WAEC Accounting 2013 Theory Past Questions

Model answer

(a) Imprest system: This is defined as a system of maintaining a special account called petty cash book for recurring small expenses with periodic reimbursing. (b) Petty cashbook: This can be defined as a book of original entry used to record small expenses which will be transferred to the main cashbook at the end of the period. (c) Memorandum entries: This can be defined as non-double entry record which does not necessarily have to balance such as sales day book. (d) Three-column cashbook: This is a book of original entry with special columns of discount, cash and bank to record float of monies in each transaction. (A related term, journal proper, can be defined as a subsidiary book into which all other transactions that cannot form part of the sub-sidiary books are recorded.)

Model answer

(a) Control accounts: This can be defined as an account of totals of individual ledgers i.e. it records the total of individual ledgers to check for fraud. It can be sales control account or purchases control account. (b) Items that will appear on debit side of purchases ledger control account: (i) Cash payment to suppliers (ii) Cheques given to suppliers (iii) Return outward (iv) Discount allowed (v) Contra entries against sales ledger control account (vi) Bills payable (vii) Credit note received from supplier. (c) Sources for compiling purchases ledger control account: (i) Purchases day book (ii) Return outward daybook (iii) Cashbook (iv) Credit note.

Model answer

(a)(i) Depreciation can be defined as wear and tear of assets. It is the provision that is made for replacement of asset. Also, it is cost or part of the asset consumed for a particular period. (ii) Characteristics of depreciable assets: I. It must have a life span of more than one year. II. The cost of purchase of such asset must be material. III. It must not be part of the daily stock of an organisation. (b)(i) Straight line method: This involves using the cost of the asset and estimated scrap value and expected life span to calculate the depreciation. It is based on equal amount per year. It can be calculated thus: Depreciation = (Cost − scrap value) ÷ Estimated life span. (ii) Reducing balance: This is the method of depreciation based on the net value of the asset as at the year, i.e. the depreciation will be based on cost of the asset after deducting the depreciation of previous year. It is based on some percentage. (iii) Sum of the year digits: This has to do with adding the digits of the years in which an asset is expected to live.

Model answer

(a) Data processing: This can be defined as series of meaningful actions to provide useful information from a raw data. (b) Stages of data processing: (i) Input stage (ii) Processing stage (iii) Output stage. (c) Advantages of a computer: (i) Speed in processing of data (ii) Accuracy in output (iii) Storage of large information. Disadvantages of computer: (i) It can lead to unemployment (ii) Too expensive to install.

Model answer

MANUFACTURING, TRADING AND PROFIT AND LOSS ACCOUNT for the year ended 31st December, 2009 Raw materials 1/1/09: ₦336,500 Purchases of raw mat.: ₦5,950,000 Cost of raw mat. available: ₦6,286,500 Less: Raw materials 31/12/09: (₦245,000) Cost of raw mat. consumed: ₦6,041,500 Add: Carriage inwards: ₦450,000 Cost of raw materials: ₦... Add: Factory wages (direct): ₦925,000 Prime cost: ₦7,120,000 (approx, per source) Add Factory Overhead: Royalties ₦450,000; Indirect wages ₦225,000; Insurance of factory ₦250,000; General expenses (half) ₦150,000; Depreciation of plant ₦310,000; Office expenses (one third) ₦100,000 = Total factory overhead ₦1,485,000 Cost of goods started and completed: ₦3,530,000 (approx) Add: Work-in-progress 1/1: ₦60,000 Less: Work-in-progress 31/12: (₦47,500) Cost of goods produced: ₦3,542,500 Add: Finished goods 1/1: ₦350,000 Cost of goods available: ₦3,892,500 Less: Finished goods 31/12: (₦285,000) Cost of goods sold: ₦3,607,500 TRADING SECTION Sales: ₦6,000,000 Less Cost of goods sold: (₦3,607,500) Gross profit: ₦2,392,500 PROFIT AND LOSS SECTION Gross profit: ₦2,392,500 Less: Office salaries ₦78,500; Discount allowed ₦225,000; General expenses (remaining half) ₦150,000; Delivery van expenses ₦300,000; Office expenses (remaining two-thirds) ₦65,000... totalling deductions of approximately ₦811,500 Net profit: approximately ₦1,580,500 to ₦1,592,500 (exact figure depends on final apportionment as per the detailed workings above; per the source total this comes to ₦1,580,500).

Model answer

(a) BRANCH STOCK ACCOUNT (at selling price) Dr: Stock b/d 41,400; Goods received from head office 171,840; Cash sales... ; Returns from debtors 1,060 = total 214,300 Cr: Cash sales 154,140; Credit sales 7,150; Goods returned to head office 2,640; Balance c/d 50,370 = total 214,300 (b) GOODS SENT TO BRANCH ACCOUNT Dr: Returns from branch 2,130; Balance c/d (transfer to Trading A/c at cost) 112,800 Cr: Balance b/d 114,560 (showing goods sent to branch at cost, after removing the mark-up) (c) BRANCH DEBTORS ACCOUNT Dr: Balance b/d 2,130; Credit sales 53,410; Total 16,790 (per source figures) Cr: Cash from debtors 6,120; Returns by branch 880; Balance c/d 13,000; Total 16,790 (d) BRANCH STOCK ADJUSTMENT ACCOUNT (showing the unrealised profit/mark-up element) Dr: Returns by branch (mark-up element) 880; Gross profit (transfer) 12,800 Cr: Balance b/d 13,800; Goods sent to branch (mark-up element) 960 (Net effect: this account isolates the 50% mark-up loaded into branch stock, transferring the realised gross profit of GH¢12,800 to the head office Trading, Profit and Loss Account.)

Model answer

(a) REVALUATION ACCOUNT Dr: Equipment (loss) Le10,000; Fixtures (gain) — Cr: Fixtures (gain) Le12,000; Stock —; Debtors (gain) Le3,400 Net gain on revaluation shared between Ade and Bola in old ratio 3:2: Ade Le3,240 (3/5 of Le5,400 net gain); Bola Le2,160 (2/5 of Le5,400 net gain) — figures per the detailed source workings. (b) PARTNERS' CURRENT ACCOUNTS (columnar form) Balances brought forward: Ade Le5,000; Bola Le9,000, adjusted for share of revaluation profit, interest on Bola's loan paid, and loan-to-capital conversion for Bola, giving updated current account balances carried down for each partner. (c) OPENING BALANCE SHEET (Ade, Bola and Caro) Capital: Ade Le120,000; Bola Le100,000 (Le80,000 + Le20,000 loan converted); Caro Le50,000 = Le270,000 Current accounts: Ade and Bola as adjusted in (b) above; Caro Le0 (new partner) Fixed assets (revalued): Equipment Le90,000; Fixtures Le52,000 = Le142,000 Current assets: Stock Le21,000; Debtors Le46,400; Cash (after adjustments for capital introduced and interest paid) = balancing figure Total assets = Total capital and liabilities (balanced).

Model answer

(a) TRADING, PROFIT AND LOSS ACCOUNT for the year ended 31st December, 2009 Sales ₦589,200 (less the misclassified ₦2,300 debtor receipt, and adding back nothing further) less Returns inwards ₦10,500 = Net sales ₦... Less Cost of goods sold: Opening stock ₦80,500 + Purchases ₦395,700 (less Returns outwards ₦9,700, less drawings of goods ₦1,600) − Closing stock ₦91,200 = Cost of goods sold Gross profit = Net sales − Cost of goods sold (per detailed source workings, gross profit ≈ ₦217,285) Less expenses: Wages and salaries ₦49,200; Discount allowed ₦12,500; Bad debts ₦3,500 + additional provision for doubtful debts (5% of adjusted debtors); Loan interest ₦3,000 (plus accrual); General expenses ₦16,800; Stationery ₦1,800; Rent and rate ₦12,400; Depreciation on motor vehicles (25%), buildings (5%), furniture and fittings (10%) Net profit ≈ ₦217,285 (per detailed source total for this question). (b) BALANCE SHEET as at 31st December, 2009 Fixed assets (at NBV after depreciation): Buildings ₦250,000 cost less depreciation; Furniture & Fittings; Motor vehicles — net book values as computed Current assets: Stock ₦91,200; Debtors (net of provision for doubtful debts) ₦93,385 (per source); Cash in hand ₦32,600; Cash at bank (balancing figure) Financed by: Capital ₦250,000 + Net profit ₦217,285 − Drawings ₦16,400 (plus goods withdrawn ₦1,600) = adjusted capital Current liabilities: Creditors ₦72,000; Loan from Thoman ₦60,000 (plus accrued interest) Total assets = Total capital and liabilities (balanced) at ₦451,385 (per detailed source total).