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UI Post-UTME Financial Accounting 2025 (Model questions) Question 15

Question 15

Final Accounts of a Sole Trader

Which of the following will INCREASE the profit figure reported in the final accounts?
I. Understating closing stock
II. Overstating closing stock
III. Understating accrued expenses
IV. Overstating prepaid expenses

  1. A.I and III only
  2. B.II, III and IV only
  3. C.I and IV only
  4. D.II and III only
Show the answer and explanation

Answer: B (II, III and IV only)

Explanation

Overstating closing stock lowers cost of sales; understating accruals and overstating prepayments lower expenses. All three raise profit.