UTME CBT FREE Practice Test – Principles of Accounts

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The document that ¡s used to acknowledge the acceptance of the return of goods by the seller from the buyer is known as _____

A. credit note    B. debit note    C. invoice       D. voucher.

The price paid by an acquiring company is the _____

A. Premium    B. Purchase consideration    C. Sales consideration    D. Conversion fee.

Mr. White acquired Mr. Black’s business for GHc 410,000. The total assets were GHc 670,000 and liabilities amounted to GHc 320,000.

How much was paid for goodwill?

A. GHc 350,000    B. GHc 260,000    C. GHc 90,000    D. GHc 60,000

Which of the following is the equation for determining net profit or Loss from the records of a firm?

A. Closing Capital - Drawings- Capital Introduced
B. Opening Capital + Drawings - Closing Capital
C. Closing Capital + Opening Capital - Drawings
D. Closing Capital Drawings - Opening Capital

Which of the following is a source of revenue for a local government?

A. Personal income tax     B. Company registration fees     C. Royalties     D. Market tolls

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 correct closing balance for Musa’s current account is ______

A. N 36,200 credit    B. N 16,600 credit   C. N 16,600 debit    D. N 1,800 credit

Which of the following indicate that a partnership business ¡s in place?

(i) There is a business
(ii) It is run commonly by partners
(iii) It has profit making in view
(iv) Partners’ liability is limited

A. I and II only    B. I, II and III only    C. I, III and IV only    D. II, III and IV only.

As part of the initial investment, a partner contributes office equipment that originally cost N 20,000 and on which provision for depreciation of N 12,500 had been recorded. If the partners agree on a valuation of N 9,000 for the equipment, what amount should be debited to the office equipment account?

A. N 7,500    B. N 9,000   C. N 121,500    D. N 20.000

Hospital buildings 200,000
Drugs 180,000
Hospital beds and mattresses 40,000
Doctors’ and nurses’ salaries 120,000
Administrative expenses 50,000

Capital expenditure is _______

A. N 420,000        B. N 380,000        C. N 240,000       D. N 200,000

To record the transfer of stock from one department to another the correct entry would be to debit _____

A. goods outwards and credit goods inwards
B. merchandise account and credit department stock account
C. department transferring and credit department receiving
D. department receiving and credit department transferring.

Hospital buildings 200,000
Drugs 180,000
Hospital beds and mattresses 40,000
Doctors’ and nurses’ salaries 120,000
Administrative expenses 50,000

Recurrent expenditure is ______

A. N 390,000       B. N 360,000       C. N 350,000        D. N 170,000

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 events increases a corporation’s shareholders’ equity?

A. Donation of shares out of the corporation’s own stock to the corporation
B. The corporation’s purchase of treasury stock
C. Shares of previously subscribed stock to subscribing stockholders
D. A municipality donation of land to the corporation

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 following is a draft balance sheet as at 31\12\92

  Cost Depreciation Net
  N N N
Fixed Assets (Tan) 200,000 100,000 100,000
Current Assets      
Stock in trade   10,000  
Trade debtors   4,500  
Cash at bank   22,800  
Cash in hand   9,700  
Trade creditors   ?  
Capital   ?  

Trade creditor’s account was maintained at 25% to the capital

What was in the capital account as at 31/12/92?

A. N 76000      B. N 83,000       C. N 17,600       D. N 117,650

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.

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 difference between a trading account and a manufacturing account is that while manufacturing account _______

A. has no particular period, the trading account has
B. does not consider cost of goods involved, the trading account does
C. is concerned with the cost of production, trading account is not.
D. is not concerned with stock of raw materials, the trading account is.

Goods returned to a supplier is ______

A. debited to Returns outwards account.
B. credited to Returns outwards account
C. debited to Returns inwards account
D. credited to Returns inwards account

A provision for bad debt account had N 33,800 at the beginning of the year and N 1,220 at the close of the year. If bad debts are calculated at the rate of 1/20 % of annual credit sales, what was the credit sales for the period?

A. N 2,100,000   B. N 844,400   C. N 840,000   D. N 500,000

The basic role of accounting is to ______

A. detects fraud.
B. attests to financial statements
C. measure performance
D. protect shareholders


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

Which of the following are sources of revenue to state governments in Nigeria?

I. Statutory allocation.
II. Fines from customary courts.
III. Petroleum tax.
IV Income tax.

A. I and II only.    B. II and III only.    C. I and IV only.    D. III and IV only.

The document which sets out the internal arrangement for the proper management of a company is the _______

A. prospectus.
B. article of association.
C. memorandum of association.
D. certificate of incorporation

Granada Corporation has net assets of N 600,000 and contributed capital of N 180,000. The corporation has N 30,000 shares of common stock outstanding with no preferred stock: This suggests that the corporation has _____

A. a book value of 14 per share
B. a book value of 20 per share
C. a deficit of N 420,000
D. retained earnings of N 600,000.

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.

Subscriptions in arrears are _____

A. credited to the income and expenditure account and shown as a liability in the balance sheet
B. debited to the income and expenditure account and shown as an asset in the balance sheet
C. credited to the income and expenditure account and shown as an asset in the balance sheet
D. debited to the income and expenditure account and shown as a liability in the balance sheet

The factory cost of goods produced ¡s made up of ______

A. prime cost and factory overhead
B. prime cost and office overhead
C. raw materials consumed and fixed cost
D. raw materials and administrative overhead.

The instruments that are general when firms enter into business transactions with others are called ______

A. purchases documents
B. journals
C. source documents
D. invoices.

ASSURE Edu Services Balance Sheet (Extract) as at 31st December, 1997.

  N   N
Paid up capital 200,000 Fixed assets 300,000
Share premium 15,000    
Profit & Loss a/c 60,000 Investments 180,000
Long-term loan 180,000 Stock 28,000
    Debtors 90,000
Creditors 200,000 Provision (3,000) 87,000
Other current liabilities 100,000 Cash 60,000
    Bank 100,000
  755,000   755,000

Determine the owners’ equity.

A. N 200,000    B. N 215,000    C. N 275,000    D. N 755,000


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

Which of the following accounts has a credit balance?

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

Alabede (Nig.) Limited issued 50,000 ordinary shares, 1 each at a market value of N 2.50 each. The share premium is ______

A. N 125,000    B. N 100,000    C. N 75,000    D. N 50,000.

The accounting concept that assumes that a business will continue operating for an indefinite period is ______

A. business entity.    B. going concern.    C. consistency.    D. duality

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.

Which of the following statements is correct about the head office current account and the branch current account?

A. Both always have debit balances.
B. Both always have credit balances.
C. The head office current account has a credit balance while the branch current account has a debit balance.
D. The head office current account has a debit balance while branch current account has a credit balance.

If goods are invoiced to the branch at cost and the invoice per value is N 2,000 with 5% discount rate cash remitted to the head office at cost and the invoice per value ______

A. N 2,100    B. N 2,000    C. N 1,900    D. N 100

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

The contribution margin on a job is the _______

A. Gross profit
B. Net profit
C. Excess of sales revenue over variable costs
D. Difference between fixed and variable cost.


Capital at the beginning 20,000
Drawings 3,000
Capital at end 30,000
New capital introduced 8,000

What is the profit for the period?

A. N 4,000    B. N 5,000    C. N 6,000    D. N 8,000

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