ICSAN Pre-Professional - Introduction to Accounting (Nigeria)

Which of the following accounting concepts states that a business should be treated as a separate entity from its owners?

• AGoing concern concept
• BBusiness entity concept
• CAccrual concept
• DMoney measurement concept

Which accounting concept assumes that a business will continue to operate indefinitely and has no intention or necessity of liquidating its operations?

• AAccrual concept
• BConsistency concept
• CGoing concern concept
• DHistorical cost concept

Under which accounting concept are revenues and expenses recognized in the period they occur, regardless of when the cash is actually received or paid?

• AAccrual concept
• BMoney measurement concept
• CPrudence concept
• DHistorical cost concept

Which concept requires assets to be recorded in the books of accounts at their original purchase price rather than their current market value?

• ARealization concept
• BConsistency concept
• CHistorical cost concept
• DPrudence concept

A company decides to change its depreciation method from straight-line to reducing balance without any valid reason. Which accounting concept is violated?

• AAccrual concept
• BConsistency concept
• CPrudence concept
• DMateriality concept

The concept that dictates that profit should not be anticipated, but all possible losses must be provided for, is known as:

• APrudence concept
• BMatching concept
• CBusiness entity concept
• DGoing concern concept

Which accounting concept justifies expensing the purchase of a low-cost office stapler immediately rather than capitalizing it as a non-current asset?

• AHistorical cost concept
• BMateriality concept
• CConsistency concept
• DDual aspect concept

Which of the following transactions cannot be recorded in a company's ledger accounts due to the money measurement concept?

• APurchase of office building for ₦50,000,000
• BPayment of salary to the General Manager
• CThe skill and experience of the company's workforce
• DSale of goods on credit for ₦200,000

According to the realization (revenue recognition) concept, when is revenue generally considered to have been earned?

• AWhen cash is received from the customer
• BWhen the contract is signed
• CWhen goods are manufactured
• DWhen goods or services are delivered and the customer is invoiced

Which accounting concept states that every transaction has a two-sided effect, which forms the basis of double-entry bookkeeping?

• ADual aspect concept
• BAccrual concept
• CPrudence concept
• DHistorical cost concept

Which qualitative characteristic of accounting information is met when the information has predictive or confirmatory value for decision-makers?

• AComparability
• BUnderstandability
• CRelevance
• DFaithful representation

Accounting information must depict the economic substance of transactions rather than merely their legal form. This is an application of:

• AMateriality
• BFaithful representation (Substance over form)
• CUnderstandability
• DTimeliness

Which of the following statements best describes the relationship between bookkeeping and accounting?

• ABookkeeping and accounting are identical terms used interchangeably.
• BBookkeeping is the recording phase, while accounting includes summarizing, interpreting,…
• CAccounting is a sub-branch of bookkeeping.
• DBookkeeping involves analyzing financial statements, while accounting involves raw ledger…

Which of the following is classified as an external user of a company's financial statements?

• AThe Chief Financial Officer
• BThe Operations Manager
• CA potential investor or lender
• DThe internal auditor

Expenditure incurred on improving the earning capacity of an existing non-current asset is classified as:

• ARevenue expenditure
• BCapital expenditure
• CCapital receipt
• DDeferred revenue expenditure

Which of the following is an example of a capital receipt for a retail business?

• ACash received from the sale of inventory
• BReceipt of bank interest on savings
• CProceeds from the sale of an old delivery van
• DCash sales received from customers

A business purchases a new computer system for ₦750,000 and pays ₦50,000 for installation. How much should be capitalized as the cost of the computer system?

• A₦700,000
• B₦750,000
• C₦800,000
• D₦50,000

In December 2025, a firm spent ₦120,000 on repairing a delivery truck's engine and ₦15,000 on engine oil. How should these costs be recorded?

• ACapitalize ₦135,000 as a non-current asset
• BExpense ₦135,000 as revenue expenditure
• CCapitalize ₦120,000 and expense ₦15,000
• DExpense ₦120,000 and capitalize ₦15,000

Which of the following best defines a non-current asset?

• AAn asset held primarily for sale to customers in the ordinary course of business
• BAn asset that can be converted into cash within twelve months
• CAn asset acquired for long-term use in the business to help generate revenue, not for res…
• DAn asset that has no physical substance but represents a legal claim

Under which category is rent paid in advance classified in the financial records at the end of the accounting period?

• ACurrent asset
• BNon-current liability
• CCurrent liability
• DOperating expense

Which of the following transactions will increase both total assets and total liabilities?

• ACollection of ₦100,000 from a trade receivable
• BPurchase of inventory on credit for ₦250,000
• CPayment of ₦150,000 to a trade payable
• DRepayment of a bank loan of ₦1,000,000

At the start of the year, a business has Assets of ₦5,000,000 and Liabilities of ₦2,000,000. During the year, Assets increase by ₦800,000 and Liabilities decrease by ₦300,000. What is the owner's capital at the end of the year?

• A₦3,000,000
• B₦4,100,000
• C₦1,100,000
• D₦3,500,000

When a sole trader withdraws cash from the business bank account for personal use, what is the correct journal entry?

• ADebit drawings account; Credit bank account
• BDebit bank account; Credit drawings account
• CDebit drawings account; Credit capital account
• DDebit capital account; Credit drawings account

Which of the following groups of accounts normally have a debit balance?

• AAssets, Capital, and Income
• BLiabilities, Capital, and Income
• CAssets, Expenses, and Drawings
• DLiabilities, Expenses, and Drawings

A business receives a credit note from a supplier for goods returned. In which book of prime entry should this credit note be recorded?

• ASales Daybook
• BSales Returns Daybook
• CPurchases Returns Daybook
• DGeneral Journal

Which source document is issued to a customer when goods are sold on credit?

• ACredit Note
• BDebit Note
• CSales Invoice
• DReceipt

Which of the following transactions would be recorded in the General Journal rather than the other books of prime entry?

• ASale of goods on credit
• BCash received from a customer
• CPurchase of a computer on credit for office use
• DPurchase of inventory on credit

Under the imprest system of petty cash, the weekly float is ₦20,000. If petty cash expenses for the week total ₦16,400, how much cash is required to restore the float?

• A₦20,000
• B₦3,600
• C₦16,400
• D₦36,400

In a three-column cash book, what is a contra entry?

• AAn entry made to correct a recording error in the cash book
• BA transaction involving the transfer of funds between cash and bank
• CA payment made to a trade payable in cash
• DA discount allowed to a customer for prompt payment

How are trade discounts and cash discounts treated in accounting records?

• ATrade discounts are recorded in the ledger; cash discounts are not.
• BBoth trade discounts and cash discounts are recorded in ledger accounts.
• CNeither trade discounts nor cash discounts are recorded in ledger accounts.
• DTrade discounts are deducted from the invoice price and not recorded; cash discounts are…

Which of the following entries would appear on the debit side of the Sales Ledger Control Account (Receivables Ledger Control Account)?

• ACash received from credit customers
• BCredit sales for the period
• CDiscount allowed to credit customers
• DSales returns from credit customers

Which of the following entries would be credited to the Purchases Ledger Control Account (Payables Ledger Control Account)?

• ACredit purchases
• BCash paid to suppliers
• CDiscount received from suppliers
• DPurchases returns

What is the primary purpose of extracting a trial balance?

• ATo calculate the net profit of the business
• BTo check the arithmetic accuracy of the double-entry bookkeeping
• CTo determine the cash balance of the business
• DTo list the assets and liabilities of the business in order of liquidity

A business debited the Motor Vehicles account with the cost of fuel purchased for the delivery van. What type of error is this?

• AError of commission
• BError of principle
• CError of original entry
• DCompensating error

An invoice of ₦45,000 received from supplier A. Alao was posted to the account of supplier B. Alao. What type of error has been committed?

• AError of principle
• BError of omission
• CError of commission
• DError of original entry

Which of the following errors would NOT cause the totals of a trial balance to disagree?

• AEntering a debit entry of ₦10,000 but omitting the corresponding credit entry
• BA credit sale of ₦50,000 completely omitted from the books of accounts
• CUndercasting the credit sales daybook by ₦5,000
• DPosting ₦8,000 to the debit side of rent expense instead of ₦80,000

If the purchase account is undercast by ₦10,000 and the rent expense account is overcast by ₦10,000, what type of error is this?

• AError of principle
• BError of commission
• CCompensating error
• DError of complete reversal

A credit sale of goods for ₦78,000 was recorded in both the sales daybook and the customer's ledger account as ₦87,000. What type of error is this?

• AError of original entry
• BError of commission
• CError of principle
• DCompensating error

Cash paid to a supplier, Alhaji Musa, of ₦20,000 was credited to Musa's account and debited to the cash account. What type of error is this?

• AError of omission
• BError of complete reversal
• CError of commission
• DError of principle

Under what circumstance is a Suspense Account opened in bookkeeping?

• AWhen cash balances do not agree with bank statement balances
• BWhen the trial balance debit and credit totals do not agree
• CWhen a customer becomes insolvent and cannot pay
• DWhen depreciation is calculated for the year

A business has the following details: Opening inventory: ₦120,000; Purchases: ₦850,000; Carriage inwards: ₦30,000; Closing inventory: ₦150,000. What is the Cost of Sales?

• A₦820,000
• B₦850,000
• C₦790,000
• D₦880,000

If a business has a gross profit margin of 20% on sales, and its sales revenue is ₦1,200,000, what is the cost of sales?

• A₦240,000
• B₦960,000
• C₦1,000,000
• D₦1,440,000

A sole trader takes inventory costing ₦40,000 from the shop for personal consumption. What is the correct accounting entry to record this?

• ADebit drawings account; Credit purchases account
• BDebit drawings account; Credit sales account
• CDebit purchases account; Credit drawings account
• DDebit capital account; Credit inventory account

Why is carriage inwards added to purchases in the Statement of Profit or Loss?

• AIt represents a selling expense to deliver goods to customers.
• BIt is part of the cost of bringing inventory to its present location and condition.
• CIt increases the sales revenue of the business.
• DIt represents a finance cost on borrowed funds.

Where is carriage outwards recorded in the financial statements of a sole trader?

• ADeducted from sales revenue in the trading section
• BAdded to purchases in the cost of sales section
• CAs an operating expense in the profit or loss section
• DAs a current liability in the statement of financial position

Under IAS 2 (and NGAAP), inventory must be valued at the:

• ALower of cost and net realizable value
• BHigher of cost and net realizable value
• CReplacement cost in the market
• DOriginal purchase price (historical cost) regardless of value

What is meant by the 'Net Realizable Value' (NRV) of inventory?

• AThe original cost of producing or purchasing the inventory
• BThe estimated selling price in the ordinary course of business less the estimated costs o…
• CThe cost to replace the inventory at the balance sheet date
• DThe scrap value of the inventory if sold immediately