Intermediate Accounting Trivia Exam Quiz!
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Questions and Answers
- 1.
Which of the following is not a type of Mineral rights License?
- A.
Joint Venture (JV)
- B.
Production sharing contracts
- C.
Oil Mining Lease
- D.
Service contracts
Correct Answer
C. Oil Mining LeaseExplanation
Oil Mining lease is type of License not an acquisition arrangementRate this question:
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- 2.
Pay-As-You-Earn tax should be remitted when?
- A.
On or before the 10th day of the following month
- B.
Within 21 days of the following month
- C.
Before the end of the following month
- D.
None of the above
Correct Answer
A. On or before the 10th day of the following monthExplanation
Pay-As-You-Earn tax should be remitted on or before the 10th day of the following month. This means that the tax payment should be made within the first 10 days of the month that follows the month in which the income was earned. This ensures timely payment and compliance with tax regulations.Rate this question:
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- 3.
What is the applicable IFRS standard on E & E assets?
- A.
IAS 6 on ‘Evaluation for and Exploration of Mineral resources’.
- B.
IFRS 6 on ‘Evaluation for and Exploration of Mineral resources’.
- C.
SAS 14 on Accounting in the petroleum industry: Upstream activities
- D.
None of the above
Correct Answer
D. None of the aboveExplanation
The applicable standard is IFRS 6 on ‘Exploration for and Evaluation of Mineral resources.Rate this question:
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- 4.
Which of the following authorities regulates the Oil Service sector?
- A.
Nigerian National Petroleum Corporation (NNPC)
- B.
Department of Petroleum Resources (DPR)
- C.
Federal Ministry of Environment (FMEnv)
- D.
Petroleum Products Pricing Regulatory Agency (PPPRA)
Correct Answer
B. Department of Petroleum Resources (DPR)Explanation
The Department of Petroleum Resources (DPR) is the correct answer because it is the authority responsible for regulating the oil service sector in Nigeria. The DPR is a department under the Nigerian Ministry of Petroleum Resources and its main functions include ensuring compliance with petroleum laws and regulations, monitoring and enforcing health, safety and environmental standards, and promoting investment in the oil and gas industry. The Nigerian National Petroleum Corporation (NNPC) is the state oil corporation responsible for exploration, production, and marketing of petroleum and petroleum products. The Federal Ministry of Environment (FMEnv) is responsible for environmental protection and the Petroleum Products Pricing Regulatory Agency (PPPRA) is responsible for regulating the prices of petroleum products.Rate this question:
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- 5.
Pre-exploration and Pre-evaluation costs are expensed?
- A.
True
- B.
False
- C.
It depends
- D.
None of the above
Correct Answer
C. It dependsExplanation
It depends on the accounting policy chosen by the Company. It is expensed and capitalized under the successful effort method and Full cost method respectively.Rate this question:
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- 6.
Which of the following is not a type of Mineral rights License?
- A.
Oil Exploration License
- B.
Oil Prospecting License
- C.
Oil Mining Lease
- D.
None of the above
Correct Answer
D. None of the aboveExplanation
The given options are all types of licenses related to mineral rights in the context of oil. Therefore, none of the options is not a type of Mineral rights License.Rate this question:
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- 7.
Which of the following is not a responsibility of the Department of Petroleum Resources (DPR)?
- A.
Award of OML & OPLs.
- B.
Regulation & Monitoring and control of activities in the upstream and downstream sectors
- C.
Approval of field development plans.
- D.
Manages NNPC investments in JVs and PSCs
Correct Answer
D. Manages NNPC investments in JVs and PSCsExplanation
NNPC (NAPIMS) is saddled with this responsibilityRate this question:
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- 8.
Which of the following accounts feeds into the Statement of Comprehensive Income?
- A.
Fixed asset
- B.
Asset under construction
- C.
Accumulated depreciation
- D.
Depreciation expense
Correct Answer
D. Depreciation expenseExplanation
Depreciation expense feeds into the Statement of Comprehensive Income because it represents the portion of an asset's cost that is allocated as an expense over its useful life. This expense is recognized in the income statement and reduces the net income of the company. It is important to include depreciation expense in the Statement of Comprehensive Income to accurately reflect the company's financial performance and to provide a comprehensive view of its income and expenses.Rate this question:
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- 9.
Which of these is not a financial assertion to which financial controls must be linked?
- A.
Valuation
- B.
Existence
- C.
Completeness
- D.
Precision
Correct Answer
D. PrecisionExplanation
Precision is not a financial assertion to which financial controls must be linked. Financial controls are designed to ensure the accuracy and reliability of financial information, and they are typically linked to assertions such as valuation, existence, and completeness. Precision, on the other hand, refers to the level of detail or accuracy in reporting financial information, and while it is important, it is not considered a separate financial assertion that requires specific controls.Rate this question:
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- 10.
Information processing objectives fall under the following categories except:
- A.
Validity
- B.
Completeness
- C.
Presentation and Disclosure
- D.
Restricted Access
Correct Answer
C. Presentation and DisclosureExplanation
The question asks for an exception among the given categories of information processing objectives. The categories mentioned are validity, completeness, presentation and disclosure, and restricted access. The correct answer is "Presentation and Disclosure" because it does not fall under the category of information processing objectives. Validity refers to the accuracy and reliability of the information, completeness refers to the inclusion of all necessary data, and restricted access refers to controlling who can access the information. However, presentation and disclosure are not objectives of information processing but rather methods or actions taken to communicate the information effectively.Rate this question:
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- 11.
One of these is control to mitigate the risk of unapproved purchase of assets:
- A.
Assign responsibility for assets
- B.
Automated system for calculating depreciation
- C.
Use pre numbered acquisition forms
Correct Answer
C. Use pre numbered acquisition formsExplanation
Using pre-numbered acquisition forms can help mitigate the risk of unapproved purchase of assets by providing a systematic and controlled process for acquiring assets. These forms ensure that each acquisition is documented and accounted for, making it easier to track and verify the approval and authorization of purchases. By using pre-numbered forms, any unauthorized or unapproved purchases can be easily identified and investigated, allowing for timely corrective actions to be taken. This control measure adds an extra layer of security and accountability to the asset acquisition process.Rate this question:
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- 12.
A staff who prepares an expense report should record the same in the purchase ledger for consistency.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because the staff who prepares an expense report should record the expenses in the general ledger, not the purchase ledger. The purchase ledger is specifically used to record purchases from suppliers, while the general ledger is used to record all financial transactions, including expenses. Therefore, recording the expenses in the purchase ledger would not be consistent with standard accounting practices.Rate this question:
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- 13.
Which of the following is used to set up the general ledger?
- A.
Liabilities
- B.
Expenses
- C.
Equities
- D.
Chart of accounts
Correct Answer
D. Chart of accountsExplanation
The chart of accounts is used to set up the general ledger. It is a list of all the accounts that a company uses to record its financial transactions. The chart of accounts organizes these accounts in a systematic manner, making it easier to track and analyze financial information. It typically includes categories such as assets, liabilities, expenses, and equities. However, in this case, the correct answer is specifically the chart of accounts, as it is the tool used to establish the structure and organization of the general ledger.Rate this question:
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- 14.
Which of the following is not true about the trial balance?
- A.
Trial balance is a snapshot of the balances on all the ledger accounts at a particular date
- B.
Trial Balance is a proof of the arithmetical accuracy of postings
- C.
It is the basis of preparing the profit & loss and balance sheet
- D.
When the trial balance balances, the accounts must be correct
Correct Answer
D. When the trial balance balances, the accounts must be correctExplanation
The given statement is not true because even if the trial balance balances, it does not guarantee that the accounts are correct. The trial balance only checks for the arithmetical accuracy of the postings, ensuring that the total debits and credits are equal. However, it does not verify the accuracy of individual transactions or account balances. Errors such as incorrect entries, omissions, or compensating errors can still exist even if the trial balance balances. Therefore, the statement that "When the trial balance balances, the accounts must be correct" is incorrect.Rate this question:
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- 15.
Which of the following errors cannot be detected by the trial balance?
- A.
Incorrect footing in any account
- B.
Entering an item on only one side of the books
- C.
Entering one figure on the debit side of the books and a different figure on the credit
- D.
Errors of omission
Correct Answer
D. Errors of omissionExplanation
Errors of omission are errors where transactions or amounts are completely left out or not recorded in the books of accounts. These errors cannot be detected by the trial balance because they do not affect the equality of debits and credits. The trial balance only checks for mathematical accuracy and balance between the total debits and total credits. Therefore, errors of omission will not be identified by the trial balance and may lead to inaccurate financial statements.Rate this question:
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- 16.
Which of the following defines error of principle?
- A.
An error where an item is entered in the wrong class of account e.g. capital v/s revenue
- B.
An error where the original entry is incorrect although double entry is still used
- C.
An error where multiple unrelated errors cancel each other out
- D.
An error where the correct amount is entered but in the wrong person’s accounts
Correct Answer
A. An error where an item is entered in the wrong class of account e.g. capital v/s revenueExplanation
Error of principle refers to the situation where an item is mistakenly recorded in the wrong class of account, such as recording a capital transaction as a revenue transaction. This type of error violates the fundamental principles and rules of accounting, which require accurate classification and presentation of financial transactions. By entering an item in the wrong class of account, the financial statements will be misstated and may lead to incorrect analysis and decision-making.Rate this question:
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- 17.
All individual ledger accounts are together called?
Correct Answer
General LedgerExplanation
The correct answer is "General Ledger." The General Ledger is a collection of all individual ledger accounts in a company's accounting system. It serves as the central repository for recording and summarizing all financial transactions. By grouping all the individual ledger accounts together, the General Ledger provides a comprehensive overview of the company's financial position and performance.Rate this question:
- 18.
Which of the following is not a component of financial statements in line with IAS 1?
- A.
Statement of financial position
- B.
Statement of comprehensive income
- C.
Statement of cash flows
- D.
Value added statement
Correct Answer
D. Value added statementExplanation
The value added statement is not a component of financial statements in line with IAS 1. IAS 1 specifies that the components of financial statements include the statement of financial position, statement of comprehensive income, and statement of cash flows. The value added statement is not a required component under IAS 1 and is not commonly included in financial statements prepared in accordance with IAS 1.Rate this question:
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- 19.
Which of the following statements does not describe current assets?
- A.
Assets used in normal operating cycle
- B.
Assets held primarily for trading purposes
- C.
Assets expected to be realised within 12 months
- D.
Property, plant and equipment are examples of current assets
Correct Answer
D. Property, plant and equipment are examples of current assetsExplanation
Property, plant and equipment are not examples of current assets. Current assets are assets that are expected to be converted into cash or used up within one year or the normal operating cycle of a business. Property, plant, and equipment are long-term assets that are held for use in the production or supply of goods and services, rather than for sale or conversion into cash.Rate this question:
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- 20.
Which of the following are not classified by nature?
- A.
Employee expenses
- B.
Sales & marketing department
- C.
Depreciation expense
- D.
Impairment expense
Correct Answer
B. Sales & marketing departmentExplanation
Sales & marketing department is not classified by nature because it is a functional department within an organization, rather than a specific type of expense or financial transaction. Employee expenses, depreciation expense, and impairment expense are all examples of specific types of expenses that can be classified according to their nature.Rate this question:
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- 21.
A statement which shows how the wealth created is distributed among various interest groups is called?
- A.
Value added statement
- B.
Cash flow statement
- C.
Statement of comprehensive income
- D.
Statement of financial position
Correct Answer
A. Value added statementExplanation
A value added statement is a statement that shows how the wealth created is distributed among various interest groups. It provides a breakdown of the value added by a company and how it is distributed to employees, shareholders, and other stakeholders. This statement helps in understanding the economic impact of a company and how it benefits different groups involved in its operations.Rate this question:
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- 22.
Temporary differences may arise from:
- A.
Zero tax rate
- B.
Recognition of asset which affects taxable profit
- C.
Goodwill with no deductible tax amortization
Correct Answer
C. Goodwill with no deductible tax amortizationExplanation
Temporary differences may arise from goodwill with no deductible tax amortization. This means that the company has recognized goodwill on its financial statements, but for tax purposes, there is no deduction allowed for the amortization of this goodwill. As a result, the taxable profit will be higher than the accounting profit, leading to a temporary difference.Rate this question:
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- 23.
A deferred tax liability results from:
- A.
Deductible temporary differences at current year end
- B.
Deductible temporary differences over years
- C.
Taxable temporary differences at current year end
Correct Answer
C. Taxable temporary differences at current year endExplanation
A deferred tax liability arises when there are taxable temporary differences at the current year-end. Taxable temporary differences occur when the tax base of an asset or liability exceeds its carrying amount for tax purposes. This creates a future tax obligation that will be settled in a future period. The deferred tax liability reflects the amount of taxes that will be payable in the future when these temporary differences reverse and result in taxable income.Rate this question:
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- 24.
A deferred tax asset results from:
- A.
Deductible temporary differences at current year end
- B.
Deductible temporary differences over years
- C.
Taxable temporary differences at current year end
Correct Answer
A. Deductible temporary differences at current year endExplanation
A deferred tax asset arises when there are deductible temporary differences at the end of the current year. Deductible temporary differences occur when the tax base of an asset or liability is different from its carrying amount for accounting purposes. This creates a future tax benefit that can be used to offset future taxable income, resulting in a lower tax liability. Therefore, a deferred tax asset represents a potential tax saving in the future.Rate this question:
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- 25.
Which of the following will create a future taxable amount?
- A.
Newspaper subscription
- B.
Prepaid rent
- C.
Prepaid insurance
- D.
Straight line depreciation of asset
Correct Answer(s)
B. Prepaid rent
C. Prepaid insurance
D. Straight line depreciation of assetExplanation
Prepaid rent, prepaid insurance, and straight line depreciation of an asset will create a future taxable amount. Prepaid rent and prepaid insurance are considered as deferred expenses, meaning they are paid in advance but their benefits are realized in the future. When these expenses are deducted for tax purposes in the year they are paid, they create a future taxable amount when the benefits are actually realized. Similarly, straight line depreciation of an asset is deducted over its useful life, creating a future taxable amount as the deduction is spread out over multiple years.Rate this question:
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- 26.
Which of the following will create a future deductible amount?
- A.
Newspaper subscription
- B.
Prepaid rent
- C.
Prepaid insurance
- D.
Straight line depreciation of asset
Correct Answer
A. Newspaper subscriptionExplanation
A newspaper subscription will create a future deductible amount because it is a prepaid expense that will be consumed over time. The cost of the subscription is paid in advance but the benefit is received over a period of time. Therefore, a portion of the prepaid expense can be deducted as an expense in future accounting periods.Rate this question:
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- 27.
Which of the following accounts feeds into the Statement of Comprehensive Income?
- A.
Fixed asset
- B.
Asset under construction
- C.
Accumulated depreciation
- D.
Depreciation expense
Correct Answer
D. Depreciation expenseExplanation
Depreciation expense is the correct answer because it represents the portion of an asset's cost that is allocated as an expense over its useful life. This expense is included in the Statement of Comprehensive Income to reflect the decrease in the value of the fixed asset over time. Fixed assets, asset under construction, and accumulated depreciation are all related to the fixed asset, but they do not directly contribute to the Statement of Comprehensive Income.Rate this question:
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- 28.
Which of these is not a financial assertion to which financial controls must be linked?
- A.
Valuation
- B.
Existence
- C.
Completeness
- D.
Precision
Correct Answer
D. PrecisionExplanation
Precision is not a financial assertion to which financial controls must be linked. Financial controls are measures put in place to ensure the accuracy, reliability, and integrity of financial information. The assertions to which financial controls must be linked include valuation (ensuring assets and liabilities are accurately valued), existence (ensuring assets and liabilities actually exist), and completeness (ensuring all relevant financial information is included). Precision, on the other hand, refers to the level of detail or accuracy in financial reporting, but it is not a specific assertion that financial controls are directly linked to.Rate this question:
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- 29.
An impairment loss is recognised on trade receivable balances when..
- A.
The recoverable amount is more than the carrying amount
- B.
The receivable is not settled by a customer for more than 6 months
- C.
The carrying amount is more than the recoverable amount
- D.
The carrying amount is equal to the recoverable amount
- E.
A receivable is written-off
Correct Answer
C. The carrying amount is more than the recoverable amountExplanation
An impairment loss is recognized on trade receivable balances when the carrying amount (the amount recorded on the company's books) is more than the recoverable amount (the amount expected to be collected from the customer). This means that the company does not expect to fully collect the amount owed by the customer, and therefore, an impairment loss is recognized to reflect the decrease in the value of the receivable.Rate this question:
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- 30.
Which of the following assets have an infinite useful life?
- A.
Motor Vehicles
- B.
Oil Well
- C.
Freehold land
- D.
Buildings
- E.
Leasehold land
Correct Answer
C. Freehold landExplanation
Freehold land has an infinite useful life because it is a type of property ownership that grants the owner complete and indefinite ownership rights over the land. Unlike other assets such as motor vehicles, oil wells, buildings, and leasehold land, freehold land does not depreciate or wear out over time. It can be used for various purposes and can be passed down through generations, making it a long-lasting and valuable asset.Rate this question:
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- 31.
The income of a non-resident company will be taxable in Nigeria based on the following factors, EXCEPT
- A.
Permanent establishment/ fixed base
- B.
Agency relationship
- C.
Turnkey project
- D.
Location of head office of the non-resident entity
Correct Answer
D. Location of head office of the non-resident entityExplanation
The income of a non-resident company will be taxable in Nigeria based on factors such as permanent establishment/fixed base, agency relationship, and turnkey projects. However, the location of the head office of the non-resident entity is not a determining factor for taxation.Rate this question:
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- 32.
Incomes of the following forms of organizations are CIT exempt, EXCEPT
- A.
A company formed for the promotion of sports
- B.
A hospital officially registered
- C.
A cooperative society
- D.
A pioneer company in the 3rd year of operations
Correct Answer
B. A hospital officially registeredExplanation
Incomes of hospitals that are officially registered are exempt from CIT. This means that they do not need to pay corporate income tax on their earnings. On the other hand, incomes of companies formed for the promotion of sports, cooperative societies, and pioneer companies in the 3rd year of operations are all exempt from CIT. Therefore, the correct answer is "A hospital officially registered".Rate this question:
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- 33.
Under the Value Added Tax (VAT) Act, zero rated goods include:
- A.
Non-oil exports
- B.
Books and educational materials
- C.
Basic food items
- D.
Medical and pharmaceutical products
Correct Answer
A. Non-oil exportsExplanation
Under the Value Added Tax (VAT) Act, non-oil exports are considered zero-rated goods. This means that these exports are not subject to VAT and do not incur any additional tax burden. The government aims to promote non-oil exports by exempting them from VAT, which helps to make these goods more competitive in the international market. By providing this tax incentive, the government encourages businesses to engage in non-oil exports, contributing to the growth of the economy and increasing foreign exchange earnings.Rate this question:
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- 34.
The following are the parameters for the tax deductibility test, for CIT purposes, EXCEPT ?
- A.
Wholly
- B.
Exclusively
- C.
Fairly
- D.
Reasonably
Correct Answer
C. FairlyExplanation
The parameters for the tax deductibility test for CIT purposes include the requirements that the expenses be incurred wholly and exclusively for the purpose of the trade or business. Additionally, the expenses must be reasonable. However, there is no requirement that the expenses be incurred fairly. Therefore, the correct answer is "Fairly."Rate this question:
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- 35.
Withholding tax to individuals and partnerships is payable to?
- A.
The Federal Inland Revenue Service
- B.
The Joint Tax Board
- C.
The relevant State Board
- D.
The Local Government of the individual/partnership
Correct Answer
C. The relevant State BoardExplanation
The correct answer is the relevant State Board. Withholding tax is a tax deducted at source from payments made to individuals and partnerships. It is the responsibility of the relevant State Board to collect and administer this tax. They ensure that the correct amount of tax is withheld and remitted to the appropriate authorities.Rate this question:
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