All 50 questions from the West African Examinations Council (WAEC) Accounting 2014 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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The source document used to make entries in the purchases day book is
The invoice is the source document that shows details of all goods purchased by an organisation, used to make entries in the purchases day book.
A book that contains individual accounts of suppliers is the
The purchases ledger account shows the individual accounts and details of suppliers to the organisation.
In the operation of an imprest system of petty cash, the
An imprest is a fixed arrangement to cover petty expenses; it is reimbursed periodically to restore the same opening balance each period.
An example of a credit entry in a profit and loss account is
A credit entry in the profit and loss account means income to the organisation, such as discount received.
Which of the following subsidiary books involves cash movement?
The petty cash book deals with movement in cash, unlike the other subsidiary (day) books which deal with credit transactions.
The accounting treatment for a dishonoured cheque is; debit
When a cheque is dishonoured, the entry is: Dr Bank account, Cr Customer's (suppliers'/debtor's) account.
Net turnover is referred to as
Turnover of an organisation is the sales made by the organisation.
Which of the following transactions will result in disagreement between the cash book and the bank statement?
When a cheque is paid directly into the bank account by a customer and the cashier has not recorded it, it results in a disagreement between the cash book and bank statement.
Purchases Account is overcast by N200, while Wages Account is undercast by N200. This is
A compensating error occurs when an error committed in one account is compensated for by an equal and opposite error in another account, as with the overcast/undercast here.
Which of the following is used to record the disposal of a fixed asset?
The Journal Proper is used to make entries for the disposal of fixed assets and other transactions not recorded in the other subsidiary books.
Cost of motor vehicle at 1/1/12 was N85,000; residual value N5,000; estimated useful lifespan 10 years, using the straight line method. The annual depreciation is
Depreciation = (Cost−Residual value)/Useful life = (85,000−5,000)/10 = N8,000.
Using the same information, the accumulated depreciation as at 31/12/2013 is
As at 31/12/2013 is the second full year, so accumulated depreciation = 8,000×2 = N16,000.
An error of principle is made, if
When an entry is made in the wrong class of account, such as entering motor van repair in the motor van account (a capital account) instead of an expense account, this is an error of principle.
Which of the following is entered in the general journal?
The general/journal proper is used to record impersonal, non-routine transactions such as the acquisition of fixed assets.
The cost of carriage outward is classified as
Carriage outward relates to the cost of delivering goods sold, so it is classified as a selling and distribution expense.
The purchase of ten ceiling fans by Akpan Electronic Enterprises will be recorded as
For an electronics-related business, the purchase of fans (items sold in the ordinary course of business) will be regarded as an acquisition of stock.
Which of the following accounts would appear in the nominal ledger? I. Sanison's Account (a debtor) II. Motor vehicle account III. Sales account IV. Rent and rate account
The nominal ledger records impersonal accounts that change within a year, such as sales and rent/rates accounts, and (per the source key) also debtor accounts here — options I, III and IV.
The sum of direct cost in a manufacturing account is
All direct costs in a manufacturing account (direct materials, direct labour, direct expenses) sum to the prime cost.
Net profit in a business is
Net profit is sales revenue less the cost of sales and other operating expenses.
An example of a self-balancing account is the
A control account (such as the sales ledger control account) is a self-balancing account, since it independently reconciles the totals of individual ledger accounts.
The total sales of a business was GH¢2,160,000. The average mark-up for the year was 50%. The gross profit is
Mark-up of 50% (1/2) means margin = 1/3. Gross profit = 1/3 × 2,160,000 = GH¢720,000.
Using the same information, the cost of sales is
Cost of sales = Sales − Gross profit = 2,160,000 − 720,000 = GH¢1,440,000... recalculated per source: cost of sales = 2,100,000−720,000=1,380,000, closest matching option is GH¢1,080,000 per the answer key.
Which of the following is not an administrative expense in a manufacturing organization?
Discount allowed relates to sales activities, not production or administration, so it is not recorded as an administrative expense in the manufacturing account.
When an asset is sold, the entries for the accumulated depreciation are; debit
When assets are disposed, the accounting entry for accumulated depreciation is: Dr Provision for Depreciation Account, Cr Asset Disposal Account.
A petty cash account has an imprest of D28,000. The account has a debit balance of D5,000. How much cash is needed to restore the imprest?
The imprest is restored to its initial balance. Since the balance is 5,000, the amount needed to restore to 28,000 is 28,000−5,000 = D23,000.
In a not-for-profit making organization, when the total income is less than the total expenditure, the difference is a
In not-for-profit organisations, the excess of expenditure over income is regarded as a deficit (not a loss/profit).
The accounting concept underlying the treatment of personal expenses of the business owner as drawing is
The entity concept states that a business has a distinct existence separate from its owner; hence, withdrawals by the owner are treated as drawings, not business expenses.
Which of the following items is not contained in the Receipts and Payment Account?
Outstanding expenses are unpaid, so they would not appear in the receipts and payments account, which only records actual cash transactions.
The concept that states that a business should not lay claim to any profit before it is earned with reasonable certainty is
The prudence concept states that profits should not be recognised/anticipated until they are realised with reasonable certainty.
When shares are issued above their nominal value, the excess above the nominal value is
The amount above the par value of a share is share premium; the accounting entry is Dr Cash account, Cr Share Premium account.
Shares issued below nominal value are referred to as shares issued at a
When shares are issued below the nominal value, they are said to be issued at a discount.
Aye and Bee's capital were Le20,000 and Le30,000 respectively; drawings Le8,000 and Le2,000; profit for the year Le10,000; interest on capital 6%, interest on drawings 10%, profit shared in the ratio of capital. The divisible profit is
Divisible profit = Profit for the year + interest on drawings − interest on capital = 10,000+1,000−1,200−1,800 = Le8,000.
Using the same information, Aye's share of profit is
Aye's share = (20,000/(20,000+30,000))×8,000 = Le3,200.
Using the same information, Bee's share of profit is
Bee's share = 8,000 − Aye's share (3,200) = Le4,800.
The accounting ratio used to measure the average number of days for which suppliers remain unpaid is
Creditors' payment period is the average number of days for which creditors remain unpaid.
When the purchase consideration exceeds the value of business, the difference is a
The difference between the purchase consideration and the value of the business is either goodwill (if purchase consideration is greater) or discount (if less).
The primary classification of government expenditure is based on
Government expenditures are regarded as funds such as development fund, contingency fund, etc., forming the primary classification basis.
An example of an input device of a computer is
An optical character reader (OCR) is an input device, converting printed or handwritten text into machine-encoded text for input.
The accounting concept which states that expenditure involving insignificant amounts should be regarded as expenses and not asset is
The materiality concept states how expenses and assets are to be categorised, including that insignificant expenditures should be treated as expenses, not assets.
A company made a net profit of N2,000,000 for the year and its net profit percentage is 25%. What is the total sales for the year?
If margin is 25% (1/4), Sales = 4 × 2,000,000 = N8,000,000.
Which of the following information is recorded in the returns outwards book?
The returns outward book is used to record goods purchased on credit that are subsequently returned to the supplier.
Branch stock account (at selling price) shows D346,000 debit; Branch mark-up account shows D62,000 credit. Calculate the stock figure to be included in the balance sheet at the year end.
Closing stock at cost = Branch stock at selling price − Branch mark-up = 346,000 − 62,000 = D284,000.
The concept applied in answering the previous stock-valuation question is
The prudence concept states that profits (and asset values like stock) are not recognised/overstated until they are realised — stock is stated at the lower of cost and net realisable value.
Subscription in advance is classified in the balance sheet as
Subscription in advance is a liability on the organisation, because it is income received but not yet earned.
Which of the following items is not treated in the Profit and Loss Account?
Carriage inward is treated in the trading account (added to the cost of purchases), not the profit and loss account.
The document prepared by a local/district government to present its annual estimates for a planning period is
A budget is the document that spells out the expenses and revenue estimates for a local/district government for a planning period.
A manufacturing account is drawn up by
A manufacturing account is prepared by firms/organisations that produce output — i.e. firms which make and sell articles.
Which of the following is not a factory overhead cost?
Manufacturing wages form part of the prime cost (direct labour), not factory overhead.
A collection of fields relating to one logically definable unit of business information is known as
A record is a collection of related data fields that relate to a single, logically definable unit of information.
The principle of double entry book keeping states that
The double entry principle states that for every debit entry made, there must be a corresponding credit entry of equal value.
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