2024 NECO FINANCIAL ACCOUNTING: 2025 NECO Financial Accounting (Account) Verified Answers (5464)

(1a)

(PICK ANY THREE)

(i) Decreased Sales Volume: A drop in the number of units sold can lead to lower gross revenue, thereby reducing gross profit.

(ii) Increased Cost of Goods Sold: Rising costs of raw materials, labor, or manufacturing can increase COGS, reducing the gross profit margin.

(iii) Price Reduction: Lowering the selling price of goods without a corresponding decrease in costs can diminish gross profit.

(iv) Poor Inventory Management: Overstocking or understocking can lead to increased storage costs, wastage, or lost sales, negatively impacting gross profit.

(v) Market Competition: Increased competition can force a business to lower prices or incur higher marketing expenses, reducing gross profit.

(1b)

(PICK ANY FIVE)

(i) Initial Cost

(ii) Useful Life

(iii) Residual Value

(iv) Depreciation Method

(v) Asset Usage

(vi) Repairs and Maintenance Costs

(1c)

(PICK ANY THREE)

(i) Wear and Tear

(ii) Obsolescence

(iii) Natural Factors

(iv) Accidents and Damage

(v) Legal and Regulatory Changes

(2i)

Proforma Invoice: A proforma invoice is a preliminary invoice sent to the buyer before the shipment of goods, indicating the weight, value, and other details of the goods to be shipped. It’s used to obtain import/export licenses, open letters of credit, and for customs purposes. Unlike a standard invoice, it is not a request for payment but rather a statement of commitment that helps in planning and budgeting for the buye

(2ii)

Goodwill: Goodwill is an intangible asset that arises when a business is purchased for more than the fair value of its identifiable net assets. It represents the value of a company’s brand, customer relationships, employee relations, and other factors that contribute to its earnings potential beyond its tangible assets. Goodwill is recorded on the balance sheet and is subject to impairment testing but is not amortized.

(2iii)

Consignee: A Consignee is the person or entity to whom goods are shipped and delivered. In the context of consignment, the consignee is responsible for selling the goods on behalf of the consignor (the owner of the goods). The consignee typically does not own the goods but holds them in trust until they are sold, at which point the proceeds are shared as agreed.

(2iv)

Preference Share: A Preference Share is a type of equity security that entitles the holder to a fixed dividend before any dividends are paid to common shareholders. Preference 'copied from e x a m p l a z a . c o m free' shares usually do not carry voting rights, but they have a higher claim on assets and earnings than common shares. In the event of liquidation, preference shareholders are paid out before common shareholders.

(2v)

A Three Column Cash Book is an accounting record that tracks all cash and bank transactions in a business, along with discounts. It has three main columns for each side (debit and credit): cash, bank, and discount. This cash book provides a comprehensive view of the business’s cash flows, bank transactions, and any discounts allowed or received, making it a vital tool for managing liquidity and financial transactions.

(3a)

(PICK ANY FIVE)

(i) Errors of Omission: When a transaction is completely omitted from the accounting records. For example, if both the debit and credit entries for a sale are not recorded, the trial balance will still balance.

(ii) Errors of Commission: When an entry is made to the wrong account but on the correct side. For instance, posting a receivable to the wrong customer account will not affect the trial balance.

(iii) Errors of Principle: When a transaction violates fundamental accounting principles. An example is recording a capital expenditure as a revenue expense. This error affects the financial statements but not the trial balance.

(iv) Compensating Errors: When two or more errors cancel each other out. For example, an overstatement in one account might be offset by an understatement in another.

(v) Errors of Original Entry: When both the debit and credit sides of a transaction are incorrectly recorded with the same incorrect amount. For example, recording a sale of N500 as N50 in both the sales and cash accounts.

(vi) Errors of Reversal: When the debit and credit entries of a transaction are reversed. For instance, recording a payment to a creditor by debiting the creditor’s account and crediting the bank account.

(vii) Errors of Duplication: When a transaction is recorded more than once. If both instances of the duplicate entry are equal, 'copied from e x a m p l a z a . c o m free' the trial balance will still balance.

(3b)

(PICK ANY FIVE)

(i) Raw Material Costs

(ii) Direct Labor Costs

(iii) Manufacturing Overheads

(iv) Depreciation of Manufacturing Equipment

(v) Indirect Materials

(vi) Indirect Labor

(vii) Work-in-Progress Costs