UTME CBT FREE Practice Test – Principles of Accounts (Questions with Answers and Explanations)

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Motor van – N 3,600;
Premises - N 5,000;
Loan from R. Nwaeke - N 1 000;
Cash at bank - N 2,560;
Cash in hand – N 3,250
Debtor – N 6,910.

Calculate the capital figure.

A. N 9,650     B. N 8,650     C. N 7,850     D. N 6,850

The conversion of a partnership business into a limited liability company affords the _____

A. general partners the chance of enjoying the limited liability protection
B. limited liability partners the chance of enjoying the limited liability protection
C. creditors the chance of enjoying the limited liability protection
D. debtors the chance of enjoying the limited liability protection.

Capital and revenue expenditure of government are usually accounted for under funds which include ______

A. personal advances, technical and public funds
B. technical special trust and commercial funds.
C. personal advances treasury clearance and special trust funds.
D. commercial loans and treasury clearance funds.

What is the ledger entry for the sale of plant and machinery on credit to Wilson?

A. Credit Sales Account and debit Cash Account
B. Credit Plant and Machinery Account and debit Wilson’s Account
C. Credit Sates Account and debit Wilson’s Account
D. Credit Plant and Machinery Account and debit Cash Account

An advantage of the use of the voucher system is that it ______

A. reduces the number of cheques that will be written during any given period
B. provides a highly flexible system for handling unusual transaction
C. provides a comprehensive record of business done with particular suppliers
D. ensures that every expenditure ¡s reviewed and verified before payment is made.

Which of the following accounts has a credit balance?

A. capital    B. Cash    C. Drawings     D. Premises

To compute gearing ratio, divide ______

A. profit by capital employed
B. current assets by current liability
C. profit by total assets
D. long term debt by equity capital.

A charitable club has the following figures:

Subscriptions received in 1991 2,800
Subscriptions unpaid in 1990 300
Subscriptions due 1991 150

How much should be charged to the Income and expenditure of this club as subscription for 1991?

A.  N 2,530      B. N 2,680      C. N 2,830       D. N 2,980

The process of allocating the cost of an intangible asset over its useful life is known as ______

A. depreciation       B. extraction      C. depletion       D. amortization

The fixed amount of money given to a petty cashier at the beginning of a period is called _____

A. imprest petty cash    B. float    C. cash advance    D. cash.

The understatement of closing value of work-in-process would have the effect of ______

A. understating cost of goods manufactured
B. overstating prime cost of goods manufactured
C. overstating cost of goods manufactured |
D. understating prime cost of goods manufactured.


Net profit 25,000
Cost of sales 25,000
Sales 85,000

Determine the total expenses

A. N 45,000    B. N 35,000    C. N 25.000    D. N 15,000

The following information is provided for Amusa Company Ltd, a manufacturer:

Prime cost 999,000
Manufacturing overhead 132,000
Closing work in progress 25,000
Work in progress at close 75,000
Value of finished goods transferred to the Trading Account 1,116,000

If included in the manufacturing overhead were rents of 5,000 paid in advance, what is the opening work in progress for the period?

A. N 85,000    B. N 80,000    C. N 70,000       D. N 65,000

The manufacturing cost can be classified based on _____

A. timing of charges, degree of averaging and size of capital
B. degree of averaging, ease of traceability and timing of charges
C. degree of averaging, size of floor space occupied and cost accounts
D. number of employees, timing of charges and management style.

When the invoice of a customer is overcast, the supplier will send to him a ______

A. cheque.    B. payment voucher.    C. debit note.    D. credit note

Sobande Incorporation acquired a machine that involved the following expenditures and related factors.

Gross invoice price 15,000
Sales tax 900
Purchases discount taken 300
Freight 750
Assembly of machine 500
Installation of machine 800
Assorted spare parts for future use 1,200
Turning and adjusting machine 700

What is the initial accounting cost of the machine?

A. N 19,550    B. N 18,950    C. N 18,350    D. N 17,500

The purchases ledger .control account of a company had an opening balance of N 45,600 credit and closing balance of N 72,600 credit. The company made payments of N 437,000 to credit suppliers during the period; and had discount received of N 18,600 on this account. What were the credit purchases for the period?

A. N 509,600       B. N 482,600       C. N 428,600       D. N 418,400

On 1st January, 1993, Lobo Company purchased equipment for N 18,000. It uses straight-line depreciation and a N 2,000 salvage value. On 31st December, 1996, it sells the equipment for N 8,000. In recording this sale, it should reflect ______

A. N 10,000 loss    B. N 2,000 loss    C. N 6,000 gain    D. N 8,000 gain.

Which of the following is a strong feature of partnership?

A. The life of the partnership is generally assumed to be indefinite
B. The owners are liable personally for all debts of the business
C. The transfer of ownership interest is frequent and easy to accomplish
D. The partnership is complex to form because of many legal and reporting requirements.


Direct material 10,000
Direct labour 5,000
Direct expenses 2,000
Factory overhead 4,000

What is the prime cost?

A. N 21,000    B. N 17,000    C. N 15,000    D. N 6,000

Yakubu (Nigeria) Limited.(Extract Balance sheet as at 31st December, 1993 Authorized issued)

  N N N
Ordinary shares 100,000 80,000  
10% preference shares 30,000 20,000  
Shares premium   20,000  
Profit and loss A/C   13,000  
Trade creditors   30,000  
Accruals   5,000  
Stock     10,000
Debtors     40,000
Bank     25,000

Equity shareholders’ fund is _______

A. N 133,000       B. N 120,000       C. N 113,000       D. N 100,000

Goods stolen at the branch is debited to ______

A. Defalcations Account.
B. Branch Stock Account.
C. Branch Adjustment Account.
D. Branch Debtors Account

The principal use of control accounts is to _____

A. localize errors within the ledgers
B. prevent fraud
C. increase sales
D. record assets and liabilities.

Dan and Baker are in partnership with capital of N 50,000 and N 30,000 each. The partnership agreement provides that

(i) Profit be shared in the ratio of capital
(ii) Baker be paid a salary of N 8,000
(iii) Both partners earn interest on capital at 6% p.a.
(iv) Both partners pay interest on drawings at 6% p.a.

At the end of the year, Dan drew N 15,000 while Baker drew N 14,000 in four equal installments on 31/3/, 30/9 and 31/12. The net profit for the year was N 48,000. N 5,000 is to be written off the Goodwill account.

What is the interest on the drawing by Baker?

A. N 210    B. N 315    C. N 450    D. N 840

Shares issued to a vendor in payment of business purchased would require a debit to _____

A. cash account and credit to share capital account
B. share capital account and credit to vendors account
C. vendor’s account and credit to share capital account
D. share capital account and credit to cash account

Which of the following ratios gives an idea of the liquidity of a firm?

A. Turnover ratio      B. Quick ratio       C. Debt ratio      D. Dividend yield.

The need for changes in accounting theory in Nigeria was influenced by the _____

A. dynamics of commercialisation and privatisation policies
B. growth in size of business units
C. introduction of the structural adjustment programme
D. inconvertibility of the nation’s currency.

The following represents extracts from the trading account of a retail outlet for a given month:

Opening stock - N 2,400
Closing stock - N 6,400
Other expenses - N 2,000
Sales - N 11,000
Profit - N 900

What is the purchase figure for the month?

A. N 13,000       B. N 12,100       C. N 12,000       D. N 11,200

Which of the following conditions best represents the net effect of discount allowed on credit sales on the accounts of a business?

A. Decrease in the closing balance of sales ledger control account
B. Increase in net profit.
C. Increase in the value of sales.
D. Decrease in the value of purchases in the trading account.

Arninu and sons credit purchases (Extract) as at February 1996.

Feb. 1 balances 40,000
Debit balances 1,000
Feb. 26 Purchases journal 500,000
Returns outwards journal total 50,000
Cheques paid to suppliers 400,000
Promissory notes sent to suppliers 30,000
Discount received from suppliers 8,000
Credit balances in the purchases ledger set Off against debit balances in the sales ledger 2,000

What is the balance c/d in the purchases ledger control account?

A. N 2,000    B. N 8,000    C. N 40,000    D. N 49,000

Partners Current Account
  Musa Kalu Lawal   Musa Kalu Lawal
  N N N   N N N
Interest on Capital 10,000 8,000 8,000 Interest drawings 800 600 300
Drawings 18,000 10,000 6,000 Share of profit 26,200 13,100 13,100
  28,800 18,000 14,000 Balance c/d 1,800 4,300 540
Balance c/d 1,800 4,300 540        

The current closing balance of Lawal’s current account is _______

A. N 21,100 debit    B. N 14,740 debit    C. N 14,740 credit    D. N 540 credit.

The statement of affairs prepared from incomplete records can be descried as ______

A. the summary of all the business transactions of the trader ascertained by the accounts
B. a balance sheet at a particular date showing the assets and liabilities of the business
C. a schedule of all business ventures entered into for the period to which the records relate
D. the statement that shows the profit or loss made during the period.

The accounting concept that allows the cost of kitchen cutlery to be expensed, though it will be used for more than one year is ______

A. materiality.    B. accrual.    C. going concern.    D. business entity

Which of the following expenses is allocated according to the floor area?

A. Wages and salaries    B. Rent and rates    C. Canteen expenses    D. Discount allowed

The effect of the payment of a liability is that it ______

A. increases both assets and liabilities
B. increases assets and decreases liabilities
C. decreases assets and increases liabilities
D. decreases both assets and liabilities.

The difference between the factory cost of production and the prime cost of production is ______

A. direct materials  B. direct labour   C. selling expenses   D. overhead.

The starting point for the production of accounts from incomplete records is to ______

A. ascertain the total sales
B. computes the opening stock of goods sold
C. verify the total purchases
D. prepares an opening statement of affairs.

Which of the following is not revealed by a firm’s accounting records?

A. Profit of a period     B. Quality of labour force     C. Credit worthiness     D. Value of assists

I. A retailer, when fixing his selling price, adds one-quarter to the cost of the article.
II. The expenses of the retailer’s 10% of his-sales.
III. The total sales is N 23,000.
IV. He turned over his stock five times ¡n the year.

Compute the average amount of stock in hand at cost price.

A. N 3,860    B. N 3,806    C. N 3,680    D. N 3,086


Prime cost 220,000
Factory cost 32,000
Work in progress at beginning 25,000
Work in progress at close 19,000
Administrative expenses 21,000

Determine the production cost.

A. N 296,000    B. N 277,000    C. N 258,000    D. N 246,000

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