Practice neco model questions vol1 financial_accounting 2021 Past Questions

Question 1 View Details

During the year the Rent Expense account recorded the following cash payments: \(₦360,000\) paid on 1 March and \(₦360,000\) paid on 1 September. At 31 December a prepaid rent balance of \(₦120,000\) (covering January and February of the next year) remained, and an accrued rent of \(₦60,000\) for January (rent not yet paid) was omitted. What should be the balance of the Rent Expense account after the necessary adjusting entries are made?

Correct A. 660000

B. 720000

C. 540000

D. 600000

Correct Answer: A

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Question 2 View Details

Partners A, B and C share profits in the ratio 3:2:1. Their opening capital balances are A \(₦500,000\), B \(₦300,000\) and C \(₦200,000\). During the year the partnership revalued a building upward by \(₦200,000\) and inventory downward by \(₦50,000\). The partnership earned a profit of \(₦720,000\) for the year. Goodwill was valued at \(₦300,000\) and a new partner D was admitted for a one‑fourth share, paying cash of \(₦75,000\) for his share of goodwill. The remaining goodwill was distributed among the existing partners in their old profit‑sharing ratio. After these adjustments, partner C retired. How much cash should be paid to C on his retirement?

A. 345000

B. 420000

C. 357500

Correct D. 382500

Correct Answer: D

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Question 3 View Details

The bank statement shows a balance of \(₦1,250,000\) as at 31 December, while the cash book shows a balance of \(₦1,210,000\). The following items are noted: deposits in transit of \(₦45,000\); outstanding checks of \(₦30,000\); bank service charges of \(₦5,000\) not yet recorded in the cash book; a bank error that credited the account with \(₦12,000\); interest earned of \(₦3,000\) not yet recorded; and a customer's cheque of \(₦20,000\) that was deposited but later bounced. What is the corrected cash‑book balance after reconciliation?

A. 1185000

B. 1193000

C. 1208000

Correct D. 1188000

Correct Answer: D

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Question 4 View Details

A machine was purchased on 1 January 2022 for \(₦500,000\). It has an estimated useful life of 5 years and a residual value of \(₦50,000\). The partnership uses the double‑declining‑balance method. The machine was sold on 30 June 2024 for \(₦150,000\). Determine the gain or loss on disposal.

A. 15000

B. 42000

C. -125000

Correct D. 6000

Correct Answer: D

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Question 5 View Details

The Sales Ledger Control Account had an opening balance of zero at the start of the month. During the month the following transactions occurred: credit sales of \(₦800,000\); sales returns (credit) of \(₦30,000\); bad debts written off of \(₦20,000\); and cash receipts from customers of \(₦600,000\). The subsidiary ledger shows that Customer X owes \(₦70,000\), Customer Y owes \(₦50,000\) and Customer Z owes \(₦30,000\). What is the closing balance of the Sales Ledger Control Account, and does it agree with the total of the subsidiary ledger? Answer with the closing balance and either "Yes" or "No".

A. 150000; No

B. 130000; Yes

Correct C. 150000; Yes

D. 170000; Yes

Correct Answer: C

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Question 6 View Details

The following trial balance items are for the year ended 31 December: - Sales: ₦1,200,000 - Sales Returns: ₦30,000 - Opening Stock: ₦150,000 - Purchases: ₦600,000 - Purchase Returns: ₦20,000 - Closing Stock: ₦180,000 - Salaries: ₦80,000 - Rent: ₦40,000 - Equipment (cost): ₦200,000 - Accumulated Depreciation (b/f): ₦50,000 - Trade Receivables: ₦120,000 Depreciation is charged at 10 % per annum on the cost of equipment and bad debts are written off at 5 % of trade receivables. Using this information, calculate the net profit for the year.

A. 480000

Correct B. 474000

C. 494000

D. 500000

Correct Answer: B

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Question 7 View Details

A business has the following opening balances: Cash ₦200,000, Inventory ₦150,000, Equipment ₦150,000 (total assets ₦500,000); Liabilities ₦200,000; Owner's equity ₦300,000. During the month the business purchases inventory on credit for ₦80,000. After this transaction, what is the new total amount of liabilities?

A. 200000

B. 300000

C. 360000

Correct D. 280000

Correct Answer: D

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Question 8 View Details

After posting all transactions for the month, the trial balance shows a debit excess of ₦7,000. The accountant therefore entered a suspense account with a debit balance of ₦7,000. Later two errors are discovered: 1. A purchase of ₦9,000 was recorded as ₦5,000 (both debit and credit were understated by ₦4,000). 2. A cash sale of ₦12,000 was recorded only as a credit to Sales; the corresponding debit to Cash was omitted. What is the correct balance of the suspense account after correcting both errors?

Correct A. 2000 credit

B. 6000 credit

C. 4000 credit

D. 2000 debit

Correct Answer: A

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Question 9 View Details

The Rent Expense ledger has an opening debit balance of ₦5,000. During January the following entries were posted: - 1 Jan: Paid cash rent for January ₦30,000. (Debit Rent Expense, Credit Cash) - 10 Jan: Paid cash rent for February and March in advance ₦60,000. (Debit Prepaid Rent, Credit Cash) - 31 Jan: Adjust prepaid rent to expense for one month (February rent) ₦30,000. (Debit Rent Expense, Credit Prepaid Rent) What is the balance of the Rent Expense account on 31 January?

Correct A. 65000

B. 71000

C. 59000

D. 50000

Correct Answer: A

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Question 10 View Details

The business purchased office furniture on credit for ₦120,000. Identify the two accounts involved and indicate the debit and credit entries required by the double‑entry system.

A. Debit Accounts Payable ₦120,000; Credit Office Furniture ₦120,000

B. Debit Office Furniture ₦120,000; Credit Cash ₦120,000

C. Debit Office Furniture ₦100,000; Credit Accounts Payable ₦100,000

Correct D. Debit Office Furniture ₦120,000; Credit Accounts Payable ₦120,000

Correct Answer: D

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Question 11 View Details

Alpha Ltd. had opening retained earnings of \(₦1,200,000\) on 1 January 2021. During the year the following events occurred: (i) Net profit before tax of \(₦480,000\); tax expense is \(30\%\) of profit before tax. (ii) An interim dividend of \(10\%\) of the ordinary share capital of \(₦2,000,000\) was declared and paid. (iii) The company issued 5,000 new ordinary shares with a par value of \(₦100\) each at a premium of \(₦150\) per share. (iv) It bought back 2,000 of its own shares at \(₦180\) per share. (v) The company revalued its property, increasing the revaluation surplus by \(₦250,000\). Assuming the opening share capital was \(₦2,000,000\), compute the closing balance of shareholders' equity on 31 December 2021.

A. 4226000

B. 4620000

Correct C. 4476000

D. 4836000

Correct Answer: C

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Question 12 View Details

Beta Co. prepared an unadjusted trial balance for the year ended 31 March 2021 (debit balances unless indicated). The balances are: Cash \(₦150,000\); Accounts Receivable \(₦80,000\); Inventory \(₦120,000\); Prepaid Expenses \(₦30,000\); Equipment \(₦200,000\); Accumulated Depreciation ‑ Equipment \(₦50,000\) (credit); Accounts Payable \(₦70,000\) (credit); Salaries Payable \(₦20,000\) (credit); Share Capital \(₦300,000\) (credit); Retained Earnings \(₦40,000\) (credit); Sales Revenue \(₦500,000\) (credit). No balances were shown for Cost of Goods Sold, Salaries Expense, Depreciation Expense or Rent Expense. The following adjusting entries are required: (i) 30 % of the inventory is obsolete and must be written down to a net realizable value of \(₦70,000\). (ii) One‑month of the prepaid expenses (\(₦30,000\)) has been used. (iii) Equipment is depreciated on a straight‑line basis over 5 years with no residual value. (iv) Salaries incurred but not yet paid amount to \(₦15,000\). After posting these adjustments, what is the net profit for the year?

A. 425000

B. 400000

C. 435000

Correct D. 385000

Correct Answer: D

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Question 13 View Details

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

A. Conservatism principle

B. Revenue recognition principle

Correct C. Matching principle

D. Historical cost principle

Correct Answer: C

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Question 14 View Details

Omega Manufacturing reported the following data for the year ended 31 December 2021 (all figures in ₦): Opening inventories - Raw Materials \(₦120,000\); Work‑in‑Progress \(₦80,000\); Finished Goods \(₦150,000\). Purchases of raw materials \(₦350,000\). Closing inventories - Raw Materials \(₦100,000\); Work‑in‑Progress \(₦70,000\); Finished Goods \(₦130,000\). Direct labour \(₦200,000\). Manufacturing overhead applied \(₦180,000\). Sales revenue \(₦900,000\). Selling and administrative expenses \(₦100,000\). Using the cost‑of‑production approach, determine the net profit for the year.

A. 22000

Correct B. 20000

C. 18000

D. 25000

Correct Answer: B

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Question 15 View Details

The municipal council prepared the following budgeted and actual figures for the fiscal year (all amounts in ₦): Revenue - budget \(₦1,200,000\); actual \(₦1,150,000\). Expenditure - budget \(₦1,050,000\); actual \(₦1,080,000\). Capital grant - budget \(₦300,000\); actual \(₦320,000\). Capital expenditure - budget \(₦250,000\); actual \(₦260,000\). At year‑end, an unspent portion of the capital grant amounting to \(₦20,000\) must be returned to the granting authority. Assuming a modified accrual basis where cash inflows are the actual revenues and grants received, and cash outflows are the actual expenditures and the grant return, calculate the overall cash surplus (or deficit) for the year.

A. 90000

Correct B. 110000

C. 120000

D. 100000

Correct Answer: B

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Question 16 View Details

The trial balance of XYZ Ltd shows the following balances (all amounts in ₦): Cash \(\text{Dr }18,000\); Bank \(\text{Dr }12,000\); Accounts Receivable \(\text{Dr }25,000\); Equipment \(\text{Dr }40,000\); Sales \(\text{Cr }70,000\); Capital \(\text{Cr }30,000\); Rent Expense \(\text{Dr }5,000\). The total of debits equals the total of credits. Later the accountant discovers that the Equipment account of \(\text{₦}40,000\) was mistakenly recorded on the debit side instead of the credit side. To correct the trial balance, a depreciation expense is to be recorded. What amount of depreciation expense (debit) should be entered so that the trial balance balances after the correction?

Correct A. 80,000

B. 60,000

C. 120,000

D. 40,000

Correct Answer: A

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Question 17 View Details

A machine was purchased on 1\,January\,2022 for \(\text{₦}500,000\). Its estimated residual value is \(\text{₦}50,000\) and its useful life is 5\,years. For the first two years (2022 and 2023) depreciation was charged on a straight‑line basis. From 1\,January\,2024 the company changed to the diminishing‑balance method at a rate of 40\% per annum on the book value at the beginning of each year. What is the book value of the machine at 31\,December\,2025 (end of year\,4)?

Correct A. 115,200

B. 128,000

C. 192,000

D. 124,800

Correct Answer: A

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Question 18 View Details

The Sales Control Account of ABC Traders shows a credit balance of \(\text{₦}250,000\) at the end of the period. The subsidiary sales ledger records total sales of \(\text{₦}260,000\), sales returns of \(\text{₦}12,000\) and sales allowances of \(\text{₦}8,000\). Assuming all other entries are correctly posted, determine the amount of sales that has been omitted from the subsidiary ledger.

A. 20,000

Correct B. 10,000

C. 12,000

D. 2,000

Correct Answer: B

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Question 19 View Details

Using the following trial balance figures (all amounts in ₦): Sales 500,000; Purchases 300,000; Opening Stock 50,000; Closing Stock 70,000; Salaries 40,000; Rent 20,000; Depreciation expense 15,000; Bad debts written off 5,000; Discount allowed 3,000; Discount received 2,000. Compute the net profit for the period.

A. 119,000

B. 129,000

Correct C. 139,000

D. 149,000

Correct Answer: C

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Question 20 View Details

On 15\,March, XYZ Co. purchased equipment costing \(\text{₦}120,000\). The company paid a cash down‑payment of \(\text{₦}30,000\) and agreed to pay the balance on credit. Record the journal entry for this transaction.

A. Equipment Dr 120,000; Cash Cr 90,000; Accounts Payable Cr 30,000

Correct B. Equipment Dr 120,000; Cash Cr 30,000; Accounts Payable Cr 90,000

C. Equipment Dr 120,000; Cash Cr 30,000; Notes Payable Cr 90,000

D. Equipment Dr 120,000; Cash Dr 30,000; Accounts Payable Cr 90,000

Correct Answer: B

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Question 21 View Details

A cash sale of \(200,000\) naira was recorded as a debit to Cash and a credit to Sales. Later it was discovered that the sale was on credit, so Cash should not have been debited; instead Accounts Receivable should have been debited. To correct the error, the accountant made a single entry debiting Suspense \(200,000\) and crediting Cash \(200,000\), but omitted the required debit to Accounts Receivable and credit to Suspense. After this correction, what is the balance in the Suspense Account and by how much is the trial balance out of balance?

A. Suspense Account has a credit balance of 200,000 naira; the trial balance is out of balance by 200,000 naira (credits exceed debits).

Correct B. Suspense Account has a debit balance of 200,000 naira; the trial balance is out of balance by 200,000 naira (debits exceed credits).

C. Suspense Account has a debit balance of 200,000 naira; the trial balance is out of balance by 0 naira (balanced).

D. Suspense Account has a debit balance of 0 naira; the trial balance is out of balance by 200,000 naira (debits exceed credits).

Correct Answer: B

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Question 22 View Details

A local government council prepares its annual financial statements (all figures in \(\text{₦ thousands}\)). The following information is given:\n\n- Opening cash balance: \(5,000\)\n- Cash receipts during the year: \(120,000\)\n- Accrued revenue earned but not yet received: \(30,000\)\n- Cash payments during the year: \(80,000\)\n- Accrued expenses incurred but not yet paid: \(20,000\)\n\nAt year‑end an audit discovers that a grant of \(15,000\) was received but not recorded, and a liability for \(10,000\) of accrued salaries was omitted. The council uses the accrual basis for its financial statements but prepares the cash‑flow statement on a cash basis.\n\nDetermine: (a) the corrected cash balance at year‑end, (b) the corrected total assets, (c) the corrected total liabilities, and (d) the surplus (or deficit) for the year on an accrual basis.

A. Cash balance: 55,000; Total assets: 90,000; Total liabilities: 35,000; Surplus: 45,000 (all figures in ₦ thousands).

Correct B. Cash balance: 60,000; Total assets: 90,000; Total liabilities: 30,000; Surplus: 55,000 (all figures in ₦ thousands).

C. Cash balance: 60,000; Total assets: 85,000; Total liabilities: 30,000; Surplus: 50,000 (all figures in ₦ thousands).

D. Cash balance: 75,000; Total assets: 105,000; Total liabilities: 30,000; Surplus: 75,000 (all figures in ₦ thousands).

Correct Answer: B

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Question 23 View Details

A company purchases office equipment for \(250,000\) naira cash. Record the journal entry using the double‑entry system and state the effect of this transaction on the accounting equation.

A. Debit Office Equipment 250,000; Credit Cash 250,000. Assets unchanged, liabilities unchanged, equity decrease.

Correct B. Debit Office Equipment 250,000; Credit Cash 250,000. Assets unchanged, liabilities unchanged, equity unchanged.

C. Debit Office Equipment 250,000; Credit Cash 250,000. Assets unchanged, liabilities increase, equity unchanged.

D. Debit Office Equipment 250,000; Credit Cash 250,000. Assets increase, liabilities unchanged, equity unchanged.

Correct Answer: B

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Question 24 View Details

For the year ended 31 December 2025, a company provides the following (all amounts in \(\text{₦ thousands}\)):\n\n- Opening retained earnings: \(500\)\n- Net profit before tax: \(300\)\n- Tax expense: \(90\)\n- Depreciation expense recorded: \(40\) (the correct depreciation should be \(60\))\n- Goodwill of \(120\) was acquired at the start of the year with a useful life of 5 years (annual amortisation \(24\)) but no amortisation was recorded.\n- Dividend declared and paid: \(80\)\n- An expense of \(20\) was omitted from the trial balance.\n\nDetermine the corrected closing retained earnings for the year.

A. 586000

B. 610000

Correct C. 566000

D. 646000

Correct Answer: C

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Question 25 View Details

A manufacturing company produces a single product. The following data for the year are given (all amounts in \(\text{₦ thousands}\)):\n\n- Opening raw materials inventory: \(40\)\n- Purchases of raw materials: \(180\)\n- Closing raw materials inventory: \(30\)\n- Opening work‑in‑progress (WIP): \(25\)\n- Closing WIP: \(35\)\n- Direct labour incurred: \(120\)\n- Manufacturing overhead is applied at 150 % of direct labour cost.\n- Overhead actually incurred: \(200\) (difference will be adjusted at year‑end).\n- Opening finished goods inventory: \(50\)\n- Closing finished goods inventory: \(45\)\n- Sales revenue: \(600\)\n- Selling and distribution expenses: \(50\)\n- Administrative expenses: \(40\)\n\nDetermine (a) the total manufacturing cost of goods produced, (b) the cost of goods sold after adjusting for overhead variance, (c) the gross profit, and (d) the amount of under‑applied overhead to be transferred to profit or loss.

A. Total manufacturing cost (COGM): 470,000; Adjusted cost of goods sold: 495,000; Gross profit: 105,000; Under‑applied overhead transferred: 10,000 (all figures in ₦).

B. Total manufacturing cost (COGM): 480,000; Adjusted cost of goods sold: 500,000; Gross profit: 100,000; Under‑applied overhead transferred: 25,000 (all figures in ₦).

Correct C. Total manufacturing cost (COGM): 480,000; Adjusted cost of goods sold: 505,000; Gross profit: 95,000; Under‑applied overhead transferred: 20,000 (all figures in ₦).

D. Total manufacturing cost (COGM): 485,000; Adjusted cost of goods sold: 510,000; Gross profit: 90,000; Under‑applied overhead transferred: 15,000 (all figures in ₦).

Correct Answer: C

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