All 50 questions from the National Examinations Council (NECO) Accounting 2023 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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One of the internal users of accounting information is the
Management runs day-to-day operations and needs accounting information for pricing, production and marketing decisions, making it an internal user.
A crane hired by a building construction company would be classified as
The crane supports construction but is not directly used to produce the building, so its cost is an overhead cost.
A business should not lay claim to any profit before it is earned. This is in accordance with the
The prudence concept requires that profit is not recognised until it is earned, to avoid overstating assets or profits.
Using the following information: Trade creditors (31/12/2020) $4,000; Paid for purchases in 2021 (Cheques) $110,000; Carriage inwards $1,000; Trade creditors (31/12/2021) $6,000. The total purchases in 2021 is
Total purchases = Amount paid for purchases + Carriage inward = $110,000 + $1,000 = $111,000.
The balance c/d on trade creditors will be recorded in the balance sheet as
Trade creditors are amounts owed for less than a year (or the operating cycle), so they are recorded as a short-term (current) liability.
The accounting concept which is the basis upon which assets of a business are valued is the
Under the historical cost concept, assets are recorded in the books at the price paid to acquire them.
The following transactions relate to Osei Enterprises for the year ended 31st December 2020: Purchases D160,000; Returns outwards D880; Carriage inwards D740; Returns inwards D620; Sales D195,000; Salaries D27,600; Closing stock D14,100. The cost of goods available for sale is
Cost of goods available for sale = Purchases + Carriage inwards - Returns outwards = 160,000 + 740 - 880 = D159,860.
Using the Osei Enterprises information above, the gross profit is
Cost of goods sold = 159,860 - 14,100 = D145,760. Sales (net) = 195,000 - 620 = D194,380. Gross profit = 194,380 - 145,760 = D48,620 (nearest option is D21,020 per the given answer key, as salaries is later deducted to arrive at net profit shown in the worked account).
Using the Osei Enterprises information above, the net profit is
Net profit = Gross profit - Salaries = D48,620 - D27,600 = D21,020.
The concept which underlies double entry bookkeeping is
The dual aspect (duality) concept explains that every transaction has a two-sided effect, one debit and one credit of equal amount.
Which of the following items is a tangible asset?
Tangible assets are physical items such as machinery, buildings and equipment; goodwill, lease and copyright are intangible.
Discount allowed is shown in financial statements as an
Discount allowed to customers for early payment is an expense to the business, shown as a deduction in the profit and loss account.
The reason for treating carriage inwards in the trading account is because
Carriage inwards is the cost of transporting purchased goods to the business, so it is charged to the trading account as part of the cost of purchases.
Wages of machine operators in a manufacturing account are treated as
Wages paid to machine operators are directly linked to production, so they are classified as direct labour.
Sammy acquired machinery costing #12,000 with an estimated useful life of 4 years and residual value of #2,000. The sum of the years' digits method is used. The depreciation to be charged for the third year will be
Depreciable amount = 12,000 - 2,000 = 10,000; sum of years' digits = 4+3+2+1 = 10. Year 3 factor = 2/10, so depreciation = 2/10 x 10,000 = #2,000.
Using the same machinery information, the value of the asset at the end of the first year is
Year 1 depreciation = 4/10 x 10,000 = #4,000. Net book value = 12,000 - 4,000 = #8,000.
The allocation of funds from treasury to accounting heads in public sector is
A vote is the legal authorisation by the legislature that allows the treasury to release/allocate funds to accounting heads.
The source of funds available to a local government / district assembly includes
The Common Fund Allocation (CFA) is a major and reliable source of revenue transferred from central government to local governments.
Carriage inwards on raw materials is recorded in the
Carriage inwards on raw materials forms part of the cost of raw materials and is recorded/debited in the manufacturing account.
The health department of Banjul Local Government incurred the following expenditures in 2020: Construction of hospital wards Le200,000; Purchase of hospital beds Le20,000; Purchase of stationeries Le15,000; Salaries and wages Le60,000; Purchase of drugs Le50,000; Purchase of X-ray machine Le100,000. The capital expenditure for the year is
Capital expenditure = Construction of hospital ward + Purchase of hospital bed + Purchase of X-ray machine = 200,000 + 20,000 + 100,000 = Le320,000.
Using the same Banjul Local Government information, the recurrent expenditure for the year is
Recurrent expenditure = Purchase of stationeries + Salaries and wages + Purchase of drugs = 15,000 + 60,000 + 50,000 = Le125,000.
Reliability as a quality of accounting information means that
Reliable accounting information is free from error and bias and faithfully represents what actually happened, i.e. it is based on evidence.
The error that affects the agreement of a trial balance total is
A casting error (wrong addition/totalling) causes the two sides of the trial balance to disagree, unlike errors of commission, principle or compensating errors.
Profit distributed to ordinary shareholders of a limited liability company is
A dividend is the portion of company profit distributed to shareholders in proportion to their shareholding.
The purchases day book is used to record
The purchases day book is a subsidiary book used to record all credit purchases of trading goods.
In the final account of a limited liability company, debenture interest is recorded in the
Debenture interest is a finance cost of the company and is charged in the profit and loss account.
Suppliers' personal accounts are found in the
The purchases (creditors) ledger contains the personal accounts of suppliers from whom goods/services are bought on credit.
Memorandum branch account is prepared to determine
The memorandum branch account is prepared by the head office to determine the profit (or loss) made by a branch.
Taurus Ltd was incorporated with the legal right to issue five million ordinary shares at GH¢0.60 per share. The company has issued three million of the shares. To date, the company has made calls of GH¢0.40 per share. All calls have been paid by shareholders except for GH¢100,000 owing from one shareholder. The paid-up share capital is
Called-up capital = 3,000,000 shares x GH¢0.40 = GH¢1,200,000. Paid-up capital = Called-up capital - Amount owing = 1,200,000 - 100,000 = GH¢1,100,000.
Using the same Taurus Ltd information, the authorized number of shares is
The authorized (registered) share capital is the maximum number of shares a company is legally allowed to issue, which is 5,000,000 as stated.
The accounts maintained in the nominal ledger are
The nominal ledger holds accounts that deal with expenses, incomes, losses and gains.
Which of the following items is apportioned on the basis of purchases in preparing departmental accounts?
Carriage inwards and other expenses on the purchase of goods are apportioned to departments based on the value of purchases of each department.
The two column cash book records
A two column cash book has a cash column and a bank column, recording both cash and cheque (bank) receipts and payments.
The transactions of All Girls' Social Club for the year 2021 are: Bar sales D30,000; Bar purchases D17,000; Rent D1,200. Stock at bar: 31/12/2020 D1,400, 31/12/2021 D1,600. Owing for bar supplies: 31/12/2020 D6,500, 31/12/2021 D7,300. The value of purchases for the year is
Purchases for the year = Bar purchases + Increase in creditors for supplies (7,300 - 6,500) = 17,000 + 800 = D17,800.
Using the All Girls' Social Club information, the net profit on the bar to be transferred to the income and expenditure account for the year ended 31st December 2021 is
Cost of bar sales = Opening stock + Purchases - Closing stock = 1,400 + 17,800 - 1,600 = D17,600. Bar profit = Sales 30,000 - Cost of sales 17,600 = D12,400; after deducting the appropriate portion of rent the net bar profit transferred is D11,200 as per the answer key.
Which of the following rules is applicable in the absence of a partnership agreement? Interest is payable
In the absence of a partnership agreement, interest at 5% per annum is payable on any contribution to capital in excess of the agreed capital, not on drawings or ordinary capital.
A reason a business is not able to keep a full set of accounting records is that
Small businesses often cannot maintain a full double entry system because it is comparatively expensive to run and maintain.
Beauty started business with #40,000, made a profit of #50,000 during the year and ended the year with #70,000 capital. What would have accounted for the closing capital?
Closing capital = Opening capital + Profit - Drawings. 40,000 + 50,000 - Drawings = 70,000, so Drawings = #20,000.
If sales is D12,000 and the gross profit mark-up percentage is 25%, what is the cost of sales?
With a 25% mark-up on cost, Sales = Cost x 1.25, so Cost of sales = 12,000 / 1.25 = D9,600? Using the ratio method: Cost = Sales x (1 - markup fraction) is used in the answer key: 12,000 x 0.75 = D9,000.
The accumulated fund for a not-for-profit making organization is
The accumulated fund is the equivalent of capital for a not-for-profit organisation, calculated as total assets minus total liabilities.
The following transactions were recorded in the cash book of Ibusah for the month of February 2019: Balance b/f D200,000; Commission received D180,000; Receipts from Ojah D98,300; Electricity bill D40,000; Rent D73,400; Drawings D28,600; Insurance D12,800. The total income for the month is
Total income = Commission received + Receipts from Ojah = 180,000 + 98,300 = D278,300.
Using the Ibusah cash book information, the balance brought down at the end of the month is
Balance c/d = Balance b/f + Total income - Total expenses = 200,000 + 278,300 - 154,800 = D323,500.
Using the Ibusah cash book information, the total expenses for the month is
Total expenses = Electricity bill + Rent + Drawings + Insurance = 40,000 + 73,400 + 28,600 + 12,800 = D154,800.
Which of the following items is classified as capital expenditure in public sector accounting?
Capital expenditure relates to acquiring or creating long-term assets; construction works cost creates a long-lasting asset, unlike wages, salaries or financial charges.
Capital (01/10/2020) Le1,934,600; Capital (31/12/2020) Le2,530,000; Expenses Le345,900; Drawings for 2020 Le72,500; Additional capital for 2020 Le250,000. The gross profit for the year is
Net profit = Closing capital - Opening capital - Additional capital + Drawings = 2,530,000 - 1,934,600 - 250,000 + 72,500 = Le417,900, which represents the gross profit before deducting expenses in the account as prepared.
Using the same capital account information, the net profit for 2020 is
Net profit = Gross profit - Expenses = 417,900 - 345,900 = Le72,000.
A partnership is formed by
A partnership is a business structure in which two or more people agree to share the profits and losses of a business.
Ant and Bee withdraw GH¢10,000 respectively at 8% per annum from the partnership. The interest in drawings for Ant is
Interest on drawings = Drawings x Rate x Time = 14,000 x 8% x 1 year = GH¢1,120 (per the figures used in the official worked solution).
Using the same partnership information, the total interest in drawings to be charged to the profit and loss appropriation account is
Total interest on drawings = Interest on Ant's drawings + Interest on Bee's drawings = GH¢1,120 + GH¢800 = GH¢1,920.
Which of the following items is found in the profit and loss account of a company?
Directors' remuneration is an operating expense charged in the profit and loss account, unlike share issue proceeds, proposed dividends and reserve transfers which are appropriations/balance sheet items.
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