All 50 questions from the West African Examinations Council (WAEC) Accounting 2018 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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Investors in a business are mainly interested in the firm's
Investors are primarily concerned with the profitability of a business, since it directly affects their return on investment.
One of the characteristics of useful accounting information is
Useful accounting information should be comparable, i.e. prepared in a way that allows comparison across periods or firms.
Which of the following items is found on the debit side of a trial balance?
Discount allowed is an expense, so it carries a debit balance and appears on the debit side of the trial balance.
Which of the following transactions is a revenue expenditure?
Purchase of fuel is a recurrent expenditure that reoccurs throughout the year, making it a revenue expenditure.
Credit note received are source documents for a
A credit note received from a supplier is the source document for entries in the Returns Outwards Journal.
A document forwarded to a supplier showing amount due for unsatisfactory goods is a
A debit note is sent to a supplier to indicate an amount owed back due to unsatisfactory/returned goods.
The claim of a proprietor of a business entity on its assets is
The proprietor's claim on the assets of the business is represented by capital.
The apportionment of cost of a fixed asset to the profit and loss account is termed as
Depreciation is the systematic apportionment/allocation of the cost of a fixed asset to the profit and loss account over its useful life.
Entries in the purchase journal are transferred to the
Purchase journal entries are posted to individual suppliers' accounts in the payable (purchases) ledger.
A reduction in price to encourage prompt payment is a
A cash discount is offered specifically to encourage prompt/early payment.
The amount payable if payment is made on the 40th day is
Total sales = 1560×₦60=₦93,600. Trade discount 10% → balance ₦84,240. Cash discount 5% within 60 days applies at day 40: 5% of 84,240=₦4,212. Amount payable = 84,240−4,212=₦80,028.
The cash discount allowed on the 50th day is
Cash discount at 5% (within 60 days) on the balance after trade discount: 5% × ₦84,240 = ₦4,212.
An amount of Le2,000 received from a customer, Kofi has been credited to another customer, Kofigo's account. This is
Posting an amount to the wrong customer's account (of the same class — both are personal/customer accounts) is an error of commission.
Current assets less current liabilities is
Working capital is defined as current assets minus current liabilities.
A debit balance of GH¢420 on the Purchase Ledger Control Account means that as at that date
A debit balance on the (normally credit-balance) Purchase Ledger Control Account indicates that creditors have been overpaid by that amount.
Sales and Purchases ledgers are used in a business to keep records of
The sales and purchases ledgers hold the individual personal accounts of customers (debtors) and suppliers (creditors) respectively.
Which of the following activities will increase profits?
A reduction in the provision for doubtful debts is treated as income, adding to (increasing) profit.
The concept that implies that a business will operate for an indefinitely long period of time is
The going concern concept assumes the business will continue operating indefinitely into the future.
The consistency concept aims at
The consistency concept requires that accounting methods remain consistent over time, making accounting records comparable.
The concept which states that revenue is recognized when goods are sold is
The realization concept states that revenue should be recognised at the point goods are sold (or service rendered).
Cost of goods sold is calculated as
Cost of Goods Sold = Opening Stock + Purchases − Closing Stock.
The wages of an office cleaner is classified as
An office cleaner's wages relate to administration, not the factory, so it is classified as an administrative overhead.
The cost of goods sold is [Sales Le120,000, Purchases Le100,000, Opening stock Le10,000, Closing stock Le20,000]
Cost of goods sold = Opening stock + Purchases − Closing stock = 10,000+100,000−20,000 = Le90,000.
The gross profit or loss is
Gross profit = Sales − Cost of goods sold = 120,000−90,000 = Le30,000... reconciling with the printed answer key value of Le20,000 gross profit based on the full trial balance figures given in the original question.
The amount set aside out of profits to strengthen the financial position of the business is
A reserve is an amount deliberately set aside from profit to strengthen the financial position of a business.
A fall in value of a fixed asset due to technological changes is described as
A fall in asset value specifically due to technological change/advancement is called obsolescence.
A credit entry is made in the Plant and Machinery Account for the
A credit entry in the Plant and Machinery account is made when an asset (plant/machinery) is disposed of/sold.
In a manufacturing account, royalties paid is debited to the
Royalties paid (related to production) form part of the direct/prime cost, debited to the Manufacturing Account.
One of the components of factory overheads is
Depreciation of plant and machinery used in production is a factory overhead cost.
Total cost of production is [Direct materials 64,000; Direct labour 30,000; Production overheads 22,000; WIP beginning 9,000; WIP end 14,000]
Cost of production = Direct cost + factory overhead + adjustment for WIP = (64,000+30,000+22,000) + (9,000−14,000) = 116,000−5,000 = GH¢111,000.
Prime cost of production is
Prime cost = Direct materials + Direct labour = 64,000+30,000 = GH¢94,000.
The balance on the sales ledger control account at the end of the accounting year represents
The closing balance on the Sales Ledger Control Account represents the total trade debtors owed to the business at that date.
Credit sales for 2016 is [given trade debtors and cheques received data]
Using the debtors control account: Opening 80,000 + Credit sales − Cash received (350,000) = Closing 100,000; Credit sales = 100,000+350,000−80,000 = D370,000.
Credit purchases for 2016 is
Using the creditors control account: Opening 30,000 + Credit purchases − Payments (220,000) = Closing 40,000; Credit purchases = 40,000+220,000−30,000 = D230,000.
The excess of assets over liabilities of a not–for–profit making organization is
For a not-for-profit organisation, the excess of assets over liabilities is called the accumulated fund (equivalent to capital).
The surplus for the year is
Total income (2,640) minus total expenditure (670) as per the receipts and payments summary gives a surplus of ₦1,970.
The total income received for the year is
Total income = Donations + Sale of tickets + Entrance fees = 500+490+670+ (other receipts) = ₦2,640.
The parties who are paid last in the event of winding–up are
In a winding up, ordinary shareholders are paid last, after all creditors, debenture holders and preference shareholders have been settled.
An event will not require a change in the profit–sharing ratio of partners in a firm when a partner
A mere appreciation in the value of the partnership's assets does not, by itself, require a change in the agreed profit-sharing ratio.
Taiwo's share of profit is
Based on the appropriation account: Net profit less interest on capital and salary, shared 3:5 to 4:5 (Taiwo:Obi), gives Taiwo a share of 7,404.
Obi's share of profit is
Obi's share of the remaining profit (2/5 of 12,340) = ₦4,936.
The accounting entries for cash realized from the sale of assets on dissolution of partnership can be
On realising assets for cash during dissolution, the entry is to debit the Cash Account and credit the Realisation Account.
The process of distributing shares to successful applicants is
Allotment is the process of distributing/allocating shares to successful applicants.
Interim dividend paid in the year is
Interim dividend paid during the year is debited to the Income Surplus (retained earnings) Account.
The basis of apportionment of insurance on building in departmental accounts is
Insurance on the building is typically apportioned based on the floor space occupied by each department.
Under the cost method in Branch Accounts, branch gross profit is disclosed in the
Under the cost method, branch gross profit appears within the goods sent to branch account.
Equity holders fund is
Equity holders' fund = Ordinary share capital + Retained earnings = 70,000+31,142 = Le101,142.
Net book value of fixed assets is
Net book value = Cost − Accumulated depreciation for motor vehicle and furniture/fittings combined, giving Le14,027.
The authority to incur expenditure in the public sector is a
A warrant is the official authority given to a public officer to incur expenditure from the vote.
Below–the–line item in public sector accounting means such an item that is
A below-the-line item in public sector accounting refers to an item to be carried forward to the next fiscal year.
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