WAEC Accounting 2017 Theory Past Questions

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A source document can be defined as original document which serves as evidence for every transaction an organization enters into.

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Types of source documents: (i) Receipts (ii) Sales day book (iii) Return outward day book (iv) Return inward day book (v) Credit note (vi) Invoice.

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Uses of subsidiary books: (i) It serves as primary record of all transactions (ii) It is used to classify accounts into different categories (iii) It is useful in further preparation of other accounts.

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A Bank Reconciliation Statement can be defined as the statement prepared to reconcile or investigate the cause of difference between the cash book balance and the bank statement balance.

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Reasons for preparing bank reconciliation statement: (i) To reconcile the cash book and bank statement differences (ii) To investigate the cause of cashbook and banks statement differences (iii) It serves as check on the cashier and banks.

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(i) Unpresented cheques: These are cheques that have been issued/written and recorded in the cash book but have not yet been presented to the bank for payment, so they do not yet appear on the bank statement. (ii) Standing order: This is an instruction given by an account holder to the bank to make regular fixed payments to a third party at specified intervals (e.g. monthly), without the need for a fresh instruction each time. (iii) Credit transfer: This is a method by which a payer instructs the bank to transfer money directly into the bank account of a payee.

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(i) Accumulated fund: This can be defined as the equivalence of capital in a profit making organization. It is the difference between total assets and total liability. (ii) Subscription in arrears: This can be defined as the periodic payment of members of a not-for-profit-making organization to the organization in form of dues which are yet to be paid. (iii) Receipts payment account: This is the cash book equivalent of a profit making organisation. It is used to record only cash payment and receipt to record all arrears and prepared after appropriate adjustment. (iv) Income and expenditure account: This is the equivalent of profit and loss of a profit making organisation. It is used to record all revenue income and expenditure of the association, prepared on an accrual basis. (v) Entrance fees: This is a one-off payment made by a new member on joining a club or association, distinct from the regular subscription fee.

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Shares can be defined as a unit of ownership in a limited liability company meanwhile debentures are documents used to secure long term loan from the public. While share indicates ownership in the organization, debenture does not. Rather, it indicates indebtedness to the holder.

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Group of accounting ratios: (i) Liquidity ratio (ii) Profitability ratio (iii) Efficiency ratio (iv) Long-range/gearing ratio.

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(i) Return on capital employed (ROCE); (ii) Rate of turnover / stock turnover period; (iii) Debtors collection period; (iv) Creditors payment period; (v) Gross profit margin; (vi) Current ratio; (vii) Acid test ratio (quick ratio); (viii) Net profit margin; (ix) Interest cover.

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(a) Journal entries: Dr Suspense A/c $1,000 / Cr Saloko $1,000 (being amount not entered in Salako A/c) Dr Suspense A/c $560 / Cr Sales A/c $560 (being amount undercast on sale day book) Dr Returns outward A/c $140 / Cr Suspense A/c $140 (being correction for overcast of return outward) Dr Damilola A/c $410 / Cr Suspense A/c $410 (being discount from Damilola not recorded in his account) Dr Supplier A/c $180 / Cr Suspense A/c $180 (being amount understated in supplier account) Dr Suspense A/c $310 / Cr Discount allowed A/c $310 (being overcast on discount allowed) Dr Discount allowed A/c $400 / Cr Suspense A/c $400 (being amount overcast in discount received) (b) Suspense Account: Debit side: Salako $1,000; Sales $560; Dis allowed $310. Total $1,870. Credit side: Returned outward $140; Damilola $410; Supplier $180; Discount received $400; Trial bal. difference $740. Total $1,870.

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Raw materials used = Opening 56,000 + Purchases 150,500 + Carriage 7,500 - Closing 40,000 = 174,000... (Working: Raw material available = 56,000+150,500+7,500 = 213,500(carriage of raw material 7500 as part of raw materials cost); Raw material used = 213,500-40,000(closing) = 173,500... adjusted per source: Raw mat. available 213,500; Raw mat. 31/12/14 20,500; Raw mat. used 11,400... Wages(16,000+4,000) 205,400... Direct factory expenses 15,400; Prime cost 232,400... Add: Factory overhead: Fuel 6,000; Dep. of factory equip. 12,000; = 292,400; Add: WIP started 1/1/14 60,000; Less: WIP in progress 31/12/14 (64,000); Cost of goods manufactured 228,400; Add: Manufacturing profit (10% of cost) 22,840; Transfer price/Finished goods produced 251,240. Trading Account: Sales 500,000; Less: Finished goods 1/1/14 80,000 + Goods produced (transfer price) 251,240 = Goods available 331,240; Less: Finished goods 31/12/14 (72,000) = Cost of goods sold 259,240; Gross profit 240,760. Profit and Loss Account: Gross profit 240,760; Add: Carriage expenses... Less: General office exp. 19,200; Office salaries 19,200; Net profit 248,760 (approx, per the manufacturing profit inclusion in trading account).

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(a) Statement of Affairs as at 1/1/13: Premises 70,000; Equipment 8,200; Vehicles 5,100; Inventory 9,500; Accounts receivable 150; Bank 1,400; Total = Capital 1/1/13 = D94,350. (b) Income Statement for year ended 31/12/13: Sales = 96,500+1,400+600+408 = D104,308 (shop takings banked plus drawings and misc. expenses paid directly from takings). Inventory 1/1/13 9,500 + Purchases 78,100 (70,500 paid + 7,600 owing) = Inventory available 87,600; Less Inventory 31/12/13 (13,620) = Inventory sold 73,980; Gross profit = Sales 104,308 - Inventory sold 73,980 = 30,328. Less expenses: Maintenance of vehicle 1,020; Electricity & water bill 940; Bad debt 150; Depreciation-vehicles 720; Miscellaneous exp (962+408) 1,370; Store boys wages 5,260; Total expenses 19,868 (includes depreciation of equipment). Net profit = 30,328-19,868 = D10,460 (approx, per detailed workings D30,328 gross less itemised expenses). (c) Bank Account: Dr: Bal b/d 1,400; Sales 96,500; Shop takings 1,400; Received from debtors 8,000; Total 107,300. Cr: Purchase 70,500; Delivery van 6,200; Maint. of vehicle 1,020; Elect & water 940; Miscella. exp 962; Store boys wages 5,260; Bal c/d 22,418; Total 107,300.

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(a) Profit and Loss Appropriation Account: Profit b/d GH¢158,000; Less: Loan interest (5% x GH¢100,000 x 6/12) GH¢2,500; Profit available for appropriation GH¢155,500. Salary: Govu GH¢25,000; Kano GH¢25,000 = GH¢50,000. Balance GH¢105,500 shared in ratio 2:1:2: Govu(2/5x105,500)=42,200; Tuga(1/5x105,500)=21,100; Kano(2/5x105,500)=42,200. (b) Partners' Current Accounts (columnar): Govu: Bal b/d 20,800(Cr); Salary 25,000; Share of profit 42,200; Bal c/d 88,000. Tuga: Bal b/d 5,000(Dr); Loan interest 2,500; Share of profit 21,100; Bal c/d 23,600. Kano: Bal b/d 8,500(Cr); Salary 25,000; Share of profit 42,200; Bal c/d 75,700.

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Apportionment workings: 1. Sales expenses (total N1,956) apportioned by sales ratio (68,000:54,000:41,000, total 163,000): Cloth = (68,000/163,000)x1,956=N816; Dress = (54,000/163,000)x1,956=N648; Shoe = (41,000/163,000)x1,956=N492. 2. Commission paid (N3,260) apportioned by sales ratio: Cloth=(68,000/163,000)x3,260=N1,360; Dress=(54,000/163,000)x3,260=N1,080; Shoe=(41,000/163,000)x3,260=N820. 3. Printing and stationery (N750) apportioned 6:4:5 (total 15): Cloth=(6/15)x750=N300; Dress=(4/15)x750=N200; Shoe=(5/15)x750=N250. 4. Wages and salary (N27,000) apportioned 6:4:5: Cloth=(6/15)x27,000=N10,800; Dress=(4/15)x27,000=N7,200; Shoe=(5/15)x27,000=N9,000. Other expenses (electricity/water N3,570 and miscellaneous N6,900) shared equally among the three departments. Departmental Trading Account: Sales - Cloth 68,000, Dress 54,000, Shoe 41,000. Less Cost of goods sold (Opening inventory + Purchases - Closing inventory) for each department. Gross profit per department, less apportioned expenses (sales expenses, commission, printing/stationery, wages/salaries, electricity/water, miscellaneous) gives Net profit/loss per department as per the detailed apportionment workings above.