NECO 2023 Financial Accounting (Objective, Theory & Practice) Answers

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NECO FINANCIAL ACCOUNTING

ACCOUNTING OBJ
1-10: CECAEBBDEC
11-20: BBAEAABDDC
21-30: ABEBEACDAC
31-40: AAAABBDAEB
41-50: CCCACBADED
51-60: BBADDCDDBC

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SECTION A
(Answer Only TWO Questions From This Section)

(1a)
Bank Reconciliation Statement is a document that explains the differences between the balance in a company’s bank account and the balance in its accounting records, usually the general ledger. It helps identify discrepancies such as unrecorded transactions, errors, or timing differences between the bank’s records and the company’s records.

(1b)
(PICK ANY FIVE)

(i)Outstanding Checks: These are checks issued by the company but not yet presented to the bank for payment by the statement date. They reduce the cash book balance but are not yet reflected in the bank statement.

(ii)Deposits in Transit: These are cash or checks that have been recorded in the company’s cash book but haven’t yet been processed and added to the bank statement balance.

(iii)Bank Errors: Mistakes made by the bank, such as recording the wrong amount for a transaction, can lead to differences between the two balances.

(iv)Bank Reconciliation Timing: If the bank statement and the cash book are being reconciled on different dates, transactions occurring after the reconciliation date can cause differences.

(v)Dishonored Checks: Checks that were initially recorded as deposits in the cash book but were later returned by the bank due to insufficient funds or other reasons.

(vi)Direct Debits and Standing Orders: Automatic deductions from the company’s account, such as loan repayments or utility bills, might not be promptly recorded in the cash book.

(vii)Bank Charges and Interest: Sometimes, bank charges and interest earned on the account might be recorded differently in the cash book and bank statement.

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(2i)
Error of principal: Error of Principle is a type of accounting mistake that occurs when a transaction is recorded in the wrong category or account due to a fundamental misunderstanding or misapplication of accounting principles. This type of error affects the classification of the transaction, leading to inaccuracies in financial reporting.

(2ii)
Error of Compensation: Error of Compensation in accounting refers to a situation where two or more errors occur that counterbalance each other, resulting in the overall financial statements appearing accurate even though individual errors were made. These errors can cancel each other out, leading to an unintentional masking of the discrepancies.

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(2iii)
Error of omission: Error of Omission in accounting occurs when a transaction or data is completely left out or not recorded in the financial records. This omission can result in incomplete or inaccurate financial statements and reports. Errors of omission can happen due to oversight, negligence, or misunderstanding of the importance of recording certain transactions.

(iv)
Error of commission: Error of Commission in accounting refers to a mistake made while recording a transaction, typically involving an incorrect amount, account, or calculation. For example, if a company records a sales transaction but mistakenly enters the wrong amount for the sale, it would be an error of commission

(2v)
Error of Complete reversal of entries: Error of Complete Reversal of Entries in accounting occurs when the debits and credits of a transaction are reversed, resulting in the opposite effect of what should have been recorded. In other words, the account that should have been debited is credited, and vice versa. This type of error can lead to significant inaccuracies in the financial records.

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(3a)
(PICK ANY THREE)

(i)Donations and Contributions: Donations from individuals, corporations, foundations, and other entities form a significant source of income for non-profits. These funds can be unrestricted or designated for specific purposes.

(ii)Grants: Non-profits often receive grants from government agencies, private foundations, and international organizations to fund specific projects or initiatives. Grants can cover a wide range of areas, from education to healthcare to social services.

(iii)Membership Fees: Some non-profit organizations offer membership programs where individuals or entities pay a fee to become members. Membership fees can provide regular income and may include benefits like access to events, resources, or networking opportunities.

(iv)Fundraising Events: Non-profits organize fundraising events such as galas, charity auctions, walkathons, and benefit concerts. These events not only raise funds but also engage the community and promote the organization’s cause.

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(v)Earned Income: Some non-profits generate income by providing goods or services related to their mission. For instance, a museum might charge admission fees, or a charitable hospital might charge for medical services on a sliding scale.

(vi)Investment Income: Non-profit organizations often invest their funds in stocks, bonds, real estate, or other investment vehicles. The income generated from these investments can contribute to their financial sustainability

(3b)
(PICK ANY FIVE)

(i)The account doesn’t provide information about when specific transactions occurred. It only records cash flows during a given period, making it difficult to analyze the timing of financial activities.

(ii)The Receipts and Payments Account lacks the detailed breakdown that could help in assessing the efficiency of spending or identifying trends.

(iii) The account doesn’t provide information about liabilities or debts owed by the organization, which is essential for understanding its overall financial obligations.

(iv)Due to its focus on cash activities, the Receipts and Payments Account might not provide the depth of information needed for effective decision-making or strategic planning.

(v)The reciept and payment account doesn’t provide information about when specific transactions occurred. It only records cash flows during a given period, making it difficult to analyze the timing of financial activities.

(vi)The account might not adhere to Generally Accepted Accounting Principles (GAAP), which could be a concern when reporting to external parties or seeking transparency and accountability.

(3c)
(PICK ANY TWO)

(i)Income Taxes: Individuals and corporations pay income taxes based on their earnings and profits.

(ii)Corporate Taxes: Businesses are taxed on their profits and income generated from their operations.

(iii)Customs Duties: Taxes imposed on imported goods, helping to protect domestic industries and generate revenue.

(iv)Payroll Taxes: Taxes collected from employers and employees to fund programs such as Social Security, Medicare, and unemployment benefits.

(v)Value Added Tax (VAT): A consumption tax levied on the value added at each stage of production or distribution of goods and services.

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(4ai)
Source documents: Source documents are original records or pieces of evidence that provide information about financial transactions and business activities. These documents serve as the foundation for maintaining accurate accounting records and generating financial statements. They are crucial for ensuring transparency, accountability, and the ability to trace and verify transactions.

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(4aii)
Debit note: Debit note is a document issued by a buyer to inform a seller about a debit entry that needs to be made in their accounts payable. It’s commonly used to correct errors in invoices, return goods to a supplier, or make adjustments to the amount owed. debit note is a tool used in business transactions to rectify errors, make adjustments, and maintain accurate financial records between buyers and sellers.

(4aiii)
Prime entry: Prime entry, also known as original entry, refers to the initial recording of a financial transaction or event in the accounting books. It is the first step in the accounting process and involves entering transaction details directly into the ledger or accounting system. prime entry is the foundational step in the accounting process, where raw transaction data is recorded directly from source documents

(4b)
(PICK ANY TWO)
(i) Government accounting focuses on accountability, transparency, and stewardship of public funds. WHILE Private sector accounting focuses on profitability and shareholder value.

(ii) In government accounting , Stakeholders include citizens, taxpayers, elected officials, regulatory agencies, and oversight bodies WHILE Private sector accounting, Stakeholders include shareholders, investors, creditors, customers, and employees.

(iii) Government entities derive revenue from taxes, fees, grants, and other public sources. WHILE Private companies generate revenue from sales, services, investments, and other business activities.

(iv) Government entities operate under budgetary constraints set by legislative bodies. WHILE Private companies develop budgets to plan and control business operations, aiming to optimize profitability and growth.

(v) Government accounting follows standards and guidelines set by governmental accounting bodies WHILE Private sector accounting adheres to generally accepted accounting principles (GAAP)

(4c)
(PICK ANY TWO)
(i) Cash Account
(ii) Inventory Account
(iii) Property, Plant, and Equipment (PP&E) Account
(iv) Accounts Receivable Account
(v)Accounts Payable Account

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