All 50 questions from the West African Examinations Council (WAEC) Accounting 2016 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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1. External users of accounting information include A. employees B. management C. bankers D. directors
External users are those who are not part of the organisation. Bankers are not part of the organisation.
2. Every asset should have A. a non-monetary value B. tangible and intangible qualities C. monetary cost and future benefit D. an inadequate monetary value
Assets must be quantifiable in monetary terms and also have future benefit it serves.
3. Which of the following are impersonal accounts? I. Investment II. Creditors III. Premises IV. Debtors V. Salaries A. I, III and IV B. II and IV C. I, III and V D. II, III and V
Impersonal accounts are real and nominal accounts. Investment, Premises and Salaries fall under this category.
4. Nwoye buys stock and pays by cheque. The entries in the books of Nwoye is debit A. Purchase; Credit cheque B. Purchase; Credit bank C. Bank; Credit Purchase D. Cheque; Credit Purchases
The transaction is treated thus: Dr Purchases A/c; Cr Bank A/c.
5. A bank statement shows an overdraft of GH¢190,000. Kofi, a debtor, paid GH¢400,000 into the account. The new bank balance is A. GH¢590,000 B. GH¢590,000 overdrawn C. GH¢210,000 D. overdrawn
Bank balance (overdraft) = (190,000); Direct payment = 400,000; New balance = 400,000-190,000 = GH¢210,000.
6. Which of the following errors are errors of commission? I. A cheque paid to Adom debited to Adam's account II. 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 A. I and IV C. II and IV D. III and IV
Error of commission is committed when an account is posted in a wrong account with similar curve/name, e.g. Adom's transaction posted into Adam A/c.
7. 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? A. GH¢8,000 B. GH¢6,000 C. GH¢4,000 D. GH¢2,000
The reimbursement to petty cashier to keep the imprest is the amount spent from the imprest: 6,000-2,000=GH¢4,000.
8. 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 A. Principle B. Commission C. Complete reversal of entries D. Original entry
The entry was reversed. Since cash is paid to Jake, correct posting is Dr Jake A/c, Cr Cash A/c, but it was posted the other way — a complete reversal of entries.
9. One of the purchases invoice of Mr. Dauda showed D96,240 less 12½% trade discount and cash discount of 20%. Since Mr. Dauda paid the amount due within the credit period, the amount paid is A. D77,368 B. D73,157 C. D67,368 D. D63,157
Trade discount=12.5%×96,240=D12,030; balance after trade discount=D84,210; cash discount=20%×84,210=D16,842; amount paid=84,210-16,842=D67,368.
10. Bank reconciliation statement is prepared to reconcile the differences between A. bank statement and credit transfers B. Cash book and bank transfers C. bank statement and cash transfers D. cash book and bank statement
Bank reconciliation statement is the statement prepared to investigate the difference that occurred between the cashbook and the bank statement.
11. Which of the following items of expense involves actual cash payment? A. Discounts allowed B. Provision for depreciation C. Carriage outwards D. Allowance for doubtful debts
Carriage outwards involves actual cash payment because the carrier will collect cash and not provision.
12. 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 A. materiality concept B. dual aspect concept C. matching concept D. money measurement concept
Matching concept states that accounts relating to a particular year should be matched with the year. Since the sale is made during the year, then it must appear in the account for the year.
13. In accounting context, purchases refer to A. goods bought and paid for only B. goods bought for resale only C. goods bought on credit only D. goods bought to be used in the firm only
Purchases, in accounting means goods that are bought for stock, which are intended for resale.
14. Which of the following items is a current liability? A. Stock of raw materials B. Cash in hand C. Bills payable D. Cash at bank
Current liabilities are claims against the assets of the company which lasts for a single year, such as bills payable.
15. The balance sheet is prepared to reveal A. the result of the operations for the period under review B. the financial position of the business C. the arithmetical accuracy of the ledger accounts D. the accruals and payments
Balance sheet is prepared to reveal the financial position of an organization.
16. The excess of cost of goods sold over net sales is A. gross profit B. gross loss C. net profit D. net loss Use the following information to answer questions 17 and 18 Rent prepaid 1/01/2014: N600; Rent paid 31/12/2014: N3,000; Rent prepaid 31/12/2014: N400
Gross loss occurs when cost of goods sold is greater than the net sales.
17. Rent for 2014 chargeable to the profit and loss account is A. N4,000 B. N3,200 C. N3,000 D. N2,800
Rent A/c: Bal b/d 600 + Cash 3,000 = 3,600; P&L (rent chargeable) = 3,600-400(bal c/d)=N3,200.
18. The balance sheet as at 31st December, 2014 will show A. current asset of N600 B. current asset of N400 C. current liability of N400 D. current asset of N600
Prepaid is a current asset for the person/business; the N400 prepaid rent is shown as a current asset.
19. Which of the following would result from an increase in the provision for doubtful debts? A. A decrease in gross profit B. A decrease in net profit C. An increase in gross profit D. AN increase in net profit
Provision for doubtful debt is an expense to the business. Thus, when it is increased, the expense total increases and this will lead to decrease in net profit. Use the following information to answer questions 20 and 21. Acquisition cost of computers 80,000; Installation cost 20,000; Estimated residual value 4,000; Estimated useful life 5 years
20. The depreciable value of computers is A. Le80,000 B. Le 96,000 C. Le 100,000 D. Le 104,000
Depreciable value = (80,000+20,000)-4,000 = Le96,000.
21. The total cost of the computers is A. Le80,000 B. le96,000 C. Le 100,000 D. Le 104,000
Total cost of computer = Le80,000+Le20,000 = Le100,000.
22. Which of the following expenses constitutes prime cost? I. Direct labour cost II. Factory overheads III. Hiring of machine for production IV. Warehouse rent A. I and II only B. I and III only C. I, II and III only D. I, II and IV only
Prime cost can be defined as all direct cost of production, i.e. the cost that can be traced to unit of output produced — direct labour cost and hiring of machine for production.
23. Partly manufactured goods are treated in the balance sheet of a manufacturing company as A. current assets B. fixed assets
Partly manufactured goods (work-in-progress) forms part of the stock. Thus, it is treated as current assets. Use the following information to answer questions 24 and 25 Cash purchase D29,641; Creditors 1/1/14 D3,473; Creditors 31/12/14 D3,117; Cash paid to creditors D127,345; Discount received D4,211
24. The credit purchases is A. D161,841 B. D156,986 C. D134,673 D. D132,200
Purchases Control A/c: Cr side (Discount Received 4,211 + Cash 127,345 + Bal c/d 3,117) = Dr side (Bal b/d 2,473 + Credit purchases). Credit purchases = 4,211+127,345+3,117-2,473 = D132,200.
25. The total purchases is A. D161,841 B. D156,986 C. D134,673 D. D132,200
Total purchases = Credit purchases + Cash purchases = D132,200 + D29,641 = D161,841.
26. Offei, a petty trader, sold goods for GH¢36,240. The gross profit being 33⅓% on cost. What was the cost price? A. GH¢45,300 B. GH¢28,992 C. GH¢27,180 D. GH¢24,160
Gross profit mark-up=1/3; profit margin=1/(3+1)=1/4=25%; cost=100%-25%=75% of sales price=75%×36,240=GH¢27,180.
27. Which of the following is a credit item in an Income and Expenditure account? A. Electricity B. Donations C. Stationery D. Bar suppliers
Donations is an income to the organisation. Incomes are credited to the income and expenditure account.
28. Purchases of fixtures and fittings by a club is recorded in the A. Receipts and Payments Account only B. Income and Expenditure only C. Receipts and Payments Account and Balance sheet D. Income and Expenditure Account and Balance sheet
Fixtures and fittings are assets. Purchase is treated as Dr Furniture & Fittings A/c, Cr Cash/Bank A/c; the balance is transferred to the balance sheet.
29. The concept which states that the affairs of a business is to be treated as being separated from the private activities of the owner is A. realization concept B. business entity concept C. cost concept D. dual aspect concept
Business entity concept states that the business is an artificial entity separate from the owner.
30. Where fixed capitals are maintained in a partnership, share of profits are A. credited to partners capital accounts B. credited to partners current accounts C. debited to partners capital accounts D. debited to partners current accounts
When fixed capital is maintained in a partnership, the individual monetary relation of the partners with the partnership business is treated in the current account. Thus, share of profit is credited to Partners Current Account.
31. In the absence of a partnership agreement, additional capital contributions by partners attract interest of A. 5% B. 10% C. 12% D. 15%
When there is no partnership deed, any partner who applies additional capital will attract 5% interest per annum.
32. In preparing partnership accounts, interest on drawings is debited to A. current accounts and credited to capital account B. appropriation account C. drawings account D. profit and loss account
Interest on drawing is an income to partnership business but expense to the partners. It is treated as Dr Partners Current A/c, Cr P&L Appropriation A/c.
33. When allotments have been fully paid, subscribers are referred to as A. allotters B. applicants C. non-members D. shareholders
When allotments have been fully paid, subscribers become shareholders. Use the following information to answer questions 34 to 36. 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.
34. The subscribed share capital is A. N300,000 B. N250,000 C. N200,000 D. N150,000
Since all those who applied paid, then all of them subscribed. Thus, the price paid = N1 × 200,000 = N200,000.
35. The unsubscribed share capital is A. N300,000 B. N200,000 C. N150,000 D. N100,000
Unsubscribed is the one for which application is yet to be received = N1 × 100,000 = N100,000.
36. The Authorised share capital is A. N300,000 B. N250,000 C. N200,000 D. N150,000
Authorised share capital = N100 × N300,000 = N300,000.
37. The Branchy Current Account records A. head office transactions with the branch B. branch transactions with the head office C. goods sent to branch at selling price D. cash received from branch
The branch current account is used to record the relationship between the branch and the head office.
38. The entries for credit sales at branch where the Head office keeps all records are: Debit A. Branch Stock Account; Credit Branch Debtors Account B. Branch Debtors Account; Credit Branch Stock Account C. Branch Debtors Account; Credit Branch Adjustment Account D. Branch Adjustment Account; Credit Branch Debtors Account
When the head office keeps the branch accounts, credit sales will be treated as Dr Branch debtors account, Cr Branch stock account.
39. The cost of goods returned by branch to head office is debited to A. Branch Stock Adjustment Account B. Goods sent to Branch Account C. Branch Stock Account D. Branch Profit and Loss Account
Goods returned to head office is treated as Dr Goods sent to branch A/c, Cr Branch stock A/c.
40. Which of the following is a source of local government revenue? A. Excise duties B. Market dues C. Import duties D. Loans and grants
Market dues is a source of local government revenue.
41. The transfer of money from one sub-head to another in the public sector is A. budgeting B. allocation C. retirement D. virement
Virement is the document used to transfer money from one sub-head to another sub-head in the public sector.
42. The total of the discounts received column in the three-column cash book is A. debited to Discount Received Account B. credited to Discount Received Account C. debited to Discounts Allowed Account D. credited to Discounts Allowed Account
Discount received is an income A/c, thus the total money in the discount received column, of the three-column cash book is treated as Dr Purchase control A/c, Cr Discount received A/c.
43. Which of the following expense is apportioned between departments based on sales? A. Discount received B. Electricity C. Carriage inwards D. Carriage outwards
Carriage outwards is the cost incurred to carrying goods sold out to the organisation. Thus, it is a sales related expense, apportioned based on sales.
44. 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 A. bonus B. goodwill C. net profit D. premium
When a buyer pays more than the value of the net assets of a business, the excess is called goodwill.
45. Assets which are readily convertible into cash are termed as A. liquid assets B. fixed assets C. intangible assets D. tangible assets
Assets which are readily convertible into cash are termed liquid assets.
46. A loan to a company under the company's seal is A. fixed deposit B. mortgage C. bond D. debenture
Debenture is a document which indicates a company's indebtedness to the bearer. This is a form of long-term loan.
47. Debts that a firm is unable to recover are debited to A. Bad Debts Account and credited to B. Suppliers Account C. Customers Account D. Cash Account
Bad debts are treated as Dr Bad debt A/c, Cr Sales control A/c.
48. When a fixed asset is disposed off, the accounting entries to write off the asset are Debit A. Profit and Loss Account; Credit Asset Disposal Account B. Asset Disposal Account; Credit Asset Disposal Account C. Profit and Loss Account; Credit Asset Account D. Provision for Depreciation Account
For disposal of an asset, the accounting entries are: Dr Disposal of assets A/c, Cr Asset A/c.
49. The financial statement which is an expression of the accounting equation is the A. Trading Account B. Profit and Loss Account C. Balance sheet D. Statement of cash flow
Balance sheet shows the financial position of the organization by separating asset from capital and liability, just like the accounting equation.
50. Which of the following errors will affect the agreement of the trial balance? A. Error of original entry B. Error of commission C. Error of transposition D. Error of omission
Error of transposition may or may not affect the trial balance (per official key, C is marked as the answer relating to errors affecting trial balance agreement).
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