MCQ1: What effect would purchase of goods for credit have on the assets, liability and capital of a business? Answer: Increase Assets, decrease Liability and no effect on Capital MCQ2: Which of the following are the effects of matching concept? (i) Determination of periodic profits (ii) Unexpired costs are deferred (iii) Cost of goods sold may be different from purchases Answer: I, II, and III MCQ3: The accrual concept requires a business to treat as income those which are due and receivable and to treat as expenses those which are in arrears respectively. Answer: Yes MCQ4: The implication of the entity concept to a sole trader is that the ------------------- Answer: business can sue and be sued separately MCQ5: Which of the following transactions would reduce asset and reduce liability? Answer: Sale of goods on credit MCQ6: Which of the following statements about a journal are correct? (I) The double entry for a transaction is completed in a journal. (II) Journal is used to record withdrawal of cash to the office. (III) A set-off between customers and suppliers is resolved through journal. (IV) Journal records adjusting events. Answer: I, III and IV MCQ7: Which of the following journal entries may be accepted as being correct according to their narration? Answer: Dr Plant and machinery N250,000. Cr Ernest Opare & Co N250,000. Being Purchases of goods on credit MCQ8: The invoiced price of a commodity is N50,000 with a trade discount of 10%. C. Eghan issued the invoice to Wii Dromo. How much is recorded in the books of original entry of Wii Dromo and in what book is it recorded? Answer: N50,000 and purchases day book MCQ9: Which of the following roles does a debit note serve? Answer: A document issued by the seller informing the buyer that his account has been credited for overcharge on the invoice. MCQ10: What is the relationship between a Purchase Order and Goods Received Note? Answer: The GRN confirms that goods are supplied according to the specification in the purchase order. MCQ11: Which of the following will increase the value of the account? (I) Debit an asset account. (ll) Debit a liability account. (III) Debit an expense account. (IV) Debit an income account Answer: I and II MCQ12: A photocopy machine is purchased on credit for N500,000, state the accounts to be debited and credited. Answer: Dr Office equipment and Cr Purchases MCQ13: An entry on the right-hand side of a ledger account is --------------------------- Answer: Credit MCQ14: Answer: Olu Ventures purchased N75,000 motor vehicle MCQ15: Answer: Trade Payables MCQ16: When there is a set off between trade receivables and trade payables, and creditors the amount is Answer: debited in sales ledger control account MCQ17: Which of the following will NOT be recorded in the sales ledger control account? I. Amount received from receivables II. Bills payable discounted III. Cash sales IV Discount allowed Answer: I and II MCQ18: What is the effect of purchases set-off on control account? Answer: It will reduce amount receivable from trade receivables MCQ19: What is the source of information for dishonoured cheques recorded in total account? Answer: Bank statement credit side MCQ20: Control accounts are also called I. Total accounts. II. Self balancing ledger. III. Three column cash book. IV. General journal Answer: I and II MCQ21: Which of the following reconciliation items will affect the cash book balance? I. Bank error overstating the bank balance II. Cash book error, overstating the bank balance III. Income received through the bank IV. Imprest cheques Answer: I and II MCQ22: The effect of items that are recorded on the debit side of a bank statement but are not found on the credit side of the cash book is that Answer: Bank balance is overstated MCQ23: What is the effect of non-bank credit card draft on the account of a business when it is deposited by the customer? Answer: Receivables‟ account is increased MCQ24: The cash book of a trader shows an overdrawn account. Which of the following will reduce the balance when the necessary recordings are completed? Answer: Bank charges MCQ25: Given the following: NAcquisition cost of machine 200,000 Installation cost 50,000 Estimated annual maintenance cost 20,000 Estimated useful life 5 years Estimated residual value 10,000 What is the depreciable value of the machine? Answer: N200,000 MCQ26: Given the following: NAcquisition cost of machine 200,000 Installation cost 50,000 Estimated annual maintenance cost 20,000 Estimated useful life 5 years Estimated residual value 10,000Using straight line method, what would be the annual depreciation charge for the second year of usage? Answer: N48,000 MCQ27: Dominic bought a non-current asset on credit from Mepai Company Limited. In which subsidiary book will Mepai Company Limited record this transaction? Answer: Purchases journal MCQ28: The fall in value of non-current intangible assets as a result of passage of time is referred to as? Answer: Depletion MCQ29: Depreciation of an asset with fixed period of legal life is often referred to as? Answer: Obsolescence MCQ30: An increase in the value of a non-current asset over and above its original cost is termed? Answer: Depreciation MCQ31: The basic formula for the straight-line method of depreciation is given as? Annual depreciation = a – b C where Answer: a = cost of the asset, b = expected asset life in years, c = residual value MCQ32: Which of the following assets will not be shown on the statement of financial position of a business unit? Answer: Intangible asset such as management services MCQ33: Which of the following is an example of revenue expenditure? Answer: Expenditure on non-current assets bought by the firm MCQ34: Every asset should have at least Answer: Tangible and intangible qualities MCQ35: A motor van was purchased by a bookshop on 1st July 2003 for ¢10,000,000 and sold on 30th June 2005 for ¢8,200,000. The firm‟s accounting year ends on December 31st. Motor vans are depreciated at 10% per annum on cost. What is the profit or loss on disposal of the motor van? Answer: ¢200,000 (loss) MCQ36: A motor van was purchased by a bookshop on 1st July 2003 for ¢10,000,000 and sold on 30th June 2005 for ¢8,200,000. The firm‟s accounting year ends on December 31st. Motor vans are depreciated at 10% per annum on cost. What is the accumulated depreciation on the motor van as at 30th June, 2004? Answer: ¢1,000,000 MCQ37: A company has business premises worth ¢80,000,000. An additional amount of ¢20,000 was used to provide metal gate for the building. The cost of the gate should be treated as Answer: Revenue expenditure MCQ38: Given the following information:Motor vehicles at cost (1/1/2005) ¢50,000,000 Accumulated depreciation (1/1/2005) ¢18,000,000 Depreciation is at the rate of 20% per annum using reducing balance method What would be the depreciation charge for 2005? Answer: ¢6,800,000 MCQ39: Given the following information:Motor vehicles at cost (1/1/2005) ¢50,000,000 Accumulated depreciation (1/1/2005) ¢18,000,000 Depreciation is at the rate of 20% per annum using reducing balance method What would be the written down value of the motor vehicles as at 31st December, 2005? Answer: ¢28,800,000   MCQ40: The value of a non-current asset is recorded in a Answer: Nominal account MCQ41: Which of the following best describes the provision made for the loss in value of non-current assets that is of a wasting nature? Answer: Depletion MCQ42: An expense is said to be capital in nature if it Answer: Reduces the capital of the business MCQ43: The following are non-current assets except Answer: Land MCQ44: Which of the following accounting equations is correct? Answer: Asset = Capital + Liability MCQ45: Which of the following should be accounted for as capital expenditure? Answer: Cost of repainting of building MCQ46: Depreciation in Accounting is best described as a method of Answer: Spreading cost of non-current assets over a period of years MCQ47: An entity selling goods bought a motor vehicle for N800,000 cash. The amount was debited into purchases account and credited into cash account. What is the type of error committed? Answer: Error of commission MCQ48: Which of the following statements is correct in preparing a bank reconciliation statement? Answer: A dishonoured cheque received from a customer is debited to adjusted cash book MCQ49: A suspense account is used when------------------------------ Answer: Source of error is unknown MCQ50: If Ado allows his personal building worth N300,000 to be used for the operations of his business then the assets of his business will ----------------------------------- Answer: increase by N 300,000 Fill in the Blank Questions (FBQs): FBQ1: The two main financial statements drawn up by a sole trader are comprehensive income statement and _______________________ Answer: *Statement of financial position* FBQ2: __________________ is a form of accounting information needed for the day to day running of a business. Answer: *Management accounting information* FBQ3: The main advantage of the going-concern concept is _________________ Answer: *Increase patronage* FBQ4: The effect of the historical cost concept on profit in a period of rising prices is____________________. Answer: *Holding gain* FBQ5: The relevant concept that justifies the charging to expense the cost of small waste basket even though the basket has useful life of several years is ______________ Answer: *Materiality* FBQ6: ____________________ is the accounting concept which justifies the depreciation of non-current assets. Answer: *Matching concept* FBQ7: Mensa and Co., a sole trader, discovered that the business liability is in excess of the assets. He thus included his private assets in the Statement of financial position. _________________as accounting concept is violated. Answer: *Entity concept* FBQ8: Bank __________________ is the main source document for recording cash paid into the bank. Answer: *Pay-in-Slip* FBQ9: The total in a sales day book is transferred to ___________ account in the ledger. Answer: *Sales ledger* FBQ10: The duplicate copy of credit note will serve as the source document to record in the _________________ book. Answer: *Returns inwards* FBQ11: The importance of narration in a journal is to indicate the purpose and ________________ of the transaction. Answer: *Authority* FBQ12: The source document for cash sales is ______________ of cash receipt issued by the seller. Answer: *Duplicate copy* FBQ13: Information stored in a computer-based accounting system which can be arranged into any desired format is called _______________________.  Answer: *Database* FBQ14: The relationship between the ledger and the Trial Balance is that a debit balance in the ledger will be on the _____________ side of the Trial Balance. Answer: *Debit* FBQ15: Trial Balance complements the usefulness of the double entry principle by testing whether the principle of __________________ is properly followed in recording in ledger accounts. Answer: *Double entry* FBQ16: The Error of Omission can affect the Trial Balance when-------------------of the double entry of a transaction is posted to the ledger. Answer: *Only one entry* FBQ17: While the Trial Balance proves the equality of the debit and credit entries in the ledger, it does not __________ some errors. Answer: *Detect* FBQ18: It is common to divide the ledger for a large organisation into four separate ledgers known as the general ledger, ___________, sales ledger and purchases ledger.  Answer: *Private ledger* FBQ19: The account in the general ledger that after posting shows the total amount owed and agrees with the totals in the subsidiary ledger is termed the _______ account. Answer: *Purchases Ledger control* FBQ20: Postings are made to the general ledger ____________________________ Answer: *Every month end* FBQ21: A supplementary record used to provide detailed information for control account in the general ledger is known as _____________________ ledger. Answer: *Subsidiary ledger* FBQ22: __________________ is an item that is normally posted to the credit side of the purchases ledger control account in relation to settlement of creditor’s account. Answer: *Dishonored bill payable* FBQ23: Reconciling the ---------------------- with the bank statement balance is a main step involved in preparing the bank reconciliation statement. Answer: *Adjusted balance* FBQ24: When a customer’s cheque that is lodged is dishonored by the bank, it will ____________balance in the bank. Answer: *Reduce cash* FBQ25: _______________ is the account that a business normally maintains with a bank when it has fund for investment for a relatively long period of time. Answer: *Fixed deposit account* FBQ26: Answer: *N24,570* FBQ27: Answer: *N12,8708* FBQ28: A main function of the Credit Card involves --------------------- payment of cash to creditors. Answer: *Prompt* FBQ29: Assets and liabilities of a going concern entity are generally valued on historical cost basis or ........................................ basis. Answer: *Fair value* FBQ30: An authorising document for payment of a particular expense or service is called........................................  Answer: *Payment Voucher* FBQ31: The book of original entry that gives a brief explanation of the transaction, referred to as “narration” is called......................................... Answer: *The Journal* FBQ32: Control accounts are also called .......................................... ledgers Answer: *Self balancing* FBQ33: An asset was bought on 1 January 2006 for N600, 000 and depreciation was provided annually at 20% on reducing balance basis. Depreciation is charged in the year of disposal on pro-rata basis. The asset was sold for N350, 000 on 30 October, 2008. What is the net book value of the asset at the time of disposal?.................................................................. Answer: *320,000* FBQ34: An asset was bought on 1 January 2006 for N600, 000 and depreciation was provided annually at 20% on reducing balance basis. Depreciation is charged in the year of disposal on pro-rata basis. The asset was sold for N350,000 on 30 October, 2008. The amount of profit on disposal is --------------------------. Answer: *N30,000* FBQ35: A machine costs N360,000 and has a useful life span of n years and an expected disposal value of N12,000 with annual depreciation of N69,600. The useful lifespan of the machine is ---------------------using straight-line method of depreciation. Answer: *5 years* FBQ36: A machine costs N360, 000 and has a useful life span of n years and an expected disposal value of N12, 000 with annual depreciation of N69, 600. Using reducing balance method, the depreciation charged for Year 2 (ignoring residual value) is............................... Answer: *N57, 600* FBQ37: A machine costs N360, 000 and has a useful life span of n years and an expected disposal value of N12, 000 with annual depreciation of N69, 600. Using the reducing balance method, the net book value of the asset at the end of Year 3? is............................. Answer: *N69, 600* FBQ38: A company bought goods worth N300,000 and spent N20,000 for transportation. Such transport cost is a form of ----------------------- to the company. Answer: *Carriage inwards* FBQ39: Usman returned defective goods worth N30,000 to Yaro Enterprises. This transaction will appear in the Trading, Profit and Loss account of Yaro Enterprises as ……………… Answer: *Sales return* FBQ40: The excess of current assets over current liabilities is known as……………….. Answer: *Working Capital* FBQ41: The amount of fictitious value placed on a company’s reputation is called ------------------------------. Answer: *Goodwill* FBQ42: The amount at which an asset is recognized after deducting any accumulated depreciation and accumulated impairment losses is called ………………… Answer: *Carrying Amount* FBQ43: The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements are called ……………… Answer: *Accounting policies* FBQ44: Errors that result from the use of incorrect accounting estimates be treated in the current year through ……………………….during the year accordingly. Answer: *Adjustment* FBQ45: A mistake of ------------------ in the ledger account affects the agreement of the trial balance double entry principle is not adhered to. Answer: *Single entry* FBQ46: The double entry required to correct a debit balance in Jide’s account in the sales ledger which was wrongly recorded as N695 instead of N659 is debit suspense account and credit Jide Account with ----------------------------. Answer: *N36* FBQ47: When a Non-Current Asset is sold, the amount that is debited to Cash Account and credited to disposal account is called…………………. Answer: *Sales proceeds* FBQ48: Extended Trial Balance is an alternative way of arriving at the figures to be included in the ……………………… Answer: *Financial statements* FBQ49: An overdraft facility to a company is an example of ------------------- liability. Answer: *Current* FBQ50: Given a selling price of N700,000 and a gross profit mark-up of 40%, the cost priceis……………………….. Answer: *N500,000*