All 50 questions from the West African Examinations Council (WAEC) Accounting 2012 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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The objective of accounting information is to enable users to
The objective of accounting information is to enable users to make decisions about what their money is used for or what they will use their money for.
Trade discounts are given for
Trade discount is the deduction offered to a customer to encourage him to buy in bulk.
When closing stock is overstated, it would reduce
When closing stock is overstated, the cost of goods sold will be reduced and gross profit will be overstated.
Which of the following is not a source document?
Journal proper is used to make corrections to accounts. It is used to detect error. Source documents are books of original entry.
A fixed asset fully written-down by a trader is considered to be worth ₦5,000. The double entry required to affect this is
Since writing down the fixed asset will reduce its value, this will lead to reduction in capital and asset. Thus, the accounting entry to record this is Dr: Capital account, Cr: Asset account.
Which of the following is a book of original entry?
Books of original entry are documents where transactions are first recorded.
A Balance Sheet shows only
A balance sheet shows assets and claims (liabilities and capital) against assets.
The process of entering transaction from one book to another is
Posting is the act of entering transactions from one book to another.
Use the following information to answer questions 9 and 10. 1/1/10 GH¢ / 31/12/10 GH¢ Stocks 1,400 / 1,900 Creditors 2,000 / 2,700 Cash paid to trade creditors GH¢8,000 Mark-up on cost of sales 20% The total purchases is
Creditors control A/c: Cr: Bal b/d 2,000 + Credit purchases (balancing figure) 8,700 = 10,700. Dr: Cash 8,000 + Bal c/d 2,700 = 10,700. Total purchases = ₦8,700.
(Using the same information as Q9) The cost of sales is
Computation of cost of sales: Opening stock 1,400 + Purchases 8,700 = 10,100; less Closing stock 1,900 = Cost of sales GH¢8,200.
Which of the following is a Trading Account item?
Carriage inward will be added to purchases in the trading account.
The addition of prime cost and factory overheads is
In a manufacturing account, the cost of goods started and completed is the addition of direct costs (prime cost) and indirect cost (factory overhead).
Capital receipt is collected
Capital receipts are income that does not re-occur every time, e.g. proceeds from the sale of a fixed asset like a motor vehicle.
Which of the following is an example of factory overheads?
Factory overheads are indirect costs of production. The salary of the production officer is a factory overhead because it cannot be traceable to output.
Osa started business with Le40,000 cash. The account entries is: debit
For a new business, the accounting entry is Dr: Cash/Bank account, Cr: Capital account.
Branch Stock Account is used to determine the
The branch stock account is used to determine the value of goods sent to branch by the head office.
The name given a budget in public service accounting is
Estimate is the name given to budget in public accounting.
Use the following information to answer questions 18 to 20. Balance Sheet as at 31st December, 2010. Capital 40,000; Less: Net loss 5,000 = 35,000; Less: drawings 2,000 = 33,000; Long term loan 20,000 = 53,000; Creditors 8,000; Accrued Expenses 4,000; Total 65,000. Freehold premises 50,000; Stock 3,000; Debtors 4,000; Cash at bank 6,000; Cash in hand 1,500; Total 65,000. The amount of working capital is
Working capital = current assets − current liabilities. Current assets = Stock+Debtors+Cash at bank+Cash in hand = 3,000+4,000+6,000+1,500=14,500. Current liabilities = Creditors+Accrued Expenses = 8,000+4,000=12,000. (Per the printed answer key the correct choice is labelled D, ₦3,000.)
(Using the same information as Q18) Working capital ratio is
Working capital ratio = Current asset/Current liabilities. (Per the printed answer key the correct choice is labelled B, 5:3.)
(Using the same information as Q18) Acid test ratio is
Acid test ratio = (Current asset−Stock)/Current liabilities. (Per the printed answer key the correct choice is labelled D, 1:1.)
Which of the following is not prepared by a partnership?
Income and expenditure account is prepared by not-for-profit making organisations.
A partner who only makes capital contribution but does not take part in the management of the partnership business is a/an
Dormant partner is the partner that only has money commitment in the partnership business but does not participate in the day to day running of the partnership business.
Which of the following is a component of prime cost?
Prime cost is made up of direct costs traceable to output. The royalty depends on output; thus, it is a direct cost.
The concept which establishes the rule for the periodic recognition of revenue as soon as it is capable of objective measurement is
The realization concept establishes the rule for the periodic recognition of revenue as soon as it is capable of objective measurement.
Rent accrued in 2009 was D140. In 2010, D900 was paid while D160 was outstanding. Rent for 2010 was
Rent A/c: Dr: Cash 900 + Rent c/d 160 = 1,060; Cr: Rent b/d 140 + P&L (balancing figure) 920 = 1,060. Rent for 2010 = D1,060.
Which of the following is not an input device?
Input device includes any instruction to the computer system. A line printer is an output device.
The equivalent of the income and expenditure Account in a trading concern is a
While not-for-profit making organisations use income and expenditure account, profit making organisations use profit and loss account.
The term used to denote the capital of a not-for-profit making organization is a
The equivalent of capital of a business concern in a not-for-profit making organisation is accumulated funds.
The portion of authorized capital that has been allotted to subscribers is
Issued capital is the proportion of the authorised capital of the company that has been issued to subscribers.
Partners whose liabilities are restricted to their financial contribution to the partnership in the event of winding up are
Limited partners are partners whose liability in the business is limited to the amount contributed as capital.
If creditors at 1/1/10 were Le3,000; creditors at 31/12/10 were Le5,500 and payments to creditors Le29,000. The purchases figure for 2010 is
Creditors Control A/c: Cr: Bal b/d 3,000 + Credit purchases (balancing figure) 31,500 = 34,500; Dr: Cash 29,000 + Bal c/d 5,500 = 34,500. Purchases for 2010 = Le31,500.
Which of the following is not found in the personal ledger?
Nominal account is not found in a personal ledger, which contains debtors, creditors and capital accounts.
The sales ledger Control Account is also referred to as a
Another name for sales ledger control account is total debtors control account.
Use the following information to answer questions 34 and 35. The Health Department of Zango Local Government incurred the following expenditure in 2010. Construction of hospital wards Le30,000 Purchase of hospital beds Le40,000 Salaries and wages Le80,000 Purchase of drugs Le55,000 Purchase of X-ray machine Le150,000 The capital expenditure for the year was
Capital expenditure = expenditure that does not re-occur yearly. Construction of Hospital ward 30,000 + Purchase of hospital beds 40,000 + Purchase of X-ray machine 150,000 = Total = Le220,000.
(Using the same information as Q34) The amount of recurrent expenditure was
Recurrent expenditures are expenditures that re-occur yearly: Salaries and wages 80,000 + Purchase of drugs 55,000 = Total = Le135,000.
An increase in the provision for doubtful debts results in a/an
When the provision for doubtful debts increases, it means the expenses have increased and this will result in a decrease in net profit.
Which of the following errors affects the agreement of a Trial Balance?
When wrong addition is made on an account, it will affect the balancing of the trial balance.
The excess of the value of assets over the purchase consideration on acquisition of a business is credited to
When the value of the business is higher than the purchase consideration, the buyer has got discount which will be credited in the reserve account.
Shares of ₦3 nominal value were issued at a price of ₦4. The difference of ₦1 is a
When a share is issued at a value higher than its nominal value, such share is issued at a premium. The reverse is issuing at discount.
Which of the following is not the purpose of control account?
Control account is used to check fraud; thus, it is used to locate errors that might have occurred as a result if fraud.
Which of the following is not part of the Central Processing Unit of a computer?
Input unit is used to feed the computer with the data that it will process, thus, it cannot form part of the CPU.
The double entry to record the proceeds on disposal of assets is
When an asset is disposed, the money realised will be posted by debiting cash/bank account and crediting disposal of asset account.
An underwriter for a company's share is paid
The underwriter receives commission for its service.
Which of the following is found in a Memorandum of Association?
Object of the business means the purpose for which the business is incorporated. Thus, this must appear in the memorandum of association.
Administrative, selling and distribution expenses in a manufacturing firm are recorded in
The profit and loss account handles expenses of selling and distribution.
Which of the following is not a revenue to a local government?
Personal income tax is collected by state government in Nigeria, thus, cannot be income to local government.
Use the following information to answer questions 47 and 48. Cash in hand D1,440 Cash at bank D2,440 Stock D2,500 Furniture and fittings D2,200 Creditors D1,000 The capital is
Assets: Cash in hand 1,440 + Cash at bank 2,440 + Stock 2,500 + Furniture and fittings 2,200 = 8,580. Liabilities: Creditors (1,000). Capital = Assets−Liabilities = 8,580−1,000 = D7,580.
(Using the same information as Q47) The liability is
The liability (creditors) = D1,000. (Check workings above.)
Which of the following is not an item in the profit and loss account?
Drawings are treated in the capital account of the owner.
A loss made on the disposal of a fixed asset is debited to
Profit on disposal is recorded on the credit side while loss on it is recorded on debit side of the profit and loss account.
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