WAEC Accounting 2019 Theory — Question 4

Model answer

(a) Reasons for dishonouring cheques: i. Irregularity in signature of drawer. ii. Disagreement in amount written in word and the one written in figure. iii. Suspicion of alteration in the displaced (altered) cheque. (b)(i) Petty cash float: This can be defined as maximum amount given to the petty cashier to run the petty cashbook. Expenses incurred are reimbursed regularly for the cashier to keep the maximum amount intact. (ii) Contra entries: These are referred to entries posted in both debit and credit side of a single account or two similar account (such as total debtors account and total creditors account) to offset the effect of the transaction. (iii) Imprest system: This can be defined as a system of petty cashbook in which a certain amount is given to the petty cashiers to run some minute expenses in order not to overlook the main cash books. The amount spent is reimbursed regularly to keep the maximum amount intact. (c) Advantages of keeping petty cashbook using imprest system: i. It reduces burden or too much entry in the main cash book. ii. It monitors the small daily but recurring expenses in the organisation. iii. It minimizes fraud.