47 questions. Try each one, then open the answer to check yourself and read the explanation.
The historical development of accounting reveals that it
Answer: C (is a product of its own environment)
Accounting methods changed as trade, industry and laws changed, so accounting is shaped by its environment.
In a trial balance, income and liabilities are
Answer: B (credited)
Incomes and liabilities both have credit balances, so both appear on the credit side.
The principle of double entry system ensures
Answer: A (mathematical accuracy in trial balance)
Because every debit has an equal credit, total debits equal total credits, so the trial balance agrees.
I Deduct the smaller side figure from the bigger side figure
II Add up both sides
III Take the difference to the smaller side and add to the smaller figure
The correct procedure for balancing account is
Answer: A (II, I and III)
First total both sides, then find the difference, then enter it on the smaller side as the balance c/d.
Given:
Light expenses ₦400
Purchases ₦3,000
Sales ₦1,200
Creditors ₦2,250
Debtors ₦50
Calculate the total of the trial balance.
Answer: D (₦3,450)
Debits: 400 + 3 000 + 50 = ₦3 450. Credits: 1 200 + 2 250 = ₦3 450.
The major feature of a journal is that it has
Answer: B (five columns, date, particulars, folio, debit and credit)
The journal has columns for date, particulars, folio, debit amount and credit amount.
The medium of correcting errors whose differences are shown in the trial balance is by the use of
Answer: C (suspense account)
A difference in the trial balance is put in a suspense account until the errors are found and corrected.
In bank reconciliation process, discrepancies caused by timing arises as a result of
Answer: A (cash book and bank statement)
Timing differences arise because the cash book and the bank statement record the same items on different dates.
The process of reconciling cheques between banks is termed cheque
Answer: A (clearing)
Clearing is the exchange and settlement of cheques between banks.
In a bank reconciliation statement, interest charged for overdrawn balances should be added to the
Answer: A (balance as per bank statement)
Interest on an overdraft is already in the bank statement but not in the cash book. When the reconciliation starts from the balance as per bank statement, the interest is added back to that balance to arrive at the cash book figure.
I. Stock of goods
II. Furniture
III. Creditors
IV. Cash at bank
V. Loan from the bank
Determine the current liabilities
Answer: A (III and V)
Creditors and the bank loan are amounts owed by the business.
I. Stock of goods
II. Furniture
III. Creditors
IV. Cash at bank
V. Loan from the bank
Find the current assets.
Answer: D (I and IV)
Stock and cash at bank are current assets; furniture is a fixed asset.
The type of expense charged against administration of a firm is the
Answer: A (repairs on building)
Repairs to the office building are a running cost of administration; interest and discounts are financial items.
In a period of declining price, which of the following methods would result in higher profit?
Answer: C (LIFO)
LIFO charges the latest (cheaper) prices to cost of sales when prices are falling, so cost of sales is lowest and profit highest.
The item on the credit side of the trading account is the
Answer: C (sales)
Sales (less returns inwards) are credited in the trading account.
June 30 Closing stock 100 units at ₦90
July 8 Purchased 200 units at ₦95
July 10 Sold 160 units
July 17 Returned 80 faulty units purchased at ₦95
July 18 Purchased 200 units at ₦105
July 20 Sold 180 units
July 28 Purchased 200 units at ₦110
July 29 Sold 120 units
July 30 Sold 100 units
How many units were at hand as at July 30?
Answer: C (60)
100 + 200 − 160 − 80 + 200 − 180 + 200 − 120 − 100 = 60 units.
June 30 Closing stock 100 units at ₦90
July 8 Purchased 200 units at ₦95
July 10 Sold 160 units
July 17 Returned 80 faulty units purchased at ₦95
July 18 Purchased 200 units at ₦105
July 20 Sold 180 units
July 28 Purchased 200 units at ₦110
July 29 Sold 120 units
July 30 Sold 100 units
What is the value of stock at the end of July 10 using FIFO?
Answer: B (₦13 300)
The 160 sold take all 100 @ ₦90 and 60 @ ₦95, leaving 140 @ ₦95 = ₦13 300.
A typical example of a real account is
Answer: C (plant)
Real accounts record tangible assets such as plant and machinery.
The control account can be used in
Answer: D (monitoring the efficiency of bookkeeping by accountants.)
Control accounts check the accuracy of the ledger clerks' work, so they monitor how well the books are kept.
Incomplete Record (Extract)
Sales ₦10 600
Rent ₦200
Depreciation of vehicle (cost N5000) 10%
Gross profit margin is 20%
What is the cost of goods sold?
Answer: B (₦8 480)
Gross profit = 20% × 10 600 = ₦2 120, so cost of goods sold = 10 600 − 2 120 = ₦8 480.
Incomplete Record (Extract)
Sales ₦10 600
Rent ₦200
Depreciation of vehicle (cost N5000) 10%
Gross profit margin is 20%
Calculate the net profit.
Answer: C (₦1 420)
Net profit = 2 120 − rent 200 − depreciation (10% × 5 000 = 500) = ₦1 420.
Trading account for the year ended 31st December 2009
Opening stock ₦32 000
Purchases ₦40 000; Carriage inwards ₦1 000 = ₦41 000; Less returns ₦2 000 = ₦39 000
Cost of goods available for sale ??
Less closing stock ₦9 000
Cost of goods sold ??
Sales ₦48 000; Less returns ₦2 000
Find the average stock for the period.
Answer: D (₦20 500)
Average stock = (opening 32 000 + closing 9 000) ÷ 2 = ₦20 500.
Trading account for the year ended 31st December 2009
Opening stock ₦32 000
Purchases ₦40 000; Carriage inwards ₦1 000 = ₦41 000; Less returns ₦2 000 = ₦39 000
Cost of goods available for sale ??
Less closing stock ₦9 000
Cost of goods sold ??
Sales ₦48 000; Less returns ₦2 000
Calculate the cost of goods sold.
Answer: C (₦62 000)
Goods available = 32 000 + 39 000 = ₦71 000; less closing stock 9 000 = ₦62 000.
The costs that are directly traceable to the goods being produced is
Answer: D (prime cost.)
Prime cost is the total of direct costs that can be traced to the product.
The production cost that does not form part of the product but is incidental to production and facilitates the production activities is the
Answer: B (indirect cost)
Indirect costs (overheads) support production but cannot be traced to a unit of product.
Work-in-progress is the
Answer: A (value of partly finished goods)
Work-in-progress is goods started but not yet finished.
The major feature of not-for-profit-making-organization is that they are formed
Answer: B (mainly to improve the welfare of her members)
Clubs and societies exist to serve their members, not to make profit.
The subscription paid in advance is treated in the balance sheet of a club as
Answer: B (a liability)
The club owes the member a year of membership, so subscriptions received in advance are a liability.
The capital of not-for-profit-making organization is referred to as
Answer: C (accumulated fund)
A club's capital is called its accumulated fund.
The major objective of departmental accounts is to ascertain the
Answer: A (contribution of each department to profit)
Departmental accounts show how much profit each department makes.
The transactions relating to liquidation in partnership account is drawn by using
Answer: D (realization account.)
The realisation account collects the assets sold, the expenses and the amounts received, and shows the profit or loss on dissolution.
The cost method of charging goods to branch is used where
Answer: D (goods are of a perishable nature on which a pre-determined price is inapplicable.)
When goods are perishable their selling price cannot be fixed in advance, so head office charges them to the branch at cost.
The correct entries to record goods transferred to branch from head office is to debit
Answer: A (branch stock account and credit goods sent to branch account)
The branch receives stock (debit branch stock) and head office records goods sent out (credit goods sent to branch).
The two accounts that are normally opened in the head office when goods are transferred to a branch are
Answer: B (branch stock account and goods sent to branch accounts)
Head office keeps a branch stock account and a goods sent to branch account.
Goods invoiced to a branch can be sent using
Answer: B (cost price, selling price and fixed percentage on cost price)
Goods may be charged to a branch at cost, at selling price or at cost plus a fixed percentage.
The major point of agreement carried by the partnership deed is
Answer: D (the profit and loss sharing ratio of the partners.)
The most important term of the deed is how profits and losses are to be shared.
Keme and Kemi are in partnership sharing profit and losses in the ratio 3 : 2.
Capital: Keme ₦20,000; Kemi ₦10,000
Drawings: Keme ₦2,000; Kemi ₦3,000
Profit ₦6,000
Interest on capital 5%
Interest on drawings 10%
The interest on Kemi's capital is
Answer: C (₦500)
5% × ₦10 000 = ₦500.
Keme and Kemi are in partnership sharing profit and losses in the ratio 3 : 2.
Capital: Keme ₦20,000; Kemi ₦10,000
Drawings: Keme ₦2,000; Kemi ₦3,000
Profit ₦6,000
Interest on capital 5%
Interest on drawings 10%
The interest on Keme's drawings is calculated as
Answer: A (₦200)
10% × ₦2 000 = ₦200.
Which of the following can be used on admission of a new partnership?
Answer: A (Revaluation account.)
When a partner is admitted the assets are revalued, and the gain or loss goes through a revaluation account.
Goodwill is determined using
Answer: C (the business and customer relations)
Goodwill comes from the firm's reputation and its relations with customers, which bring in future profits.
The founders of a company are
Answer: A (promoters)
Promoters are the people who form a company.
The fund in which all government receipts are paid is
Answer: A (consolidated revenue fund)
All revenues of the federation are paid into the Consolidated Revenue Fund.
Which of the following accounts for the highest revenue to Nigeria?
Answer: C (Petroleum resources.)
Oil and gas earn most of Nigeria's government revenue.
If Aboki Holdings Limited issued 120,000 ordinary share of ₦2.00 each at market value of 5.50k each, the share premium would
Answer: D (₦420,000)
Premium per share = 5.50 − 2.00 = ₦3.50; 120 000 × 3.50 = ₦420 000.
Which of the following is a signatory to federal government account?
Answer: C (Accountant-General.)
The Accountant-General of the Federation operates and signs the government's accounts.
The chief accounting officer of a local government is the
Answer: A (Chairman)
The Chairman is the chief accounting officer of a local government council.
Which of the following signs general warrant for the release of money from the consolidated revenue fund?
Answer: A (Minister of Finance.)
The Minister of Finance signs the general warrant that releases money from the fund.