All 50 questions from the West African Examinations Council (WAEC) Accounting 2017 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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Customers use the financial statement of a company to
Customers are outsiders to the company, thus, they use the financial position to know how well placed is the company.
The claim on the assets of a business by outsiders is
Liabilities are claims outsiders have against the asset of the company.
A document sent by a bank to its current account customers detailing their transactions over a given period is a
Bank statement is a periodic statement sent by banks to current account holders to show the transactions of the customers account with the bank.
Which of the following items will not be entered in the adjusted cash book?
Uncredited cheques are items for bank reconciliation statement. It is deducted from the balance as per adjusted cash book.
If a petty cashier has a cash float of Le39,000 and Le37,500 is spent, he will be reimbursed with
The petty cashier is reimbursed with the amount spent to keep the imprest float.
A suspense account is used in the
Suspense account is the account which is used to record the difference in the trial balance so as to institute the error that occurred.
A credit purchase of GH¢200 from P. Osae was posted to the account of P. Osei. This is an error of
Error of commission is committed when an account is posted in the wrong nature of same category.
Discount allowed on goods invoiced at GH¢100,000 was calculated at the rate of 20% instead of 10%. The error is corrected by debiting
The correction is made as: Dr: Customers A/c with GH¢10,000; Cr: Discount allowed A/c with GH¢10,000.
The balance sheet equation shows
The balance sheet displays assets of the company and sources of financing the asset.
The effect on profit when the closing stock is understated is
When the closing stock is understated, the cost of goods sold will be overstated and this will reduce gross profit.
Which of the following describes a trial balance?
Trial balance is the list of all ledger accounts of a firm.
The accounts of Jute Enterprise in the books of a supplier, will be a
In the book of a supplier, the accounts of customers are personal accounts.
Which of the following accounts are found in the nominal ledger? I. Advertising II. Motor repairs III. Additions to motor vehicle
Nominal accounts/ledgers are used to record non-real accounts, i.e. non-assets account. Addition to motor vehicle is an asset account, thus it will show in real account.
Accounts payable is classified as a
Account payable is due yet to be paid. Thus, it is current liability on the company.
The accounting concept that provides that accounting statements should not be influenced by personal opinion is
Objectivity states that accounts should be prepared based on available information and not based on personal opinion.
The prudence concept demands that
Prudence concept states that an accountant does not count its chicks till they are in cage. This means an accountant should be careful in recognizing profit.
Carriage outward expenses of a business are treated in the
Carriage outward is expense incurred on sales. Thus, it is treated in the profit and loss account.
The cost of transporting purchased goods to the warehouse is charged to
The cost of transporting goods to warehouse is carriage inward account and it is added to purchases in the trading account.
An organization purchased an equipment for GH¢112,000. It is expected to be used for 6 years then sold for GH¢16,000. What is the annual amount of depreciation, if the straight-line method is used?
Depreciation = (Cost - residual value)/usage life = (GH¢112,000-GH¢16,000)/6 = GH¢96,000/6 = GH¢16,000.
Use the following information to answer questions 20 and 21: Sales ledger balances D 01/06/12 9,000 30/06/12 30,000; Total for the month: Cash sales D10,000; Returns inwards D3,000; Cheque dishonoured D4,000. The credit sales for the month is
Sales ledger control A/c: Bal b/d 9,000 + Cheque dishonoured 4,000 + Credit sales(x) = Returns inwards 3,000 + Bal c/d 30,000. Total sales = credit sales + cash sales = D(20,000+10,000) = D30,000... Solving for credit sales x from the control account gives x = D20,000, and total sales = credit sales + cash sales = D(20,000+10,000)=D30,000. (Check workings: the credit sales for the month is A. D36,000 per the source's stated answer.)
The total sales for the month is (using the data in Q20)
Total sales = credit sales + cash sales = D(20,000+10,000) = D30,000. (Answer D per the given option value of D20,000 corresponds to the credit sales component alone; see Q20 workings.)
The excess of the market value of goods produced over the cost of production is
Manufacturing profit = Market value of goods produced - Cost of goods produced.
Factory wages form part of
Factory wages is a direct cost and direct costs form the prime cost.
Production cost of a manufacturing firm is made up of
Cost of goods produced = Prime cost + factory overheads.
In a manufacturing enterprise depreciation of plant is treated in the
Plant is equipment used in the factory. Thus, depreciation on it will be treated in the manufacturing account.
The purpose of keeping Sales and Purchases Ledger Control Account is to
The control account serves as check against fraud by verifying total debtors at creditors.
Which of the following items will appear in the Total Creditors Account?
Discount received is allowance granted with purchases. Thus, it shows in the creditors' control account.
A disadvantage of single entry system of book-keeping is that
From a single entry, the profit made cannot be determined accurately.
Which of the following accounts or statement is used to determine credit purchases figure in an Incomplete Records?
Control account is used to determine total debtors and creditors in an incomplete record.
A trader sells goods at an average margin of 20%. His cost of sales for the month amounted to N720,000. What is his profit figure?
Margin=20%=1/5. Mark up = 1/(5-1) = 1/4 = 25%. Profit = 25% x N720,000 = N180,000.
Donations to a club are
Donations to the club are income to the club. It is treated thus: Dr: Receipt and payment a/c; Cr: Income and expenditure a/c.
A statement of affairs shows
Statement of affairs is the equivalent of balance sheet. Thus, it shows the financial position of the organisation.
In a not-for-profit making organization, the Receipts and Payments Accounts is the equivalent of
The receipt and payment account is equivalent to cash book in a non-for-profit making organisation and cash book in profit making organisation respectively.
Where there is no agreement between the partners, the Partnership Act states that
When there is no partnership deed, no salary will be paid to any partner.
Interest on partners drawings are debited in the
Interest in partners drawing is income to the partnership business. It is treated thus: Dr: Cartons current a/c; Cr: P & L appropriation a/c.
Goodwill may be brought into the books when a new partner
When a new partner is introduced, the assets are revalued. This create goodwill in most cases.
Working capital is the excess of
Working capital = current asset - current liabilities.
Share premium is classified in the balance sheet as
Share premium is a capital reserve to the business because it does not reoccur yearly.
Use the following information to answer questions 39 and 40: Opening stock N2,300; Purchases N11,874; Sales N18,600; Closing stock N3,000; Cost of goods sold N11,500. The percentage of gross profit to sales is
Gross profit = Sales - cost of goods sold = N18,600-N11,500 = N7,100. % of Gross profit to sales = (N7,100/N18,600)x100 = 38.17%.
What is the rate of stock turnover? (using the data in Q39)
Average stock = (N2,300+N3,600)/2 = N2,950. Rate of stock turnover = N11,500/N2,950 = 3.90 times ≈ 4 times.
When allotment of shares is made applicants for shares of a company become
When allotment of shares has been made, the applicant of the shares of the company becomes shareholder.
The objective of a departmental accounts is to ascertain the
Departmental account is used to determine the performance of departments.
In departmental accounting, when goods are sent from one department to another for sale, the transaction is treated as
In departmental accounting, when goods are sent from one department to another for sale, the transaction is treated as inter departmental purchases.
A branch that keeps its own records prepares the records of transactions with the head office in the
Head office current account is used to record the relationship of the branch with the head office in the case of independent department.
The accounting entries when goods are sold on credit at the branch are:
The account entries of credit sales at the branch are recorded as: Dr. Branch debtors A/c; Cr. Credit sales A/c.
Which of the following is not a method of charging goods to branch by its head office?
Net realizable value is not a method of charging goods to branch by its head office. Standard methods are cost price, cost plus profit, and selling price.
Use the following information to answer questions 47 and 48: Nzemaman Local Government incurred the following expenditure in the year 2015: Construction of market stalls D120,000; Staff salaries D40,000; Purchase of stationery D9,000; Sinking of boreholes D200,000; Building of classrooms D90,000; Maintenance of vehicles D35,000; Purchase of equipment D28,000. Recurrent expenditure for the year is
Recurrent expenditures are expenditures that occur yearly. = D40,000+D35,000+D9,000 = D84,000.
Capital expenditure for the local government is (using the data in Q47)
Capital expenditure is a one-off expenditure. It does not occur yearly. = D120,000+D200,000+D90,000+D28,000 = D438,000... (per the source's stated final answer, D410,000).
A reserve is an amount
Reserve is an amount set aside for specific purpose.
An amount set aside to meet expenses whose value is not certain is a
Provision is an amount set aside as provision for bad debts/doubtful debts etc.
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