New Curriculum Third Term Financial Accounting examination for SS 1

Class: SSS 1
Term: Third Term
Subject: Financial Accounting
Time: 1 hour 30 minutes
Total Marks: 70

SECTION A: OBJECTIVES (40 MARKS)
Instruction: Answer ALL questions. Each question carries 1 mark.

1. The closing inventory appears as a deduction when calculating cost of sales because it represents goods ________. (a) purchased and already sold twice   (b) not yet sold during the period   (c) owed to the bank rather than owned   (d) damaged beyond repair automatically
2. A machine cost ₦280,000 and accumulated depreciation is ₦56,000. Its carrying amount is ________. (a) ₦224,000   (b) ₦280,000   (c) ₦336,000   (d) ₦56,000
3. Purchases ₦180,000, purchases returns ₦10,000 and carriage inwards ₦7,000 give net purchases including carriage of (a) ₦163,000   (b) ₦177,000   (c) ₦170,000   (d) ₦197,000
4. A trial balance has debit totals of ₦495,000 and credit totals of ₦487,000. The difference is ________. (a) ₦982,000   (b) ₦16,000   (c) ₦8,000   (d) ₦487,000
5. Opening inventory ₦65,000, purchases ₦230,000 and closing inventory ₦47,000 give cost of goods sold of (a) ₦248,000   (b) ₦182,000   (c) ₦277,000   (d) ₦342,000
6. Profit available for appropriation is ₦120,000. Two partners share equally after no other adjustments. Each receives (a) ₦30,000   (b) ₦240,000   (c) ₦120,000   (d) ₦60,000
7. A machine costs ₦200,000 and annual straight-line depreciation is 10% of cost. The annual charge is ________. (a) ₦20,000   (b) ₦10,000   (c) ₦180,000   (d) ₦2,000
8. Which item should NOT be treated as a current-period operating expense? (a) Electricity used in the office   (b) Purchase of a long-lived delivery vehicle   (c) Advertising for the period   (d) Staff wages for the period
9. Net sales are ₦480,000 and cost of sales is ₦315,000. Gross profit is (a) ₦795,000   (b) ₦315,000   (c) ₦150,000   (d) ₦165,000
10. A ₦12,000 expense is posted to Motor Vehicles instead of Rent, with a matching credit to Bank. The trial balance will ________. (a) automatically report higher cash   (b) differ by ₦12,000   (c) differ by ₦24,000   (d) still agree although an account is misclassified
11. Under a partnership agreement, salaries to partners are ordinarily treated in the ________. (a) as deductions from the bank statement only   (b) as adjustments to closing stock at cost   (c) profit appropriation process   (d) as general merchandise revenue before gross profit
12. The trial balance totals disagree by ₦6,000. Which error could explain this difference? (a) An entire cash sale omitted on both sides   (b) A debit and corresponding credit both recorded as ₦6,000   (c) A single debit posting omitted for ₦6,000   (d) A correctly balanced transaction entered in the wrong accounts
13. A clerk wrongly includes prepaid insurance as a liability. The correct treatment is to (a) increase accrued expenses by the same amount   (b) recognise a current asset for the unexpired benefit   (c) remove the policy from all records   (d) record it as sales revenue
14. Which of the following does NOT necessarily cause a trial balance to disagree? (a) Posting a debit without its corresponding credit   (b) Carrying down an incorrect balance on one side only   (c) Completely omitting a transaction from both ledger accounts   (d) Entering different amounts in the debit and credit accounts
15. Which procedure best protects existing partners when a new partner is admitted? (a) Carry forward obsolete asset values without review   (b) Ignore existing liabilities in the new agreement   (c) Agree on valuation of assets and liabilities and document capital and profit-sharing changes   (d) Share remaining cash without preparing accounts
16. A debit balance in Furniture and a credit balance in Capital are placed on opposite sides of the trial balance because (a) furniture is always an expense   (b) trial balance excludes non-current assets   (c) capital is an asset of the business   (d) their normal account balances differ
17. Gross profit is ₦145,000 and operating expenses total ₦89,000. Net profit before other income is (a) ₦234,000   (b) ₦145,000   (c) ₦89,000   (d) ₦56,000
18. Which characteristic distinguishes a limited partner from a general partner in an ordinary limited partnership? (a) The limited partner must manage every daily transaction   (b) The limited partner's liability is ordinarily restricted to the agreed contribution subject to applicable rules   (c) The general partner can never incur liability   (d) Limited partners cannot contribute capital
19. Current assets are ₦210,000 and current liabilities ₦95,000. Net working capital is (a) ₦115,000   (b) ₦2,000   (c) ₦305,000   (d) ₦95,000
20. All the following may appear among current assets EXCEPT (a) loan repayable after five years   (b) prepaid expenses   (c) trade receivables   (d) inventory
21. A company receives rent income of ₦12,000 unrelated to its merchandise sales. Where is it ordinarily presented? (a) As additional closing inventory   (b) As a purchase return   (c) As proprietor's drawings   (d) As other income when determining net profit
22. A sole trader's income statement is used principally to establish ________. (a) the bank reconciliation difference   (b) cash in the till at every moment   (c) the number of shareholders   (d) profit or loss for a reporting period
23. The correct procedure for deriving cost of sales is to (a) subtract closing stock from purchases but ignore opening stock   (b) subtract purchases returns twice and treat carriage outwards as purchase cost   (c) add opening stock and net purchases, include carriage inwards, then subtract closing stock   (d) add opening and closing stock to turnover
24. A partnership profit of ₦90,000 is shared in the ratio 2:1 after adjustments. The larger share is (a) ₦60,000   (b) ₦30,000   (c) ₦75,000   (d) ₦45,000
25. A trader incorrectly includes carriage outwards in the trading account. The principal effect is to (a) increase cost of closing inventory necessarily   (b) leave gross profit unchanged   (c) understate gross profit   (d) overstate gross profit
26. Which statement correctly represents the accounting equation at the reporting date? (a) Cash = Capital + Sales only   (b) Assets = Liabilities + Equity   (c) Profit = Liabilities + Stock   (d) Assets = Revenue − Expenses
27. A credit purchase of ₦7,000 is correctly posted twice to both relevant accounts. The trial balance will (a) show a ₦7,000 debit excess   (b) have equal totals only if the supplier is paid   (c) still balance, although the transaction is duplicated   (d) show a ₦14,000 credit excess
28. In partnership accounting, a partner's drawings are ordinarily debited to the partner's ________. (a) bank charges account   (b) current or drawings account   (c) purchases returns account   (d) sales revenue account
29. Office salaries of ₦18,000 are owing at year-end. The year-end adjustment will (a) decrease salary expense and create a prepaid asset   (b) increase sales revenue and reduce liabilities   (c) reduce both liabilities and expenses   (d) increase salary expense and create an accrued liability
30. Gross profit is obtained by deducting ________ from net sales. (a) cost of goods sold   (b) capital introduced   (c) administrative salaries alone   (d) trade receivables
31. Insurance of ₦24,000 covers 12 months but only 9 months relate to the year. The expense is (a) ₦6,000   (b) ₦32,000   (c) ₦24,000   (d) ₦18,000
32. A trial balance is prepared to ________ before the financial statements are drawn up. (a) compute cash flow directly from stock figures   (b) prove that every ledger transaction is substantively correct   (c) check arithmetical equality of ledger debit and credit balances   (d) identify every omission in the accounts
33. A statement of financial position differs from an income statement because it (a) is prepared without any account balances   (b) reports assets, liabilities and equity at a point in time   (c) reports only cash receipts from customers   (d) measures gross profit for a whole period
34. The proper first step in correcting a suspected one-sided posting error is to (a) change Capital until totals agree   (b) trace the source entry and examine corresponding ledger postings   (c) remove unmatched balances from the report   (d) add an invented cash transaction
35. Which item is normally included when calculating cost of goods sold? (a) Carriage inwards on purchased stock   (b) Interest received   (c) Carriage outwards on customer deliveries   (d) Office stationery
36. An asset with book value ₦80,000 is revalued at ₦95,000 on admitting a new partner. Revaluation profit is ________. (a) ₦80,000   (b) ₦15,000   (c) ₦95,000   (d) ₦175,000
37. The main reason a partnership agreement states profit-sharing ratios is ________. (a) to remove any need for accounting records   (b) to make all drawings sales revenue   (c) to establish how agreed profits and losses are allocated   (d) to determine the bank's interest rate automatically
38. A firm owes ₦32,000 of electricity at year-end. In its statement of financial position, this is (a) a current liability   (b) a non-current asset   (c) owners' drawings   (d) sales revenue
39. Rent paid in advance of ₦9,000 relates to the next period. The current-period rent expense should be ________ by ₦9,000. (a) reduced   (b) treated as a bad debt   (c) increased   (d) reclassified as revenue
40. ________ appears in equity rather than as a liability owed to external suppliers. (a) bank overdraft   (b) owner's capital   (c) trade payables   (d) accrued electricity charge

SECTION B: THEORY (30 MARKS)
Instruction: Answer Question 1 and any other TWO questions. Each question carries 10 marks.

Question 1
(a) A trial balance has total debits ₦876,000 and credits ₦861,000. Determine the discrepancy. (3 marks)
(b) Explain why a transaction completely omitted from both sides will not be revealed by the trial balance and describe another error that might also remain hidden. (7 marks)

Question 2
(a) From opening stock ₦70,000, net purchases ₦280,000, carriage inwards ₦8,000, and closing stock ₦54,000, calculate cost of sales. (6 marks)
(b) If net sales are ₦425,000, compute gross profit. (4 marks)

Question 3
(a) A sole trader pays ₦48,000 insurance for twelve months, but nine months fall in the current period. Calculate expense and prepayment. (5 marks)
(b) Accrued wages of ₦16,000 were omitted. Explain the changes to profit and statement of financial position. (5 marks)

Question 4
(a) Two partners share net profit of ₦210,000 in the ratio 4:3, with no other appropriations. Calculate each share. (4 marks)
(b) When a new partner is admitted, an asset rises in book value from ₦90,000 to ₦114,000. Explain its treatment in the revaluation account. (6 marks)

Objective Marking Scheme
Question 1 – ✅ (b) not yet sold during the period
Question 2 – ✅ (a) ₦224,000
Question 3 – ✅ (b) ₦177,000
Question 4 – ✅ (c) ₦8,000
Question 5 – ✅ (a) ₦248,000
Question 6 – ✅ (d) ₦60,000
Question 7 – ✅ (a) ₦20,000
Question 8 – ✅ (b) Purchase of a long-lived delivery vehicle
Question 9 – ✅ (d) ₦165,000
Question 10 – ✅ (d) still agree although an account is misclassified
Question 11 – ✅ (c) profit appropriation process
Question 12 – ✅ (c) A single debit posting omitted for ₦6,000
Question 13 – ✅ (b) recognise a current asset for the unexpired benefit
Question 14 – ✅ (c) Completely omitting a transaction from both ledger accounts
Question 15 – ✅ (c) Agree on valuation of assets and liabilities and document capital and profit-sharing changes
Question 16 – ✅ (d) their normal account balances differ
Question 17 – ✅ (d) ₦56,000
Question 18 – ✅ (b) The limited partner's liability is ordinarily restricted to the agreed contribution subject to applicable rules
Question 19 – ✅ (a) ₦115,000
Question 20 – ✅ (a) loan repayable after five years
Question 21 – ✅ (d) As other income when determining net profit
Question 22 – ✅ (d) profit or loss for a reporting period
Question 23 – ✅ (c) add opening stock and net purchases, include carriage inwards, then subtract closing stock
Question 24 – ✅ (a) ₦60,000
Question 25 – ✅ (c) understate gross profit
Question 26 – ✅ (b) Assets = Liabilities + Equity
Question 27 – ✅ (c) still balance, although the transaction is duplicated
Question 28 – ✅ (b) current or drawings account
Question 29 – ✅ (d) increase salary expense and create an accrued liability
Question 30 – ✅ (a) cost of goods sold
Question 31 – ✅ (d) ₦18,000
Question 32 – ✅ (c) check arithmetical equality of ledger debit and credit balances
Question 33 – ✅ (b) reports assets, liabilities and equity at a point in time
Question 34 – ✅ (b) trace the source entry and examine corresponding ledger postings
Question 35 – ✅ (a) Carriage inwards on purchased stock
Question 36 – ✅ (b) ₦15,000
Question 37 – ✅ (c) to establish how agreed profits and losses are allocated
Question 38 – ✅ (a) a current liability
Question 39 – ✅ (a) reduced
Question 40 – ✅ (b) owner's capital

Theory Marking Scheme
Question 1
(a) ₦15,000 debit excess (3). [3 marks]
(b) Trial balance compares equal debit and credit totals and complete omission affects neither (4); error of principle or complete reversal still maintains equality (3). [7 marks]
Question 2
(a) 70,000+280,000+8,000−54,000=₦304,000 with correctly identified components (6). [6 marks]
(b) ₦425,000−₦304,000=₦121,000 (4). [4 marks]
Question 3
(a) Expense=48,000×9/12=₦36,000 (3); prepayment ₦12,000 (2). [5 marks]
(b) Expense increases ₦16,000 (2); profit/equity decreases ₦16,000 (1); accrued current liability increases ₦16,000 (2). [5 marks]
Question 4
(a) First 4/7×210,000=₦120,000; second 3/7×210,000=₦90,000 (2 each). [4 marks]
(b) Revaluation gain ₦24,000 (3); credit gain in revaluation and allocate to old partners in their agreed old profit-sharing ratio (3). [6 marks]