Frequently Asked Questions About This Topic
What are the likely NECO 2026/2027 Accounting questions?
How do I pass NECO Accounting with an A grade?
What topics does NECO Accounting cover for 2026/2027?
Introduction
Accounting is one of the most scoring-friendly subjects on the NECO paper for Commercial students. If you understand the rules and practice the formats, you will find that the marks come naturally. This subject tests your understanding of financial records, the double-entry system, trial balance, final accounts, bank reconciliation, and partnership accounts. Seventy marks and above is absolutely within reach for any student who puts in regular, structured practice. This article provides 50 objective questions with correct answers and 5 full theory questions with worked answers. Read every explanation, not just the final answer.
NECO Accounting Syllabus Breakdown for 2026/2027
NECO Accounting covers: Book-keeping and accounting concepts. Double-entry system and ledger accounts. Trial balance. Trading and profit and loss account. Balance sheet. Bank reconciliation statement. Control accounts. Partnership accounts. Club accounts. Single entry and incomplete records. Accounting ratios. Depreciation methods including straight line and reducing balance. NECO theory questions almost always include at least one full set of final accounts or a bank reconciliation statement.
50 Objective Questions and Answers
1. The double-entry principle states that every transaction has:
A. One entry
B. Two equal and opposite entries ✓
C. Three entries
D. No entry
2. The trial balance is used to:
A. Prepare bank statements
B. Check the arithmetic accuracy of ledger entries ✓
C. Calculate profit
D. Show the owner’s capital
3. Which of the following is an asset?
A. Loan from bank
B. Trade creditors
C. Motor vehicle ✓
D. Owner’s drawings
4. Gross profit is calculated as:
A. Net sales minus cost of goods sold ✓
B. Total revenue minus all expenses
C. Sales minus closing stock
D. Net profit plus expenses
5. A credit entry in a personal account means:
A. The person owes money to the business
B. The business owes money to the person ✓
C. The account is closed
D. A purchase has been made
6. Depreciation is the:
A. Increase in the value of an asset
B. Decrease in the value of a fixed asset over time ✓
C. Cost of buying a new asset
D. Profit from selling assets
7. The straight-line method of depreciation gives:
A. A decreasing charge each year
B. A constant charge each year ✓
C. An increasing charge each year
D. No charge in the final year
8. In a balance sheet, current liabilities include:
A. Long-term loans
B. Motor vehicles
C. Bank overdraft ✓
D. Capital
9. A bank reconciliation statement reconciles:
A. The cashbook balance with bank statement balance ✓
B. Assets with liabilities
C. Purchases with sales
D. Income with expenditure
10. The accounting equation is:
A. Assets = Liabilities + Capital ✓
B. Assets = Capital – Liabilities
C. Capital = Assets + Liabilities
D. Liabilities = Assets + Capital
11. When goods are returned to a supplier, the account debited is:
A. Purchases returns ✓
B. Sales returns
C. Supplier’s account
D. Cash account
12. The document sent to a customer to inform them of goods returned is a:
A. Invoice
B. Debit note
C. Credit note ✓
D. Remittance advice
13. Goodwill in a partnership is:
A. Cash at the bank
B. An intangible asset representing reputation and customer loyalty ✓
C. A type of liability
D. A capital account entry
14. Outstanding expenses in a balance sheet appear as:
A. Current assets
B. Fixed assets
C. Current liabilities ✓
D. Long-term liabilities
15. Which of the following is NOT a book of prime entry?
A. Sales journal
B. Purchases journal
C. Ledger ✓
D. Cash book
16. A sole trader’s capital increases when:
A. More drawings are made
B. A net loss is recorded
C. A net profit is made ✓
D. Expenses increase
17. Prepaid expenses are classified as:
A. Current liabilities
B. Current assets ✓
C. Fixed assets
D. Long-term liabilities
18. The reducing balance method of depreciation charges:
A. A constant amount each year
B. A higher amount in early years ✓
C. A lower amount in early years
D. Zero depreciation in the first year
19. A debenture is:
A. An ordinary share
B. A preference share
C. A long-term loan to a company ✓
D. A type of bank account
20. In partnership accounts, the appropriation account deals with:
A. Day-to-day trading activities
B. How profit is divided among partners ✓
C. The calculation of gross profit
D. The recording of assets
21. Carriage inwards is charged to:
A. Trading account ✓
B. Profit and loss account
C. Balance sheet
D. Capital account
22. If opening stock is N10,000, purchases are N40,000, and closing stock is N8,000, what is the cost of goods sold?
A. N42,000 ✓
B. N48,000
C. N50,000
D. N38,000
23. Sales ledger control account records:
A. All transactions with suppliers
B. All transactions with trade debtors ✓
C. Cash sales only
D. Fixed asset movements
24. Which of the following would NOT appear in the trading account?
A. Sales
B. Opening stock
C. Rent expense ✓
D. Carriage inwards
25. A bank overdraft appears in the balance sheet under:
A. Current assets
B. Fixed liabilities
C. Current liabilities ✓
D. Capital reserves
26. The purpose of a petty cash book is to:
A. Record all large payments
B. Record small everyday cash expenses ✓
C. Replace the main cash book
D. Calculate gross profit
27. In a receipts and payments account for a club:
A. Only income is recorded
B. Only expenses are listed
C. All cash received and paid is recorded ✓
D. Only capital items appear
28. Which of the following errors does NOT affect the trial balance?
A. Error of transposition
B. Error of omission ✓
C. Error of principle
D. Error of commission
29. If a machine costs N50,000 and has a salvage value of N5,000 with a useful life of 5 years, the straight-line depreciation is:
A. N9,000 ✓
B. N10,000
C. N8,000
D. N11,000
30. The balance sheet equation can also be written as:
A. Capital = Assets – Liabilities ✓
B. Liabilities = Capital + Assets
C. Assets = Capital x Liabilities
D. Net profit = Capital + Assets
31. Carriage outwards is charged to:
A. Trading account
B. Profit and loss account ✓
C. Balance sheet assets
D. Capital account
32. Partners are entitled to a salary in a partnership when:
A. They all work equally
B. The partnership agreement provides for it ✓
C. The profit is too small
D. They demand it from customers
33. An accrued expense is one that has been:
A. Paid in advance
B. Incurred but not yet paid ✓
C. Received but not earned
D. Paid twice by mistake
34. The purchases day book records:
A. Cash purchases
B. Returns inwards
C. Credit purchases of goods for resale ✓
D. All expenses
35. Which of the following is a source document?
A. Trial balance
B. Profit and loss account
C. Invoice ✓
D. Balance sheet
36. A provision for bad debts is created to:
A. Write off all debtors
B. Anticipate possible future losses from debtors ✓
C. Increase the net profit
D. Reduce the capital account
37. Net profit is calculated as:
A. Gross profit minus expenses ✓
B. Total sales minus cost of sales
C. Capital minus liabilities
D. Total assets minus total liabilities
38. In partnership, interest on drawings is:
A. A gain to the partnership ✓
B. A loss for the partnership
C. Credited to the partners’ current accounts
D. Added to gross profit
39. Stock turnover ratio measures:
A. How quickly stock is converted to sales ✓
B. The total value of stock on hand
C. The difference between opening and closing stock
D. The profit on each unit sold
40. When a cheque issued by the business has not yet been presented at the bank, it is called:
A. A stale cheque
B. An outstanding cheque ✓
C. A dishonoured cheque
D. A bank charge
41. The debtors ledger control account is also known as:
A. Purchases ledger control
B. Sales ledger control ✓
C. Cash ledger
D. General ledger
42. Which financial statement shows a business’s financial position at a specific date?
A. Income statement
B. Cash flow statement
C. Balance sheet ✓
D. Trading account
43. A credit balance in a partner’s current account means:
A. The partner owes the firm money
B. The firm owes the partner money ✓
C. The partner has withdrawn too much
D. The capital account is overdrawn
44. Discount allowed is posted to:
A. Debit of discount allowed account and credit of debtors account ✓
B. Credit of discount allowed account and debit of debtors account
C. Debit of cash account
D. Credit of creditors account
45. Which of the following is an example of a revenue expenditure?
A. Purchase of a delivery van
B. Building extension
C. Repair of existing machinery ✓
D. Purchase of land
46. The imprest system in petty cash means:
A. Petty cash is unlimited
B. The petty cashier is given a fixed float that is regularly restored to the same level ✓
C. All payments are made from the main cash book
D. Petty cash records are kept weekly
47. Goodwill arising on admission of a new partner is:
A. Debited to new partner and credited to old partners’ capital accounts ✓
B. Credited to new partner
C. Ignored completely
D. Always sold to an outsider
48. An increase in provision for bad debts is charged to:
A. Trading account
B. Balance sheet assets
C. Profit and loss account ✓
D. Capital account
49. Returns inwards reduce:
A. Purchases
B. Sales ✓
C. Capital
D. Expenses
50. Which of the following accounting errors inflates profit?
A. Understating sales
B. Understating expenses ✓
C. Overstating expenses
D. Omitting closing stock
5 Theory Questions with Full Worked Answers
Question 1: From the following information, prepare a Trading and Profit and Loss Account for the year ended 31 December 2025: Sales N250,000. Opening stock N20,000. Purchases N130,000. Closing stock N15,000. Carriage inwards N5,000. Wages N18,000. Rent N12,000. Discount received N3,000. Bad debts N2,000.
Answer:
Trading Account for the year ended 31 December 2025. Debit side: Opening stock N20,000. Add purchases N130,000. Add carriage inwards N5,000. Cost of goods available = N155,000. Less closing stock N15,000. Cost of goods sold = N140,000. Gross profit = N250,000 minus N140,000 = N110,000. Profit and Loss Account. Gross profit brought down N110,000. Add discount received N3,000. Total = N113,000. Less expenses: Wages N18,000. Rent N12,000. Bad debts N2,000. Total expenses = N32,000. Net profit = N113,000 minus N32,000 = N81,000. Always present final accounts in the standard two-column format in your answer booklet. Label each account clearly and include the period.
Question 2: Explain what a bank reconciliation statement is and prepare a bank reconciliation statement from the following data: Cashbook balance N45,000. Unpresented cheques N8,000. Outstanding lodgements N5,000. Bank charges not in cashbook N1,000.
Answer:
A bank reconciliation statement is a document prepared to explain the difference between the balance shown in a business’s cashbook and the balance shown on the bank statement for the same date. These two figures often differ because of timing differences such as outstanding cheques or lodgements not yet processed. Adjusted cashbook balance: Starting cashbook balance N45,000. Less bank charges N1,000. Adjusted cashbook balance = N44,000. Bank Reconciliation Statement: Balance per bank statement = N44,000 + N8,000 (unpresented cheques) minus N5,000 (outstanding lodgements) = N47,000. Verify this by working backward. The statement confirms that the adjusted balances agree when timing differences are accounted for.
Question 3: What is depreciation? Explain the straight-line method and the reducing balance method with an example.
Answer:
Depreciation is the systematic reduction in the book value of a fixed asset due to wear and tear, passage of time, or obsolescence. It is charged to the profit and loss account as an expense. Straight-line method: The same amount of depreciation is charged each year. Formula: (Cost minus Residual value) divided by Useful life. Example: Asset costs N50,000. Residual value N5,000. Useful life 5 years. Annual depreciation = (50,000 minus 5,000) divided by 5 = N9,000 each year. Reducing balance method: Depreciation is calculated on the reducing book value each year. Example: Asset costs N50,000. Depreciation rate 20%. Year 1: 20% of N50,000 = N10,000. Book value = N40,000. Year 2: 20% of N40,000 = N8,000. Book value = N32,000. This method charges more in early years, which suits assets that lose more value when they are new.
Question 4: A and B are in partnership sharing profits in the ratio 3:2. During the year ended 31 December 2025, the net profit before appropriation was N100,000. A receives a salary of N15,000. Both partners receive 5% interest on capital. A’s capital is N40,000 and B’s capital is N30,000. Prepare the appropriation account.
Answer:
Partnership Appropriation Account for the year ended 31 December 2025. Net profit N100,000. Less: Partner’s salary (A) N15,000. Interest on capital: A = 5% of N40,000 = N2,000. B = 5% of N30,000 = N1,500. Total appropriated = N15,000 + N2,000 + N1,500 = N18,500. Remaining profit to be shared = N100,000 minus N18,500 = N81,500. Share of profit: A gets 3/5 of N81,500 = N48,900. B gets 2/5 of N81,500 = N32,600. Summary of A’s total: Salary N15,000 + Interest N2,000 + Share of profit N48,900 = N65,900. B’s total: Interest N1,500 + Share of profit N32,600 = N34,100. Check: N65,900 + N34,100 = N100,000. Correct.
Question 5: State FIVE errors that do not affect the trial balance and explain how each can be corrected.
Answer:
Error of omission: A transaction is completely left out of the books. Both the debit and credit entries are missing, so the trial balance still balances. Correction: Enter the missing transaction with a journal entry. Error of commission: A transaction is posted to the correct side but the wrong account within the same class. For example, payment to supplier A is posted to supplier B’s account. Correction: Reverse the incorrect entry and post to the correct account. Error of principle: An entry is made in the wrong class of account, such as treating a capital expenditure as revenue expenditure. Correction: A journal entry moves the amount to the correct account. Compensating error: Two separate errors cancel each other out. These are difficult to detect. Correction: Each error must be traced and corrected individually. Error of original entry: The correct accounts are used but the wrong amount is entered in both debit and credit. Correction: Journal entry for the difference between the wrong and correct amounts. In NECO, name each error clearly and explain it before stating the correction.
FAQ: Accounting NECO 2026/2027
Q: What are the most important Accounting topics for NECO?
A: Final accounts (trading, profit and loss, and balance sheet), bank reconciliation, and partnership accounts appear in virtually every NECO Accounting paper. Master these three areas above all others.
Q: How do I avoid making errors in Accounting theory questions?
A: Always balance your accounts before submitting. Show every step. Label each section clearly. Do not skip narrations in journal entries. Rushing is the main cause of careless errors in Accounting.
Q: Is it possible to score 100% in NECO Accounting?
A: Full marks are very rare but a score of 80 or above is achievable with consistent practice. Students who score highest are those who practice full-length past papers under timed conditions at least once a week.
