\text{₦}50,000\) for a \(\frac14\) share of future profits. At the same time the partnership revalues its building upward by \(\text{₦}30,000\) and its inventory downward by \(\text{₦}10,000\). Goodwill is valued at \(\text{₦}40,000\). Determine the amount of goodwill that must be credited to A and to B, and the amount that must be transferred to the revaluation reserve for each of them.

A. Goodwill - A: ₦24,000, B: ₦16,000; Revaluation reserve - A: ₦10,000, B: ₦12,000

Correct B. Goodwill - A: ₦24,000, B: ₦16,000; Revaluation reserve - A: ₦12,000, B: ₦8,000

C. Goodwill - A: ₦30,000, B: ₦10,000; Revaluation reserve - A: ₦15,000, B: ₦5,000

D. Goodwill - A: ₦20,000, B: ₦20,000; Revaluation reserve - A: ₦10,000, B: ₦10,000

Correct Answer: B

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Question 22 View Details

The cash book of XYZ Ltd shows a closing balance of \(\text{₦}150,000\). The bank statement for the same date shows a closing balance of \(\text{₦}165,000\). The following reconciling items are known: outstanding checks \(\text{₦}12,000\), deposits in transit \(\text{₦}5,000\), a bank service charge of \(\text{₦}1,000\) that has already been recorded in the cash book, and interest of \(\text{₦}2,000\) credited by the bank but not yet recorded in the cash book. It is later discovered that one transaction was omitted from the cash book. Determine the amount of the omitted transaction and state whether it was a receipt or a payment.

Correct A. A payment of ₦4,000 was omitted.

B. A payment of ₦5,000 was omitted.

C. A receipt of ₦4,000 was omitted.

D. A receipt of ₦3,000 was omitted.

Correct Answer: A

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Question 23 View Details

On 15 March, Delta Co purchased machinery costing \(\text{₦}250,000\) on credit. The supplier offered a cash discount of 2 % if payment is made within 10 days. The company paid the amount within the discount period and also incurred freight charges of \(\text{₦}5,000\) paid in cash. After receiving the machinery, the company discovered defective parts worth \(\text{₦}8,000\) and returned them, receiving a credit note from the supplier. Prepare the journal entries required to record (i) the purchase, (ii) the payment with discount, (iii) the freight cost, and (iv) the return of defective parts. Show the accounts affected and the amounts to be debited or credited.

A. 1) Dr Machinery ₦250,000 / Cr Creditors ₦250,000 2) Dr Creditors ₦250,000 / Cr Cash ₦245,000 / Cr Discount Received ₦5,000 3) Dr Freight Expense ₦5,000 / Cr Cash ₦5,000 4) Dr Creditors ₦8,000 / Cr Machinery ₦8,000

Correct B. 1) Dr Machinery ₦250,000 / Cr Creditors ₦250,000\n2) Dr Creditors ₦250,000 / Cr Cash ₦245,000 / Cr Discount Received ₦5,000\n3) Dr Machinery ₦5,000 / Cr Cash ₦5,000\n4) Dr Creditors ₦8,000 / Cr Machinery ₦8,000

C. 1) Dr Machinery ₦250,000 / Cr Creditors ₦250,000 2) Dr Creditors ₦250,000 / Cr Cash ₦250,000 / Cr Discount Received ₦5,000 3) Dr Machinery ₦5,000 / Cr Cash ₦5,000 4) Dr Creditors ₦8,000 / Cr Machinery ₦8,000

D. 1) Dr Machinery ₦250,000 / Cr Creditors ₦250,000 2) Dr Creditors ₦250,000 / Cr Cash ₦245,000 / Cr Discount Received ₦5,000 3) Dr Machinery ₦5,000 / Cr Cash ₦5,000 4) Dr Machinery ₦8,000 / Cr Creditors ₦8,000

Correct Answer: B

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Question 24 View Details

Alpha Ltd had the following equity balances at the beginning of the year: Share capital (ordinary) \(\text{₦}500,000\), Share premium \(\text{₦}150,000\), and Retained earnings \(\text{₦}200,000\). During the year the company: (i) issued 5,000 new ordinary shares with a nominal value of \(\text{₦}20\) each at \(\text{₦}40\) per share; (ii) earned profit before tax of \(\text{₦}120,000\) and paid tax at 30 %; (iii) paid dividends of \(\text{₦}40,000\); (iv) revalued its land, increasing its value by \(\text{₦}50,000\) (transfer to revaluation reserve); (v) wrote off a bad debt of \(\text{₦}10,000\); and (vi) bought back its own shares costing \(\text{₦}30,000\). Prepare a statement of changes in equity showing the closing balances of each component and compute the total equity at year‑end.

A. Closing balances - Share capital: ₦600,000; Share premium: ₦250,000; Revaluation reserve: ₦50,000; Retained earnings: ₦254,000; Treasury shares (deduction): ₦30,000. Total equity = ₦1,124,000.

B. Closing balances - Share capital: ₦600,000; Share premium: ₦150,000; Revaluation reserve: ₦50,000; Retained earnings: ₦244,000; Treasury shares (deduction): ₦30,000. Total equity = ₦1,014,000.

C. Closing balances - Share capital: ₦700,000; Share premium: ₦250,000; Revaluation reserve: ₦50,000; Retained earnings: ₦244,000; Treasury shares (deduction): ₦30,000. Total equity = ₦1,214,000.

Correct D. Closing balances - Share capital: ₦600,000; Share premium: ₦250,000; Revaluation reserve: ₦50,000; Retained earnings: ₦244,000; Treasury shares (deduction): ₦30,000. Total equity = ₦1,114,000.

Correct Answer: D

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Question 25 View Details

During the preparation of a trial balance the following errors were identified: (i) a purchase invoice of \(\text{₦}12,000\) was omitted; (ii) a sales invoice of \(\text{₦}8,000\) was entered twice; (iii) a cash receipt of \(\text{₦}5,000\) was posted to the bank account instead of the cash account; (iv) a purchase return of \(\text{₦}2,000\) was posted to the Purchases account but the corresponding credit to Creditors was omitted. After posting all entries, the trial balance shows that the debit side exceeds the credit side by \(\text{₦}2,000\). Determine the amount that must be transferred to or from the suspense account to rectify the trial balance and explain the nature of the adjustment.

A. Debit the suspense account with ₦4,000 (i.e., transfer ₦4,000 from the suspense account) to eliminate the excess debit.

B. Debit the suspense account with ₦2,000 (i.e., transfer ₦2,000 from the suspense account) to eliminate the excess debit.

Correct C. Credit the suspense account with ₦2,000 (i.e., transfer ₦2,000 to the suspense account) to eliminate the excess debit.

D. Credit the suspense account with ₦1,000 (i.e., transfer ₦1,000 to the suspense account) to eliminate the excess debit.

Correct Answer: C

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