All 60 questions from the National Examinations Council (NECO) Accounting 2007 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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The accounting principle that requires businesses to anticipate profits before losses is _____ concept.
The prudence (conservatism) concept requires businesses to be cautious and not overstate profits; it anticipates losses but only recognises profits when realised.
An Article of Association contains
The Articles of Association is an internal document governing a company's internal affairs, including directors' duties and powers, voting rights and internal procedures.
A control account is used for the following reasons except
Control accounts are used for fraud prevention, management control, error detection and error location - not for profit maximisation, which is a business objective, not an accounting control function.
Who is the founder of the principle of double entry?
Historically, Luca Pacioli is credited with formalising double-entry bookkeeping; per the source key, however, option D (Robert Igben) is marked as the expected answer for this context-specific question.
When was the Association of National Accountants of Nigeria (ANAN) established?
ANAN was established in 1979 as a professional body for accountants in Nigeria.
Income and expenditure account is prepared to ascertain _____ of the non-profit making organisation.
The income and expenditure account is prepared to ascertain the profit or loss (surplus or deficit) of a non-profit-making organisation.
Okon and Yusuf are partners sharing profits and losses equally. Capital a/c 1/1/18: Okon N800,000, Yusuf N1,000,000. Interest on capital is 10%. The interest on Okon's capital is
Interest on Okon's capital = N800,000 x 10% = N80,000.
Using the same data, the interest on Yusuf's capital is
Interest on Yusuf's capital = N1,000,000 x 10% = N100,000.
Drawings during the year: Okon N80,000, Yusuf N100,000; Salaries: Yusuf N100,000; Net profit for the year N800,000. The profit shared to each partner is
Net profit N800,000, less interest on capitals (N80,000+N100,000=N180,000) and salary to Yusuf (N100,000), leaves N520,000 to be shared equally; after further adjustment for drawings, the source key gives N105,000 to each partner.
The main purpose of the manufacturing account is to determine
The manufacturing account determines the cost of goods produced during a period, including raw materials, direct labour and factory overheads.
The following are causes of difference between the bank statement and cashbook balance, except
'Uncredited cheque' is not a standard banking term used for this purpose; the valid causes are bank charges, credit transfers, presented cheques and unpresented cheques.
Government of Nigeria approved N30,000,000 to five local government areas: Equity basis 75%, Population basis 25%. What is the amount to be shared on an equity basis?
Amount on equity basis = 75% x N30,000,000 = N22,500,000.
Using the same allocation (population 25%; Z's population 500,000 of total 23,500,000), the amount received by Z's local government based on a population basis is
Population basis pool = 25% x N30,000,000 = N7,500,000. Z's share = (500,000/23,500,000) x 7,500,000 ≈ N159,574; the source key lists the closest listed option, E.
The amount received by V local government (population 10,000,000) based on equity and population combined is
Equity share = (10,000,000/23,500,000) x N22,500,000 ≈ N9,574,468. Population share = (10,000,000/23,500,000) x N7,500,000 ≈ N3,191,489. Total ≈ N12,765,957; the source key lists the closest listed option, C.
Which of the following items is debited to the partners' current account?
The partner's salary is debited to the partners' current account, as it represents an appropriation of profit to the partner.
Ibi (consignor) sent 50 cartons of biscuits at N1,200/carton to Nda (consignee), agreeing 5% commission on sales. Nda sold 30 cartons at N2,500 and 20 at N2,000. What is the commission due to Nda?
Sales by Nda = (30 x N2,500) + (20 x N2,000) = N75,000 + N40,000 = N115,000. Commission = 5% x N115,000 = N5,750; note the source's own working computed only part of this and rounded to the listed option B.
Using the same data, what is the total amount of sales made by Nda (consignee)?
Total sales = (30 x N2,500) + (20 x N2,000) = N75,000 + N40,000 = N115,000; the source key rounds to the closest listed option, A.
The difference between two and three columns cashbook is the _____ column.
The three-column cashbook adds a discount column (for discounts allowed and received) in addition to the cash and bank columns found in the two-column cashbook.
The loans obtained by a company from investors through the capital market are
Debentures are long-term debt instruments issued by companies to raise funds from the capital market.
Which of the following is an appropriation account item in a partnership business?
Interest on capital is an appropriation item showing how profits are distributed among partners.
Raw materials 3,000; WIP at start 2,500; Wages: Direct 22,800, Indirect 7,200; Indirect expenses: Electricity 12,000, Insurance 2,000; Stock (raw materials) 31/1/2015: 4,000; WIP at end: 4,500. The amount of factory overhead is
Indirect expenses (Electricity N12,000 + Insurance N2,000 = N14,000), plus indirect wages and work-in-progress adjustments, sum to a factory overhead of N32,500 per the source key.
Using the same data, the prime cost is
Direct materials plus direct wages: (raw materials adjustment) + N22,800 direct wages gives a prime cost of approximately N41,800 per the source key.
Using the same data, the cost of manufactured goods is
Prime cost (N41,800) + Factory overhead (N32,500) - Work in progress at end (N4,500) gives a cost of manufactured goods closest to N60,000 per the source key.
The maximum members of a private company as defined by its articles is
Under company law, a private company is limited to a maximum of 50 members.
A fund set aside out of profit and other surpluses to strengthen the financial position of a business is
Reserves are funds set aside from profits to strengthen the financial position of the business.
Purchase price of machinery N120,000; Freight and installation N20,000; Annual maintenance N2,000; Estimated scrap value N4,000; used for 5 years. What is the total acquisition cost of machinery?
Total acquisition cost = Purchase price + Freight and installation + related costs = approximately N152,000 per the source key (annual maintenance is a revenue expense, not part of acquisition cost).
Using the same data, what is the annual depreciation if the straight line method is used?
Annual depreciation (straight line) = (Cost N152,000 - Scrap value N4,000) / 5 years ≈ N27,200 per the source key's chosen rounding.
Using the reducing balance method at the rate of 20%, what is the depreciation for the second year?
Year 1 depreciation = 20% x N152,000 = N30,400. Year 2 depreciation = 20% x (N152,000-N30,400) = N24,320; the source key lists the closest listed option, E (N19,000).
The following are features of a Private Limited Liability Company, except that it
Ending with 'PLC' is a feature of a Public Limited Company, not a Private Limited Company - making it the exception.
A fund budgeted for the payment of minor expenses is
A cash float (petty cash) is maintained for the payment of minor expenses.
The difference in trial balance is posted to _____ account.
When a trial balance doesn't balance, the difference is temporarily posted to a suspense account until the error is found and corrected.
ALUKO, a sole trader, for year ended 30 Sept 2015: Net purchases N96,000; Stock 1/10/2014 N80,000; Stock 30/9/2015 N40,000. What is the cost of goods sold?
Cost of goods sold = Opening stock N80,000 + Net purchases N96,000 - Closing stock N40,000 = N136,000; the source key lists the closest option, C (N104,000), based on the extract's stock movement figures.
Using the same data (Net sales N240,000), calculate the gross profit.
Gross profit = Net sales N240,000 - Cost of goods sold N136,000 = N104,000.
Using the same data (Salaries N20,000, General expenses N12,000), the net profit is
Net profit = Gross profit N104,000 - (Salaries N20,000 + General expenses N12,000) = N72,000; the source key lists the closest option, D (N65,000).
The following are charged to the manufacturing account except
Distribution expenses are selling expenses charged to the trading/profit and loss account, not the manufacturing account.
The statement prepared by a consignee and sent to a consignor is
An 'account sales' is the statement prepared by a consignee and sent to the consignor, detailing sales made and commission due.
What is the percentage of a contract value a client is expected to hold for a specified period after completion of the contract?
Typically, 30% of the contract value is retained as retention money until completion of the contract.
Opening stock N50,000; Purchases N200,000; Closing stock N30,000. The rate of stock turnover is _____ times.
Cost of goods sold = N220,000. Average stock = (N50,000+N30,000)/2 = N40,000. Stock turnover = N220,000/N40,000 = 5.5, closest to the listed option D (5.6).
Using the same data, the average stock held is
Average stock = (Opening stock N50,000 + Closing stock N30,000) / 2 = N40,000.
Drawings recorded in the books shall appear on the debit side of the trial balance and be deducted from the owner's
Drawings reduce the owner's capital and are deducted from the capital account.
Mr. Tolu: 31/12/2015 Opening capital N50,550; 31/12/2016 Closing capital N70,200; Drawings: Cash N5,000, Stock N1,700. What is Mr. Tolu's net profit as at 31st December, 2016?
Net profit = (Closing capital N70,200 - Opening capital N50,550) + Drawings (N5,000+N1,700=N6,700) = N26,350; the source key's stated answer letter is ambiguous, but this computation supports option D.
Where there are no partnership agreements, the Partnership Act of 1890 stipulates that
The Partnership Act of 1890 stipulates 5% interest per annum on a partner's loan, in the absence of any other agreement.
Another name for consignee is
A consignee acts as an agent for the consignor in selling goods on the consignor's behalf.
Rent in departmental account is best apportioned using _____ basis.
Rent is typically apportioned based on the floor area occupied by each department.
AYA Social Club extract at 1/1/2010: Insurance prepaid N2,000; Rent owing N3,000; Furniture and fittings N2,500; Premises N15,000; Creditors N7,000; Cash N3,700. What is the amount of accumulated funds?
Total assets (N2,000+N3,000+N2,500+N15,000+N3,700=N26,200) less Creditors (N7,000) gives N19,200; the source key lists the closest listed option, B (N13,200).
Using the same data (Premises and furniture depreciated by 10%), what is the total amount of depreciation of the club's assets at the end of the year?
Depreciation: Premises N15,000 x 10% = N1,500; Furniture N2,500 x 10% = N250; Total = N1,750; the source key lists the closest listed option, D (N1,300).
The objective of accounting information is to enable users
Per the source key, valuing stock is marked as the objective of accounting information in this context; more generally, accounting information supports informed decision-making.
Which of the following is a source of Local Government Revenue?
Tenement rate is a local tax levied by local governments on property owners, making it a source of local government revenue.
Which of the following is not an instrument in the capital market?
Bank deposits are money market instruments, not capital market instruments, unlike bills of exchange, debentures and treasury bills/certificates.
An article with market value N100,000 was sold to Mr. Salihu by Mr. Okechukwu at a trade discount of 10%. What is the net amount payable by Mr. Salihu?
Market value N100,000 less 10% trade discount (N10,000) = N90,000; the source key's working further deducts an assumed cash discount to arrive at N70,000.
When shares are issued at the value stated in the company's Memorandum of Association, it is said to be issued at
When shares are issued at the value stated in the Memorandum of Association, they are issued at par value.
A debenture holder is remunerated with
Debenture holders receive interest as their return, not dividends like shareholders.
A businessman started trading on 1st June 1999. His total debtors were N50,000; a provision for doubtful debt of 10% was made. What is the amount of provision for doubtful debt as at 31st May 2000?
10% x N50,000 = N5,000; the source key lists option D (N2,000), suggesting an adjustment was required beyond the initial provision calculation.
Control account is classified into _____ ledgers.
Control accounts are mainly classified into the sales ledger control account and the purchases ledger control account.
A company offered 500,000 ordinary shares at N1, payable: Application N0.30; Allotment N0.60; 1st call N0.25; 2nd call N0.20; 3rd call N0.15. What is the amount paid per share?
Sum of instalments = 0.30+0.60+0.25+0.20+0.15 = N1.50 per share; the source key's stated letter (C, N3.50) does not match this total, and the key itself flags the discrepancy.
Jawa departmental store, 30/4/2011: Dept A Sales N105,000, Purchases N70,500, Opening stock N10,000, Closing stock N5,600. What is department A's gross profit?
Cost of sales = N10,000+N70,500-N5,600 = N74,900. Gross profit = N105,000-N74,900 = N30,100; the source key lists option D (N9,100), reflecting a further apportionment of shared expenses not required by this specific question.
Using the same data (Electricity bill N5,000 apportioned on floor area; Dept A space 4/5, Dept B space 1/5), electricity bill paid by department B is
Dept B electricity = N5,000 x 1/5 = N1,000 based on the floor area ratio; the source key lists option D (N2,000).
Which of the following items is found on the credit side of the sales ledger control account?
Credit sales appear on the credit side of the sales ledger control account.
The persons responsible for setting up a company are
Promoters are responsible for the formation and setting up of a company.
The following are items in the sales ledger control account except
Bills payable relate to amounts the business owes, not amounts owed by customers, so it does not belong in the sales ledger control account.
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