Practice neco model questions vol1 financial_accounting 2025 Past Questions

Question 1 View Details

The trial balance of XYZ Ltd for the year ended 31 December shows the following balances (in naira): Debit side: - Cash \(\₦95,000\) - Accounts Receivable \(\₦60,000\) - Inventory \(\₦70,000\) Credit side: - Accounts Payable \(\₦50,000\) - Sales Revenue \(\₦150,000\) - Capital \(\₦30,000\) - Interest Payable \(\₦5,000\) The total debits equal \(\₦225,000\) and total credits equal \(\₦235,000\). It is known that one of the credit balances has been posted on the wrong side. Identify the misposted account and state the corrected total of each side after moving the amount to the proper side.

Correct A. Interest Payable; each side \(\₦230,000\)

B. Accounts Payable; each side \(\₦230,000\)

C. Interest Payable; each side \(\₦225,000\)

D. Sales Revenue; each side \(\₦230,000\)

Correct Answer: A

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Question 2 View Details

A company provides consulting services in December and receives cash for the services in January of the following year. Under which accounting concept should the revenue be recognized in the financial statements for the year ended December?

A. Conservatism concept (prudence principle)

B. Cash concept (cash‑basis accounting)

C. Matching concept (expense‑recognition principle)

Correct D. Accrual concept (revenue‑recognition principle)

Correct Answer: D

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Question 3 View Details

Owner Mary withdraws \(\₦20,000\) from her personal savings to pay the business's electricity bill. Which fundamental accounting concept is violated by this transaction?

A. Historical cost concept (original cost)

B. Going concern concept (continuity)

C. Monetary unit concept (stable currency)

Correct D. Entity concept (separate entity)

Correct Answer: D

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Question 4 View Details

A machine was purchased on 1 January 2020 for \(\₦500,000\). Its estimated residual value is \(\₦50,000\) and its useful life is 5 years. The company uses the double‑declining‑balance method of depreciation. The machine was sold on 31 December 2022 for \(\₦120,000\). Calculate the gain or loss on disposal.

A. Gain of \(\₦8,000\)

Correct B. Gain of \(\₦12,000\)

C. Loss of \(\₦5,000\)

D. Gain of \(\₦20,000\)

Correct Answer: B

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Question 5 View Details

Match each of the following transactions with the appropriate book of original entry used in a typical double‑entry accounting system. 1. Sold goods on credit to ABC Ltd for \(\₦150,000\). 2. Purchased office supplies for cash \(\₦20,000\). 3. Paid salaries to staff \(\₦45,000\) by bank transfer. 4. Received cash from a customer for a previous credit sale \(\₦30,000\). Provide your answer as a comma‑separated list in the order of the transactions.

A. General Journal, Purchases Journal, Cash Payments Journal, Cash Receipts Journal

B. Sales Journal, General Journal, Cash Payments Journal, Cash Receipts Journal

C. Sales Journal, Purchases Journal, Cash Receipts Journal, Cash Payments Journal

Correct D. Sales Journal, Purchases Journal, Cash Payments Journal, Cash Receipts Journal

Correct Answer: D

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Question 6 View Details

During the preparation of a trial balance, a discrepancy of \(\text{₦}2,500\) (debits exceed credits) was noted. The following errors were later discovered:\n\n1. A purchase invoice of \(\text{₦}12,000\) was recorded twice.\n2. A sales invoice of \(\text{₦}8,000\) was omitted.\n3. A cash receipt of \(\text{₦}5,000\) was posted to the Purchases account instead of the Sales account.\n\nAfter correcting all three errors, what amount should be transferred to the Suspense Account to bring the trial balance to balance? State the amount in naira.

A. ₦2,500

Correct B. ₦27,500

C. ₦22,500

D. ₦32,500

Correct Answer: B

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Question 7 View Details

Three partners A, B and C share profits in the ratio 3:2:1. Their capital balances are A = \(\text{₦}120,000\), B = \(\text{₦}80,000\), C = \(\text{₦}50,000\). The partnership's goodwill is valued at \(\text{₦}90,000\). A new partner D is admitted, bringing in cash of \(\text{₦}45,000\) for a 20 % share. Goodwill is to be shared among the existing partners in their profit‑sharing ratio. After admission the profit‑sharing ratio becomes A : B : C : D = 2.5 : 1.5 : 1 : 1.\n\n(a) How much goodwill credit is allocated to each existing partner?\n(b) What are the revised capital balances of A, B, C and D immediately after D's admission?

A. Goodwill - A: ₦45,000; B: ₦25,000; C: ₦20,000. Revised capitals - A: ₦149,000; B: ₦95,000; C: ₦64,666.67; D: ₦77,000

Correct B. Goodwill - A: ₦45,000; B: ₦30,000; C: ₦15,000. Revised capitals - A: ₦149,000; B: ₦99,333.33; C: ₦59,666.67; D: ₦77,000

C. Goodwill - A: ₦50,000; B: ₦30,000; C: ₦10,000. Revised capitals - A: ₦154,000; B: ₦99,333.33; C: ₦55,666.67; D: ₦77,000

D. Goodwill - A: ₦40,000; B: ₦30,000; C: ₦20,000. Revised capitals - A: ₦144,000; B: ₦99,333.33; C: ₦64,666.67; D: ₦77,000

Correct Answer: B

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Question 8 View Details

The Purchases Returns Control Account had an opening debit balance of \(\text{₦}25,000\). Returns recorded in the subsidiary ledger for the month are: Supplier X = \(\text{₦}4,500\), Supplier Y = \(\text{₦}3,200\), Supplier Z = \(\text{₦}2,300\). It was later found that a return of \(\text{₦}1,800\) to Supplier Y was omitted from the control account, and a credit entry of \(\text{₦}5,000\) was posted to the control account for a return that had already been recorded for Supplier X.\n\nDetermine the correct closing balance of the Purchases Returns Control Account and indicate whether it is a debit or credit balance.

Correct A. ₦31,800 debit

B. ₦31,800 credit

C. ₦30,800 debit

D. ₦32,500 debit

Correct Answer: A

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Question 9 View Details

During one week the following transactions were recorded:\n\n1. Office equipment purchased for cash \(\text{₦}18,000\).\n2. Goods sold on credit to Customer A for \(\text{₦}12,500\) (cost of goods sold \(\text{₦}7,500\)).\n3. Bank loan received of \(\text{₦}25,000\) (interest payable annually).\n4. Wages paid in cash \(\text{₦}4,200\).\n5. Cash discount of \(\text{₦}300\) received on a previous purchase.\n\nIdentify the appropriate book of original entry for each transaction and calculate the total amount that will be posted to the General Ledger from the Sales Journal for the week.

A. ₦13,500

B. ₦12,000

C. ₦11,500

Correct D. ₦12,500

Correct Answer: D

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Question 10 View Details

A partnership of three partners X, Y and Z shares profit and loss in the ratio 4:3:3. Their capital balances at the beginning of the year are X = \(\text{₦}150,000\), Y = \(\text{₦}120,000\), Z = \(\text{₦}130,000\). During the year the partnership earned a net profit of \(\text{₦}84,000\) which has not yet been distributed. At the end of the year the partnership is dissolved. The following events occur:\n\n- A building with book value \(\text{₦}250,000\) is sold for \(\text{₦}280,000\).\n- Inventory with book value \(\text{₦}40,000\) is sold for \(\text{₦}38,000\).\n- Outstanding debts amount to \(\text{₦}70,000\) which are to be paid.\n- Any gain or loss on the sale of the building and inventory is to be shared in the profit‑loss ratio.\n- After paying the debts, the remaining cash is to be distributed among the partners in the profit‑loss ratio.\n\nHow much cash will each partner receive on dissolution?

A. X: ₦127,200; Y: ₦95,400; Z: ₦95,400

B. X: ₦88,000; Y: ₦66,000; Z: ₦66,000

Correct C. X: ₦99,200; Y: ₦74,400; Z: ₦74,400

D. X: ₦124,000; Y: ₦74,400; Z: ₦49,600

Correct Answer: C

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Question 11 View Details

The municipal council's General Fund shows the following trial‑balance items (all amounts in ₦): Cash ₦150,000; Accounts receivable ₦80,000; Supplies inventory ₦20,000; Capital equipment (cost) ₦200,000; Accumulated depreciation - equipment ₦40,000; Accrued salaries ₦15,000; Accrued interest income ₦5,000; Transfer out to Special Fund ₦30,000; Transfer in from Special Fund ₦10,000; Revenue received in advance ₦12,000. Additional information: - Capital equipment is depreciated straight‑line over 10 years with no residual value. - During the year an additional depreciation of ₦5,000 is required for equipment purchased that year (cost ₦50,000). - Salaries of ₦20,000 have been incurred; only ₦15,000 are accrued, the remaining ₦5,000 will be paid next year. - Interest income of ₦5,000 has been earned but not yet received. - The revenue received in advance relates to services to be performed next year and therefore remains a liability. Determine the adjusted fund balance (assets - liabilities) for the General Fund after all adjustments and state whether it is a surplus or a deficit.

Correct A. ₦383,000 surplus

B. ₦388,000 surplus

C. ₦378,000 surplus

D. ₦383,000 deficit

Correct Answer: A

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Question 12 View Details

Company XYZ provided the following information for the year ended 31 December 2025 (all amounts in ₦): - Sales revenue: ₦1,200,000 - Opening inventory: ₦150,000 - Purchases: ₦600,000 - Closing inventory: ₦180,000 - Operating expenses: salaries ₦200,000; rent ₦80,000; utilities ₦30,000 - Machinery cost ₦500,000; accumulated depreciation ₦150,000; useful life 10 years; residual value ₦50,000 (straight‑line) - Accounts receivable at year‑end: ₦100,000; allowance for doubtful debts to be set at 5 % of receivables - Equipment sold: original cost ₦80,000; accumulated depreciation ₦50,000; cash received ₦45,000 - Corporate tax rate: 30 % of profit before tax Calculate the profit after tax for the year.

A. ₦182,000

Correct B. ₦199,500

C. ₦215,000

D. ₦210,750

Correct Answer: B

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Question 13 View Details

A company's cash book shows a balance of \(\text{₦478,000}\) on 31 December 2025. The bank statement for the same date shows a balance of \(\text{₦480,000}\). The following items are identified: - Outstanding checks: \(\text{₦15,000}\) and \(\text{₦5,000}\). - Deposits in transit: \(\text{₦10,000}\) and \(\text{₦5,000}\). - The bank erroneously credited the account with \(\text{₦2,000}\); the same amount was recorded in the cash book. - Bank interest of \(\text{₦1,000}\) appears on the statement but is not in the cash book. - Bank service charges of \(\text{₦500}\) appear on the statement but are not in the cash book. - A customer's cheque of \(\text{₦3,000}\) was returned NSF; it had been recorded as a receipt in the cash book. Prepare the bank reconciliation and state the corrected cash book balance.

A. ₦475,500

B. ₦472,500

Correct C. ₦473,500

D. ₦476,500

Correct Answer: C

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Question 14 View Details

A small business keeps a single‑column cash book for March 2025. The following transactions occurred (chronological order): 1. Opening cash balance ₦25,000 2. Cash sales ₦40,000 3. Rent paid ₦8,000 4. Salaries paid ₦12,000 5. Bank loan received (cash) ₦30,000 6. Purchase of inventory paid ₦20,000 7. Electricity bill paid ₦3,500 8. Customer payment on a previously recorded receivable ₦5,000 9. Interest on bank overdraft paid ₦1,200 10. Petty‑cash fund of ₦2,000 used for small expenses totalling ₦1,800; the fund is replenished at month‑end. During the month a cash receipt of ₦2,500 was omitted from the cash book, and a payment of ₦1,000 was recorded twice. Prepare the cash book and give the corrected closing cash balance for March 2025.

A. ₦57,000

Correct B. ₦55,000

C. ₦54,000

D. ₦56,500

Correct Answer: B

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Question 15 View Details

A manufacturing company produces a single product. The following data relate to the year ended 31 December 2025 (all amounts in ₦): Opening inventories - Raw materials: ₦120,000; Work‑in‑progress (WIP): ₦80,000; Finished goods: ₦150,000. Purchases of raw materials: ₦500,000. Direct labour incurred: ₦300,000. Factory overhead is applied at 150 % of direct labour cost. Closing inventories - Raw materials: ₦100,000; WIP: ₦70,000; Finished goods: ₦180,000. During the year 5,000 units were started and 4,500 units were completed and transferred to finished goods. Selling price per unit: ₦1,200. Selling and distribution expenses: ₦150,000. Administrative expenses: ₦100,000. A loss on the sale of obsolete finished goods amounting to ₦20,000 was recorded. Calculate the gross profit for the year.

A. ₦4,300,000

Correct B. ₦4,150,000

C. ₦3,970,000

D. ₦4,080,000

Correct Answer: B

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Question 16 View Details

On 1 March, ABC Ltd purchased a delivery van for \(\,\text{₦}1,200,000\) cash and paid \(\,\text{₦}150,000\) for insurance covering the next six months. Record the journal entries for these transactions.

A. 1. Debit Delivery Van ₦1,200,000; Credit Accounts Payable ₦1,200,000. 2. Debit Prepaid Insurance ₦150,000; Credit Cash ₦150,000.

B. 1. Debit Delivery Van ₦1,200,000; Credit Cash ₦1,200,000. 2. Debit Prepaid Insurance ₦120,000; Credit Cash ₦120,000.

Correct C. 1. Debit Delivery Van ₦1,200,000; Credit Cash ₦1,200,000. 2. Debit Prepaid Insurance ₦150,000; Credit Cash ₦150,000.

D. 1. Debit Delivery Van ₦1,200,000; Credit Cash ₦1,200,000. 2. Debit Insurance Expense ₦150,000; Credit Cash ₦150,000.

Correct Answer: C

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Question 17 View Details

The trial balance of XYZ Ltd shows a Rent Expense debit balance of \(\,\text{₦}120,000\) and a Prepaid Rent debit balance of \(\,\text{₦}30,000\) at the beginning of the year. The prepaid amount covers six months of rent. By the end of the year, three months of the prepaid rent have been used. After making the necessary adjusting entry, what is the closing balance of the Rent Expense account?

Correct A. ₦135,000

B. ₦150,000

C. ₦105,000

D. ₦120,000

Correct Answer: A

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Question 18 View Details

Before any new issue, GreenCo Ltd has 20,000 ordinary shares with a par value of \(\,\text{₦}10\) each, a Share Premium account of \(\,\text{₦}300,000\) and Retained Earnings of \(\,\text{₦}800,000\). The company then issues 10,000 new shares at \(\,\text{₦}50\) each (par \(\,\text{₦}10\), premium \(\,\text{₦}40\)). After the issue, it declares and pays a dividend of \(\,\text{₦}5\) per share on the total shares now outstanding. What is the total shareholders' equity after these transactions?

A. ₦1,750,000

B. ₦1,600,000

C. ₦1,550,000

Correct D. ₦1,650,000

Correct Answer: D

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Question 19 View Details

MediCo Ltd provided the following data for the year:\n\n- Opening raw material stock: \(\,\text{₦}120,000\)\n- Purchases of raw materials: \(\,\text{₦}300,000\)\n- Closing raw material stock: \(\,\text{₦}80,000\)\n- Opening work‑in‑progress (WIP): \(\,\text{₦}50,000\)\n- Closing WIP: \(\,\text{₦}70,000\)\n- Opening finished goods: \(\,\text{₦}90,000\)\n- Closing finished goods: \(\,\text{₦}110,000\)\n- Direct labour cost: \(\,\text{₦}200,000\)\n- Manufacturing overhead applied at 150 % of direct labour\n- Sales revenue: \(\,\text{₦}1,200,000\)\n\nCalculate the gross profit for the year.

Correct A. ₦400,000

B. ₦300,000

C. ₦600,000

D. ₦500,000

Correct Answer: A

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Question 20 View Details

A machine was purchased on 1 January 2022 for \(\,\text{₦}500,000\). Its estimated useful life is 5 years and its residual value is \(\,\text{₦}50,000\). The company used straight‑line depreciation for the first two years. On 1 January 2024 the company switched to the double‑declining‑balance (DDB) method for the remaining life. The machine was sold on 1 July 2024 for \(\,\text{₦}120,000\). Determine the depreciation expense for the year 2024 and the gain or loss on disposal.

Correct A. Depreciation expense for 2024 = ₦64,000; loss on disposal = ₦136,000

B. Depreciation expense for 2024 = ₦106,667; loss on disposal = ₦93,333

C. Depreciation expense for 2024 = ₦90,000; loss on disposal = ₦110,000

D. Depreciation expense for 2024 = ₦128,000; loss on disposal = ₦72,000

Correct Answer: A

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Question 21 View Details

A company's cash book shows a balance of \(\₦152,500\). The bank statement balance is \(\₦150,000\). The following items are known: deposits in transit \(\₦8,000\), outstanding checks \(\₦5,500\), a bank service charge of \(\₦1,200\) not yet recorded, a customer's cheque returned NSF for \(\₦3,000\) not yet recorded, and the bank mistakenly credited the account with \(\₦2,000\) that should have been debited. After making all necessary adjustments, what is the corrected cash‑book balance?

A. ₦149,500

Correct B. ₦146,300

C. ₦148,300

D. ₦149,100

Correct Answer: B

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Question 22 View Details

A business bought equipment costing \(\₦45,000\). It paid \(\₦22,500\) in cash and the remaining amount on credit. Freight of \(\₦2,500\) to bring the equipment to the premises was paid in cash. By how much does the cash balance decrease as a result of this transaction?

A. ₦2,500

Correct B. ₦25,000

C. ₦45,000

D. ₦22,500

Correct Answer: B

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Question 23 View Details

A company prepares its accounts on the accrual basis and expects to sell all its inventory within the next twelve months. Explain how the matching principle influences the timing of expense recognition for the cost of goods sold in this situation.

A. Expenses are recognised only when cash is paid for the inventory, linking expense recognition to cash outflows instead of revenue.

B. Expenses are recognised at the end of the fiscal year regardless of when the related sales occur, so cost of goods sold is recorded at year‑end.

C. Expenses are recognised when the inventory is purchased, matching the cost with the purchase date rather than the sales revenue period.

Correct D. Expenses are recognised in the same period as the related sales revenue; thus the cost of inventory is recorded as cost of goods sold when the inventory is sold, not when it is purchased.

Correct Answer: D

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Question 24 View Details

A trader's books are incomplete. The following information is available:\n\n- Sales: \(\₦200,000\)\n- Purchases: \(\₦120,000\)\n- Opening stock: \(\₦30,000\)\n- Gross profit ratio: 25% of sales\n- Expenses (rent, salaries): \(\₦15,000\)\n- Net profit reported: \(\₦20,000\)\n- Cash sales are 40% of total sales and are collected in the period.\n- Cash purchases are 30% of total purchases; the rest are on credit and paid later.\n\nUsing the above data, determine: (i) the value of closing stock, (ii) the amount of cash sales, and (iii) the amount of any unrecorded expense that must be recognised to reconcile the reported net profit.

A. Closing stock = ₦10,000; Cash sales = ₦60,000; Unrecorded expense = ₦20,000

B. Closing stock = ₦5,000; Cash sales = ₦70,000; Unrecorded expense = ₦10,000

C. Closing stock = ₦15,000; Cash sales = ₦90,000; Unrecorded expense = ₦5,000

Correct D. Closing stock = ₦0; Cash sales = ₦80,000; Unrecorded expense = ₦15,000

Correct Answer: D

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Question 25 View Details

The trial balance of a sole trader for the year ended 31 December shows the following balances (debits unless otherwise stated):\n\n- Sales: \(\₦500,000\) (credit)\n- Purchases: \(\₦300,000\) (debit)\n- Opening stock: \(\₦80,000\) (debit)\n- Salaries expense: \(\₦50,000\) (debit)\n- Rent expense: \(\₦30,000\) (debit)\n- Depreciation expense: \(\₦20,000\) (debit)\n- Equipment cost: \(\₦100,000\) (debit)\n- Accumulated depreciation: \(\₦0\) (credit)\n- Capital: \(\₦200,000\) (credit)\n- Drawings: \(\₦40,000\) (debit)\n\nThe trial balance totals are equal. However, the correct depreciation for the year should be \(\₦15,000\) and the closing stock of \(\₦70,000\) was omitted from the trial balance.\n\n(a) State the adjusting journal entries required to correct these two errors.\n(b) After the adjustments, what is the corrected net profit for the year?

A. Net profit = ₦70,000

Correct B. Net profit = ₦95,000

C. Net profit = ₦110,000

D. Net profit = ₦80,000

Correct Answer: B

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