WAEC SSCE - Financial Accounting - 1989

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The error committed in this case is an error of original entry. An error of original entry occurs when a transaction is recorded with an incorrect amount in the day book or journal. In this case, the sales amount of N2,570 was incorrectly recorded as N2,750. This error could have been caused by a mistake in transcribing the amount from the source document, such as an invoice or receipt. An error of original entry does not get offset or compensated by any other error and will carry through to the ledger accounts and financial statements. Therefore, it is important to identify and correct this type of error as soon as possible to ensure accurate financial reporting. In summary, the error committed in this case is an error of original entry, which occurs when a transaction is recorded with an incorrect amount in the day book or journal.

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The total of raw materials consumed can be calculated by adding the opening stock of raw materials to the purchases made during the year, and then subtracting the closing stock of raw materials. Opening stock of raw materials = N10,000 Purchases of raw materials = N60,000 Less: Closing stock of raw materials = N8,000 Therefore, the total of raw materials consumed is: N10,000 + N60,000 - N8,000 = N62,000 Therefore, the correct answer is N62,000.

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When outstanding rent of N300 is paid by the proprietor, it means that the proprietor has settled a debt owed to a third party (the landlord) using company funds. The effect on the balance sheet is that both the liability and the asset are decreased. The liability decreases because the company no longer owes N300 to the landlord. The asset decreases because the company has spent N300 to settle the outstanding rent. Therefore, the correct answer is (2) both the liability and asset are decreased. both the liability and asset are increased, liability is increased while the asset is decreased, liability is decreased while the asset is increased, and both liability and asset remain unchanged are incorrect, as they do not reflect the correct accounting treatment for paying outstanding rent.

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The balance of the provision for depreciation account is shown in the trial balance as a credit. The provision for depreciation is a contra-asset account which is used to reduce the value of a fixed asset to its net book value. As depreciation is charged on the fixed assets over their useful lives, the provision for depreciation account is credited each time a depreciation charge is made. Therefore, the balance of the provision for depreciation account at any given point in time represents the total amount of depreciation charged on the fixed asset up to that point. This balance is shown in the trial balance as a credit to offset the debit balance of the fixed asset account, which reflects the original cost of the asset.

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The straight-line method of depreciation is calculated by subtracting the salvage value of an asset from its cost and dividing the result by the useful life of the asset. In this case, the machine cost is N12,000, and it has a useful life of 4 years with an expected disposal value of N400. To calculate the annual depreciation expense, we subtract the salvage value from the cost and divide by the useful life: (N12,000 - N400) / 4 = N2,900 So, the annual depreciation expense is N2,900. To find the accumulated depreciation at the end of year 3, we need to multiply the annual depreciation expense by the number of years that have passed. Therefore, the accumulated depreciation at the end of year 3 would be: N2,900 x 3 = N8,700 Therefore, the accumulated depreciation at the end of year 3 using the straight-line method is N8,700. Therefore, option (C) is the correct answer.

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The working capital is N90.00. Working capital is a measure of a company's liquidity and its ability to pay its short-term obligations. It is calculated by subtracting a company's current liabilities from its current assets. Current assets are assets that are expected to be converted into cash within a year, while current liabilities are obligations that are due within a year. To calculate the working capital, we first need to add up the current assets and the fixed assets: Current assets + Fixed assets = N240,000 + N90,000 = N330,000 Next, we need to subtract the current liabilities from this total: Working capital = Current assets - Current liabilities Working capital = N240,000 - N150,000 = N90,000 Therefore, the working capital is N90.00.

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Discount allowed would appear on the credit side of the Sales Ledger Control Account. When a business offers a discount to a customer, it is known as a discount allowed. The discount allowed is deducted from the total amount owed by the customer and is recorded in the Sales Ledger Control Account. This account keeps track of all the transactions made in the sales ledger, including sales, returns, and discounts allowed. Since the discount allowed reduces the amount owed by the customer, it is shown as a credit entry in the Sales Ledger Control Account. In summary, the discount allowed would appear on the credit side of the Sales Ledger Control Account, which keeps track of all the transactions made in the sales ledger, including sales, returns, and discounts allowed.

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When the trial balance does not balance, it indicates that there is an error in the accounting records. The difference between the debit and credit sides of the trial balance is referred to as the "balance carried down" (or "balance b/d" for short), and this amount is normally posted to a suspense account until the error is identified and corrected. A suspense account is an account used to temporarily hold the difference between the debit and credit sides of the trial balance until the error is located and rectified. Therefore, the answer is "a suspense account".

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To calculate the annual depreciation of the machine using the straight-line method, we need to subtract the expected disposal value from the original cost of the machine, and then divide the result by the useful life of the machine. The calculation would be: Annual depreciation = (Cost of machine - Expected disposal value) / Useful life of machine Substituting the values given in the question, we get: Annual depreciation = (N12,000 - N400) / 4 years Annual depreciation = N11,600 / 4 years Annual depreciation = N2,900 per year Therefore, the annual depreciation using the straight-line method is N2,900. This means that the value of the machine is expected to decrease by N2,900 each year over the 4-year useful life of the machine. At the end of the 4 years, the machine would have a net book value of N400, which is the expected disposal value.

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The reducing balance method is a depreciation method that applies a fixed percentage rate to the remaining net book value of an asset each year. To calculate the depreciation charge for year 2 at 20% using the reducing balance method, we first need to determine the net book value of the asset at the beginning of year 2. In year 1, the depreciation charge is calculated as 20% of the initial cost of the machine, which is N12,000. Therefore, the depreciation charge for year 1 is N2,400, and the net book value of the machine at the beginning of year 2 is N9,600 (i.e., N12,000 - N2,400). To calculate the depreciation charge for year 2, we apply the same depreciation rate of 20% to the net book value at the beginning of the year. Therefore, the depreciation charge for year 2 is 20% of N9,600, which is N1,920. So the answer is N1,920. In summary, the depreciation charge for year 2 using the reducing balance method at 20% for a machine that costs N12,000, has a useful life of 4 years, and has an expected disposal value of N400 is N1,920.

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The total of the loan capital of the business is N60,000. In accounting, loan capital refers to the funds raised by a business through the issuance of loans or debentures. In the given information, the business has debentures worth N60,000. Therefore, N60,000 represents the total loan capital of the business. The other items listed in the information such as issued capital, ordinary shares, preference shares, reserves, current, fixed assets, and current assets, do not represent loan capital. Issued capital is the total amount of shares issued by the company, while ordinary and preference shares represent the equity capital raised by the company. Reserves represent the accumulated profits of the company that have not been distributed as dividends. Current and fixed assets represent the assets owned by the company, and current assets represent the short-term assets that can be converted into cash within a year. In summary, the loan capital of the business is represented by the value of debentures, which in this case is N60,000.

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The amount of N7,630 represents the total credit sales made in the month of January. This information can be obtained from the "sales" column of the Sales Ledger Control Account. Credit sales are sales made to customers who do not pay in cash at the time of purchase but are instead given credit terms to pay at a later date.

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I'm happy to explain what a private ledger is and which of the listed accounts belongs to it! A private ledger is a set of financial accounts that a company maintains for internal use only, and it is not shared with outsiders. The information contained in a private ledger is used for managerial decision-making, budgeting, and other internal accounting purposes. Out of the listed accounts, the V. Okafor's account is most likely to belong to the private ledger. This is because it is a personal account that represents transactions related to a specific individual, rather than the company's assets or expenses. Personal accounts, such as customer accounts or employee accounts, are typically part of a company's private ledger. On the other hand, the other accounts listed - drawing accounts, premises account, machinery account, and depreciation account - are all related to the company's assets or expenses, which are generally part of the company's general ledger, not the private ledger. I hope this helps!

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When a buyer returns damaged goods to the seller, the seller issues a credit note to the buyer. A credit note is a document used to record a reduction in the amount owed by the buyer to the seller. It is a type of document that a seller issues to a buyer to indicate that the seller is crediting the buyer's account for the amount shown on the credit note. The credit note is issued when the goods are returned by the buyer to the seller due to damage or other reasons. The buyer can use the credit note to reduce the amount owed to the seller or to receive a refund. Therefore, option B, "credit note", is the correct answer.

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Out of the given options, "net profit" would be posted to the proprietor's capital account. The proprietor's capital account is a part of the accounting system for sole proprietorships, where the owner's equity in the business is recorded. Net profit, which is calculated by deducting all expenses from total revenue, is the amount of profit that is available to the owner of a business after all expenses and taxes have been paid. This net profit increases the equity of the owner and is therefore credited to the proprietor's capital account. The other options mentioned, such as gross sales, gross profit, net sales, and manufacturing profit, are all accounting terms used to measure different aspects of a business's financial performance. However, they do not directly affect the equity of the owner and therefore are not posted to the proprietor's capital account.

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In a sole proprietorship, the owner can withdraw funds from the business for personal use. These withdrawals are recorded in a separate account called the "drawings account". At the end of an accounting period, the balance in the drawings account is transferred to the capital account of the owner. This is because the withdrawals from the business reduce the owner's capital in the business, and transferring the balance in the drawings account to the capital account reflects this reduction. Therefore, the correct answer is (1) capital account. debit side of the trading account, credit side of the profit and loss account, current liabilities in the balance sheet, and current assets in the balance sheet are incorrect, as they do not reflect the correct accounting treatment for the drawings account of a sole proprietorship.

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The ledger contains a permanent record of all transactions. A ledger is a book or electronic record that contains a categorized summary of all financial transactions that a company or individual has made. It's also called the principal book of accounts. Every financial transaction that a company makes is recorded in the ledger, including purchases, sales, expenses, and revenues. The ledger serves as a permanent record of all these transactions, and it's used to prepare financial statements, such as the income statement and balance sheet. In contrast, the sales day book, purchases day book, cash book, and journal are subsidiary books used to record specific types of transactions, but they don't contain a complete and permanent record of all financial transactions.

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To find the average stock of finished goods, we need to take the total value of the closing stock for the period and divide it by the number of periods. From the information given, we know that the opening stock of finished goods was N10,000, and the closing stock of finished goods was N12,000. To calculate the average stock of finished goods, we add the opening and closing stock of finished goods, then divide by 2 (since there are 2 periods). Therefore, average stock of finished goods = (N10,000 + N12,000)/2 = N11,000. Hence, the answer is N11,000.

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The statement that is not true of capital expenditure is "iii. it is incurred and its full benefits consumed in one period of account." Capital expenditure refers to the funds spent by a business to acquire or improve assets that have long-term value and are essential for the business's operations. Examples of capital expenditures include the purchase of property, plant and equipment, and investments in software or other intangible assets. Option i is true because capital expenditure is incurred to acquire assets that are expected to generate income for the business in the future. Option ii is also true because an extension of the office building is considered a capital expenditure as it adds value to the property and has long-term benefits. Option iii is false because capital expenditure is expected to generate benefits over several accounting periods and not just one. For example, if a company purchases a new machine that will be used for the next 10 years, the full benefits of that machine will be realized over those 10 years, and not just in the year of purchase. In summary, capital expenditure is not fully consumed in one period of account and, therefore, option iii is not true.

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The term bad debt means debt that cannot be collected. Bad debt is a financial term used to describe a debt that is no longer considered collectible by the creditor. This may occur when a debtor is unable or unwilling to pay the debt owed to the creditor. Bad debts are usually written off by the creditor as an expense in their financial records. Bad debts can occur in any business where credit is extended to customers, and it is a risk that must be managed by the creditor. To reduce the risk of bad debts, businesses may use credit analysis tools to evaluate the creditworthiness of potential customers before extending credit.

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The N1,500 set aside by T. Trader from his private funds for business purposes is referred to as "capital". Capital represents the amount of money or assets that an owner has invested in a business. It can be in the form of cash or other assets contributed by the owner to start or grow the business. In this case, T. Trader is contributing his own funds to the business, which increases the capital of the business.

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The concept of Double Entry Book-Keeping states that for every debit entry, there must be a corresponding credit entry. Double Entry Book-Keeping is a system of accounting that ensures accuracy and completeness in recording financial transactions. Every transaction involves two or more accounts, and for every debit entry made in one account, there must be a corresponding credit entry in another account. This means that the total debits must equal the total credits in any transaction. For example, when a company sells goods on credit, it debits accounts receivable (an asset account) and credits sales revenue (a revenue account). This ensures that the total debits and credits in the transaction are equal. The seller becomes the company's creditor, but this is not the main concept of Double Entry Book-Keeping. By following this principle, errors and fraud can be easily detected, and financial statements can be prepared accurately. Double Entry Book-Keeping is widely used in modern accounting, and it forms the basis of the accounting equation: Assets = Liabilities + Equity.

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The sales account is written up from both credit and cash sales. The sales account is an important account in the books of a business, and it records the revenue generated by the sale of goods or services. The sales account is credited with the amount of revenue generated by the sale of goods or services. In most cases, a business makes both credit and cash sales. Credit sales are made when goods or services are sold on credit, and the customer is expected to pay for them at a later date. Cash sales are made when goods or services are sold for cash or a cash equivalent, such as a credit card or debit card payment. The sales account is written up from both credit and cash sales. When a credit sale is made, the amount of the sale is recorded in the sales account as a credit entry. When a cash sale is made, the amount of the sale is also recorded in the sales account as a credit entry. Therefore, the sales account is written up from both credit and cash sales, as both types of sales contribute to the revenue generated by the business.