WAEC Accounting 2014 Theory — Question 6

Model answer

(a) Receipts and payments account: (i) It records only cash transactions; (ii) It has an opening and closing balance; (iii) It debits receipts and credits payments. (b) Income and expenditure account: (i) It records income and expenditure on an accrual basis (not just cash); (ii) It matches expenses and income with the year to which they relate; (iii) It is the equivalent of a trading, profit and loss account for a non-profit organisation. (c) Trading account: (i) It is used to determine gross profit; (ii) It shows the cost of goods sold; (iii) It also shows the cost of goods available for sale. (d) Profit and loss account: (i) It is used to determine net profit; (ii) It records selling, distribution, and administrative expenses; (iii) It records other incomes not from the normal trading activities of the organisation. (e) Appropriation account of a partnership: (i) It is used to share profit (and loss) among partners; (ii) It records all partners' transactions with the business; (iii) It records interest on drawings, interest on capital, and partners' salaries.