WAEC SSCE - Financial Accounting - 2016

A loan to a company under the company's seal is

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In preparing partnership accounts, interest on drawings is debited to current accounts and credited to

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The concept which states that the affairs of a business is to be treated as being separate from the private activities of the owner is

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The concept which states that the affairs of a business are to be treated as being separate from the private activities of the owner is known as the "Business entity concept." This means that the business is considered as an independent entity, separate from the personal affairs of its owners, and has its own financial records, assets, and liabilities. This concept is important in accounting because it helps to ensure that the financial statements of a business are accurate and reliable, and it enables stakeholders to assess the performance of the business without being influenced by the personal financial situation of its owners. For example, if a business owner uses the company's funds for personal expenses, this should not be reflected in the company's financial statements. Instead, the personal expenses of the owner should be recorded separately and not be considered as a part of the business expenses.

Assets which are readily convertible into cash are termed as

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Assets which are readily convertible into cash are called liquid assets. Liquid assets are those assets that can be easily and quickly converted into cash without a significant loss in value. Examples of liquid assets include cash, stocks, bonds, and short-term investments. The term "liquid" refers to the ability to convert the asset into cash quickly and without incurring significant transaction costs. In contrast, fixed assets such as property, plant, and equipment are not easily converted into cash, and their value is generally tied to their intended use. Having a sufficient amount of liquid assets is important for individuals and businesses alike, as they can be used to cover unexpected expenses or take advantage of investment opportunities.

Which of the following errors are errors of commission?
I. A cheque paid to Adam debited to Adam's account.
II. Credit sales to Eva credited to sales account but debited to Eve's account.
III. Furniture repairs debited to furniture account.
IV. Credit purchases from Manu credited to Manu's account.

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Errors of commission are errors that occur when an incorrect entry is made in the accounting records. Specifically, errors of commission occur when the correct amount is entered, but it is entered in the wrong account. Based on this definition, the errors of commission among the given options are: - I and II In option I, the cheque paid to Adam was correctly entered, but it was debited to Adam's account instead of being credited. This is an error of commission because the correct amount was entered, but it was entered in the wrong account. In option II, credit sales to Eva were correctly credited to the sales account, but they were also debited to Eve's account instead of being credited. Again, this is an error of commission because the correct amount was entered, but it was entered in the wrong account. Option III is not an error of commission because there is no correct amount that was entered in the wrong account. Furniture repairs debited to the furniture account is simply an incorrect entry. Option IV is not an error of commission because the entry made was not correct in the first place. Credit purchases from Manu should have been credited to the purchases account, not credited to Manu's account. Therefore, the errors of commission among the given options are I and II.

Use the following information to answer this question.

Cash purchase - D 29,641
Creditors 1/1/14 - D 2,473
Creditors 31/12/14 - D 3,117
Cash paid to creditors - D 127,345
Discount received - D 4,211

The credit purchases is

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The credit purchases can be calculated as follows: Credit Purchases = Cash Purchase + Increase in Creditors - Decrease in Creditors - Discount Received Credit Purchases = D 29,641 + (D 3,117 - D 2,473) - (D 127,345 - D 0) - D 4,211 Credit Purchases = D 29,641 + D 644 + D 127,345 + D 4,211 Credit Purchases = D 161,841 Therefore, the credit purchases are D 161,841. To arrive at the credit purchases figure, we start with the cash purchase figure and then adjust for the increase and decrease in creditors over the year, as well as any discount received on purchases. The increase in creditors is added to the cash purchase figure, while the decrease in creditors is subtracted. Additionally, any discount received on purchases is subtracted as it reduces the overall cost of purchases. Knowing the credit purchases figure is important for analyzing a company's financial performance, as it helps in calculating the cost of goods sold and gross profit.

Use the following information to answer this question.

Acquisition cost of computers - Le 80,000
Installation cost - Le 20,000
Estimated residual value - Le 4,000
Estimated useful life - 5 years.

The total costs of the computers is

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Which of the following items is a current liability?

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The current liability item is Bills payable. A liability is an obligation that a company owes to another party, which could be a debt or a promise to pay. A current liability is a debt that is expected to be paid off within a year or a company's operating cycle, whichever is longer. In this case, bills payable are the amount of money that a company owes to its suppliers for goods or services purchased on credit. Since bills payable are expected to be paid off within a year, they are classified as a current liability. On the other hand, stock of raw material, cash in hand, and cash at bank are not current liabilities. Stock of raw material is an inventory asset, while cash in hand and cash at bank are cash and cash equivalents that are classified as current assets.

Which of the following is a credit item in an income and expenditure account?

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In an income and expenditure account, credit items represent income or revenue received by an organization. Therefore, the only credit item listed in the options is donations. Donations are considered a credit item because they represent the funds received by an organization from donors. Credit items are also known as revenue or income and are recorded on the credit side of the income and expenditure account. Electricity, stationery, and bar suppliers are all examples of expenses or expenditures that are recorded on the debit side of the income and expenditure account. Expenses are costs incurred by an organization in the course of generating revenue or carrying out its operations, and they are recorded as debits in the income and expenditure account.

Bank reconciliation statement is prepared to reconcile the differences between

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Bank reconciliation statement is prepared to reconcile the differences between the Cash book and Bank statement of a business. The Cash book records all the cash and bank transactions made by a business, including deposits, withdrawals, and transfers. On the other hand, the Bank statement is a statement sent by the bank to the business, which shows all the transactions that have been processed by the bank for that account during a given period, including deposits, withdrawals, fees, and interests. There can be differences between the balances shown in the Cash book and Bank statement due to timing differences, errors, omissions, or bank charges. To ensure that the Cash book and Bank statement balances are accurate, a bank reconciliation statement is prepared to identify and explain these differences. The bank reconciliation statement compares the transactions recorded in the Cash book with those shown in the Bank statement and identifies any discrepancies. These discrepancies are then adjusted for in the Cash book, which ensures that the Cash book and Bank statement balances match. For example, if a business deposits a check into its bank account, it records the deposit in its Cash book immediately. However, it may take a few days for the bank to process the deposit and credit the amount to the account. As a result, the Bank statement may show a higher balance than the Cash book. In this case, the bank reconciliation statement will identify the timing difference and adjust the Cash book balance accordingly.

Debts that a firm is unable to recover are debited to bad debts account and credited to

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Which of the following expenses constitutes prime cost?
I. Direct labour cost II. Factory overheads III. Hiring of machine for production IV. Warehouse rent

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Which of the following are impersonal accounts ?
I. Investment
II. Creditors
III. Premises
IV. Debtors
V. Salaries

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The branch current account records

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Which of the following would result from an increase in the provision for doubtful debts?

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An increase in the provision for doubtful debts would result in a decrease in net profit. The provision for doubtful debts is an estimated amount set aside by a company to account for customers who may not be able to pay their debts. An increase in the provision for doubtful debts indicates that the company is anticipating a higher level of bad debts in the future. When the provision for doubtful debts increases, this means that the company is recording a larger expense in its income statement. This larger expense reduces the company's net profit. Net profit is calculated as gross profit minus operating expenses, including the provision for doubtful debts. Therefore, an increase in the provision for doubtful debts would result in a decrease in net profit. This is because the company is setting aside more money to cover potential losses, which reduces the amount of profit it can report on its income statement.

Use the following information and answer the question below.
Oruma Ltd issued 300,000 ordinary shares at N100 each. Applications were received for 200,000 shares and all those who applied, paid in full.

The unsubscribed share capital is

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The financial statement which is an expression of the accounting equation is the

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The financial statement that expresses the accounting equation is the balance sheet. The balance sheet provides a snapshot of a company's financial position at a particular point in time. It lists a company's assets (what it owns), liabilities (what it owes), and equity (what's left over for the owners). The balance sheet expresses the fundamental accounting equation, which is Assets = Liabilities + Equity. This means that a company's assets must always equal its liabilities plus equity. The balance sheet is an important financial statement that provides insight into a company's financial health and stability.

External users of accounting information include

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Use the following information to answer this questions.

Rent prepaid - 1/01/2014 - N600
Rent paid - 31/12/2014 - N3,000
Rent prepaid - 31/12/2014 - N400.

Rent for 2014 chargeable to the profit and loss account is

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Which of the following items of expense involves actual cash payment?

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The item of expense that involves actual cash payment is "Carriage outwards." This expense refers to the cost of shipping or delivery of goods from the seller's premises to the buyer's premises or to a third party. It is an expense that the seller incurs in order to fulfill the sale, and it requires an actual payment of cash to the carrier or delivery service provider. Discounts allowed, provision for depreciation, and allowance for doubtful debts do not involve actual cash payment. Discounts allowed are reductions in the selling price of goods or services that the seller grants to the buyer, and they result in a lower amount of revenue for the seller. Provision for depreciation is an accounting entry that represents the estimated decrease in value of a fixed asset over time, and it does not involve an actual payment of cash. Allowance for doubtful debts is an estimate of the amount of accounts receivable that the seller does not expect to collect, and it is also an accounting entry that does not involve an actual payment of cash.

Use the following information to answer this questions.

Rent prepaid - 1/01/2014 - N600
Rent paid - 31/12/2014 - N3,000
Rent prepaid - 31/12/2014 - N400.

The balance sheet as at 31st December 2014 will show

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The balance sheet as at 31st December 2014 will show a current asset of N400. This is because the rent prepaid as at 1/01/2014 (N600) and the rent paid during the year (N3,000) are expenses for the period and have been fully accounted for in the income statement. The remaining rent prepaid as at 31/12/2014 (N400) is the only unexpired portion of the rent expense and therefore qualifies as a current asset.

Use the following information and answer the question below.
Oruma Ltd issued 300,000 ordinary shares at N100 each. Applications were received for 200,000 shares and all those who applied, paid in full.

The subscribed share capital is

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The subscribed share capital refers to the number of shares applied for and fully paid by shareholders. In this case, 200,000 shares were applied for and fully paid, which means the subscribed share capital is: 200,000 shares x N100 per share = N20,000,000 Therefore, the answer is N20,000,000.

The balance sheet is prepared to reveal

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The balance sheet is prepared to reveal the financial position of a business at a specific point in time. It shows the assets, liabilities, and equity of the business. The assets are what the business owns, such as property, inventory, and cash. The liabilities are what the business owes, such as loans and accounts payable. The equity represents the owners' claims to the assets of the business. The balance sheet helps stakeholders understand the financial health of the business and its ability to pay off its debts. It does not show the result of the operations for the period under review, the arithmetical accuracy of the ledger accounts, or the accruals and payments.

Where fixed capitals are maintained in a partnership, share profits are

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The cost of goods returned by branch to head office is debited

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Which of the following errors will affect the agreement of the trial balance?

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The entries for credit sales at branch where the head office keeps all records are:Debit

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In the absence of a partnership agreement, additional capital contributions by partners attract interest of

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One of the purchases invoices of Mr.Dauda showed D96,240 less 12 \(\frac{1}{2}\)% trade discount and cash discount of 20%. Since Mr Dauda paid the amount due within the credit period, the amount paid is

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The purchase invoice shows a total of D96,240 with a trade discount of 12\(\frac{1}{2}\)% and a cash discount of 20%. This means that the buyer, Mr. Dauda, is entitled to a discount of 12\(\frac{1}{2}\)% of D96,240, which is: 12.5/100 x D96,240 = D12,030 The net amount due after subtracting the trade discount is: D96,240 - D12,030 = D84,210 Next, Mr. Dauda is entitled to a cash discount of 20% if he pays within the credit period. The cash discount on D84,210 is: 20/100 x D84,210 = D16,842 The amount paid by Mr. Dauda will be the net amount due minus the cash discount. Therefore, the amount paid by Mr. Dauda is: D84,210 - D16,842 = D67,368 Hence, the correct answer is D67,368.

In the preparation of the trading account of omuya Ltd., the company included credit sales of N18,000 made during the year. The concept guiding this treatment is the

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A petty cash account has an imprest of GH¢ 6,000. If GH¢ 2,000 were left, how much will be re-imbursed at the end of the period?

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The excess of cost of goods sold over net sales is

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When the cost of goods sold (COGS) is greater than the net sales revenue, this results in a negative amount. This negative amount is known as a "gross loss". The gross profit, on the other hand, is the amount that remains after deducting the COGS from the net sales revenue. This represents the amount of money a company has made from its sales before taking into account any other expenses such as operating costs, taxes, and interest expenses. To sum up, the excess of COGS over net sales is a "gross loss" and not a "net loss." The "net loss" or "net profit" is calculated after taking into account all expenses and revenue, not just the cost of goods sold and net sales.

Which of the following is a source of local government revenue?

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A source of local government revenue refers to the ways in which local governments generate income to fund their operations and provide services to their constituents. Out of the options given, market dues are a source of local government revenue. Market dues are fees or taxes that local governments collect from individuals or businesses that operate in markets within their jurisdiction. These fees are typically based on a percentage of the revenue generated by the market operators or the goods sold in the market. Market dues can be a significant source of revenue for local governments, especially in areas where markets are popular and attract large numbers of customers. In summary, market dues are a way for local governments to generate revenue by collecting fees or taxes from individuals and businesses operating in markets within their jurisdiction.

In accounting context, purchases refer to

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Use the following information and answer the question below.
Oruma Ltd issued 300,000 ordinary shares at N100 each. Applications were received for 200,000 shares and all those who applied, paid in full.

The authorized share capital is

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Which of the following expenses is apportioned between departments based on sales?

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The expense that is apportioned between departments based on sales is Carriage Outwards. This expense refers to the cost of delivering goods from the business to the customers. Since this cost is incurred as a result of sales, it makes sense to apportion it between departments based on their respective sales. This ensures that each department bears a fair share of the cost based on their contribution to generating sales. Discount Received is an income and is not an expense. Electricity is an expense that is usually apportioned based on factors such as the area occupied by each department, the number of employees in each department, or the usage of electricity by each department. Carriage Inwards is an expense that is usually apportioned based on factors such as the weight or volume of goods received by each department.

Purchases of fixtures and fittings by a club is recorded in the

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In the purchase of a business, a buyer has paid more than the value of the net assets of the business. The excess payment is referred to as

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The excess payment made by a buyer in the purchase of a business is referred to as Goodwill. Goodwill is an intangible asset that represents the value of a business beyond its tangible assets, such as property, equipment, and inventory. When a business is sold for more than the value of its tangible assets, the excess amount is attributed to the value of the business's reputation, brand name, customer base, and other intangible assets. This excess amount is called Goodwill. Goodwill is an important concept in business valuations, as it can significantly impact the price a buyer is willing to pay for a business. Goodwill is typically calculated by subtracting the fair market value of a company's net assets from the total purchase price paid by the buyer. The resulting amount represents the value of the intangible assets, or goodwill, that the buyer is willing to pay for. Therefore, when a buyer pays more than the value of the net assets of a business, the excess payment is referred to as Goodwill.

A bank statement shows an overdraft of GH¢ 190,000. Kofi a debtor paid GH¢ 400,000 into the account. The new balance is

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When a fixed asset is disposed off, the accounting entries to write off the asset are Debit

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Partly manufactured goods are treated in the balance sheet of a manufacturing company as

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Partly manufactured goods are treated in the balance sheet of a manufacturing company as current assets. These goods are also known as work in progress (WIP) and represent goods that are in the process of being manufactured but are not yet complete. They are included in current assets because they are expected to be sold or completed within the next operating cycle of the business. Once the goods are completed, they will be transferred to finished goods inventory and then treated as current assets until they are sold.

Offei, a petty trader sold goods for GH¢36,240. The gross profit being 33\(\frac{1}{3}\)% on cost. What was the cost price?

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To find the cost price of the goods, we need to use the formula: Cost price = Selling price / (1 + Gross profit percentage) In this case, the selling price is GH¢36,240, and the gross profit percentage is 33\(\frac{1}{3}\)%, or 1/3 in decimal form. Therefore, we have: Cost price = GH¢36,240 / (1 + 1/3) Cost price = GH¢36,240 / 4/3 Cost price = GH¢27,180 So, the cost price of the goods is GH¢27,180. To explain the calculation, the gross profit percentage represents the profit as a percentage of the cost price. In this case, the profit is 33\(\frac{1}{3}\)% of the cost price. To find the cost price, we need to reverse the calculation by dividing the selling price by 1 plus the gross profit percentage in decimal form. This gives us the amount that represents the cost price plus the profit, so we then subtract the profit to get the cost price. In this example, we divide GH¢36,240 by 4/3 to get the total cost price plus profit, which is GH¢48,320. We then subtract the profit of GH¢12,080 (1/3 of GH¢36,240) to get the cost price of GH¢27,180.

The total of the discounts received column in the three column cash book is?

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The transfer of money from one sub-head to another in the public sector is

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The transfer of money from one sub-head to another in the public sector is virement. Virement is a budget management tool used by government agencies and organizations to transfer funds from one budgetary sub-head to another, within the same budget. Virement is used when there is a need to redirect funds from one area to another, due to changing priorities or unexpected expenses. For example, if a department has overspent in one area, it may need to transfer funds from another area to cover the shortfall. Virement is an important tool for ensuring that government agencies and organizations can operate effectively within their budgets, while still being able to adapt to changing circumstances. It allows for greater flexibility and responsiveness in budget management, while still maintaining overall fiscal responsibility. In summary, virement is the transfer of money from one sub-head to another in the public sector, and is an important tool for effective budget management.

Nwoye buys stock and pays by cheque. The entries in the books of Nwoye is Debit

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When Nwoye buys stock and pays by cheque, the entry in his books will be "Purchases; Credit bank". Here's why: - Purchases: This is the account that records the cost of the stock that Nwoye has purchased. - Credit bank: This account is credited because Nwoye paid for the stock using a cheque. When a payment is made by cheque, it is first recorded in the bank account and then transferred to the relevant account. In this case, the payment will be transferred from the bank account to the purchases account. To summarize, when Nwoye buys stock and pays by cheque, the purchases account is debited to reflect the cost of the stock purchased, while the bank account is credited to reflect the payment made by Nwoye. Therefore, the entry in Nwoye's books is "Purchases; Credit bank".

Use the following information to answer this question.

Acquisition cost of computers - Le 80,000
Installation cost - Le 20,000
Estimated residual value - Le 4,000
Estimated useful life - 5 years.

The depreciable value of computers is

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When allotments have been fully paid, subscribers are referred to as

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Every asset should have

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Use the following information to answer this question.

Cash purchase - D 29,641
Creditors 1/1/14 - D 2,473
Creditors 31/12/14 - D 3,117
Cash paid to creditors - D 127,345
Discount received - D 4,211

The total purchases is

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The total purchases is D 132,200. To calculate the total purchases, you need to add the cash purchase to the increase in the creditor's balance from the beginning of the year to the end of the year, and then subtract the cash paid to creditors and any discounts received. Using the given information: Cash purchase - D 29,641 Creditors 1/1/14 - D 2,473 Creditors 31/12/14 - D 3,117 Cash paid to creditors - D 127,345 Discount received - D 4,211 Beginning balance of creditors = D 2,473 Ending balance of creditors = D 3,117 Increase in creditor's balance = D 3,117 - D 2,473 = D 644 Total purchases = Cash purchase + Increase in creditor's balance - Cash paid to creditors - Discounts received Total purchases = D 29,641 + D 644 - D 127,345 - D 4,211 Total purchases = D 132,200 Therefore, the total purchases is D 132,200.

Cash paid to jake, N2,500 was entered on the credit side of his account and debited to cash account. This is an error of

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What is a general journal?

State six uses of the general journal

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(a) Outline three distinguished features of public and private companies.

(b) State three rights available to an ordinary shareholder.

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The following information was extracted from the books of Daudu Manufacturing company for the year ended 31st December 2012.

Stock of goods 1st January 2012:
Raw materials------------------8,000
Finished goods-----------------28,000
Work-in-progress ---------------2,000
Purchases of raw materials---40,000
Carriage inwards------------------1,000
Manufacturing wages-----------100,000
Sales------------------------------- 390,000
Rent--------------------------------  50,000
Factory expenses--------------   60,000
Royalties-------------------------      1500
Stock of goods - 31st December 2012
Raw materials-----------------------6,000
Finished goods---------------------26,000
Work-in-progress------------------1,5000
Depreciation:
Machinery----------------------------7,500
Delivery van------------------------- 1,280
Selling expenses ------------------ 3,000
Discount allowed------------------- 1,500

Additional information:
i. Factory expenses prepaid amounted to D5,000
ii. Selling expenses accrued was D2,500
iii. Rent is apportioned between factory and selling department in the ratio 5:3 respectively.

You are required to prepare Manufacturing, Trading, and Profit and Loss Account for the year ended 31st December 2012.

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Momoh enterprise cashbook showed a debit balance of Le4,500 on December 31, 2014. Further examination revealed the following:

- A direct debit of Le350 for subscription had been paid by the bank
- Bank charges of Le500 had not been reflected in the cash book
- Payment settled by standing orders were omitted from the cash book; electricity bill Le70, insurance Le100 and medical bill Le120.
- A dividend of Le320 paid directly into the bank had not been entered in the cash book
- It was discovered that the cash book balance brought down was undercast by Le180.
- Cheques amounting to Le4,800 issued had not been presented for payment
- Cheques amounting to Le1990 paid into the bank had not yet been credited

You are required to prepare; 

(a) The revised cash book

(b) The bank reconciliation statement as at December 31, 2014

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(a) What is depreciation of an asset?

(b) List three causes of depreciation.

(c) Explain the following methods of depreciation:

(i) straight line;
(ii) reducing balance;
(iii) revaluation.

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The following is the receipt and payments account of Kayode social club for the year ended 31st December 2014.

Receipts and payments for the year ended 31st December 2014

Additional  Information;

i. Equipment was valued at N3,250 and furniture N1,550 on 31st December 2013
ii. Depreciation to be provided as follows:
Equipment N505
Furniture N55
iii. The following expenses were outstanding
 Salaries   N300
Transport  N100
Repairs     N250
iv. Subscriptions owing by members were as follows:
31st December 2013    N1,200
31st December 2014    N2,100
v. The balance in the bank deposit account at 31st December 2013 was N300

 You are required to prepare;

(a) Statement of affairs as at 31st December 2013.

(b) Subscription account for the year ended 31st December 2014.

(c) Income and Expenditure account for the year ended 31st December 2014

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(a) List four items each that are found on the
(i) credit side of the sales ledger control account;
(ii) debit side of the purchases ledger control account.

(b) List seven types of errors a trial balance will not reveal.

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The following information relates to the books of accounts of Adom Ltd.

                      Trading, profit, and loss account for the year ended 31st December 2014

                                                        Balance sheet as at 31st December 2014

You are required to calculate any six of the following
(a) Gross profit percentage 
(b) Net profit percentage 
(c) Return on capital employed 
(d) Current ratio
(e) Acid test ratio
(f) Rate of stock of turnover
(g) Working capital
(h) Shareholders fund 
(i) Liquid assets

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