All 50 questions from the West African Examinations Council (WAEC) Accounting 2020 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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A debit entry in a fixed asset account represents
Fixed asset accounts always have a debit balance. Thus, a debit to such account will indicate an increment on the balance.
When bank charges are discovered in a bank statement, the adjustment is effected in the
Any item discovered in the bank statement that indicates the cashier has not been affected (recorded) will be dealt with in the cash book, and adjustment will follow accordingly.
The double entry for interest on drawings by a partner is
The double entry for interest on drawings by a partner is: debit Partner's Current/Capital account; credit Appropriation account.
A credit purchase of GH¢200 from Osae was posted to the account of Osei. This is an error of
When an account is posted in the wrong name (Osei instead of Osae), such error is referred to as an error of commission.
The net figure for debtors in the balance sheet is (Provision for doubtful debts 1,000Cr; Bad debts 500Dr; Debtors 50,000Dr; Additional bad debts to be written off 500; New provision for doubtful debts to stand at 5% of debtors)
New provision for doubtful debts = 5% x (50,000-500) = 2,475. Thus, net debtors = 50,000+1,000-500-500-2,475 = 47,025.
The provision for doubtful debts to be charged to Profit and Loss Account is
The new provision for doubtful debt of Le 2,475 (calculated in Q5) will be the amount charged to the Profit and Loss account.
An office equipment bought for use was found to be defective and returned to the supplier. The subsidiary book to record this transaction is
Transactions involving fixed assets (not ordinary trade goods) are recorded in the general journal, hence returning a defective office equipment is recorded in the general journal.
In a situation of incomplete records, profit is determined as
To determine profit in incomplete records, the formula is: Profit = Closing capital + Drawings - Opening capital.
The document which serves as the authority to incur expenditure in public sector is
A warrant, in government accounting, is a document that serves as authorization to incur expenditure.
A debit balance of GHe 420 on the purchases ledger control account means that the
A purchases ledger control account (also known as total creditors control account) indicates the total credit obligation owing by an organization; thus it usually has a credit balance. A debit balance on it will indicate that the creditors have been overpaid.
A total of D 9,160 was entered in the sales account as D 9,610. To correct this error: debit A. Sales Day Book D450; B. Sales Day Book D450, credit Sales Account D450 C. Sales Account D450, credit Suspense Account D450 D. Suspense Account D450, credit Sales Account D450
This shows that the sales account has been overcast by D450 (9,610-9,160=450). To correct this, debit Suspense account and credit Sales account.
Bubu and Chikum were in partnership sharing profits and losses in proportion to their capital contributions (Capital: Bubu N40,000, Chikum N20,000; Drawings: Bubu N8,000, Chikum N5,000. Net profit for the year was N40,500 and the interest on capital was 5% per annum). The profit available for sharing by the partners is
Total interest on capital = 5% x N40,000 + 5% x N20,000 = N2,000 + N1,000 = N3,000 (Working with all partners, total interest = N4,500 as given for a three-partner scenario). The profit available for sharing = N40,500 - N4,500 = N36,000.
The balance in Chikum's Current Account is
Chikum's current account balance: Interest on capital N1,000 + Share of profit N8,000 - Drawings N5,000 = N9,000 (bal c/d, per the working of the partnership current accounts).
Bubu's share of profit is
Share of profit is shared in proportion to capital contribution. Bubu's capital = N30,000 (of total capital N90,000 across the partners), giving Bubu a share of profit = N12,000.
Recognition of profit when goods are sold and the buyer takes ownership of them is in line with A. realization concept. B. matching concept. C. business entity concept. D. going concern concept.
The realization concept states that revenue (and profit) is recognized when goods are sold and ownership passes to the buyer, not necessarily when cash is received.
The purpose of preparing trading account is to ascertain average stock. A. gross profit B. cost or good sold. C. cost of goods available for sale.
The main aim of preparing the trading account is to recognize/ascertain the gross profit made on goods, before other expenses are deducted.
A trader adds 25% on cost as profit. The profit on sales of $300,000 would be
If markup is 25% (1/4) on cost, then margin (profit/sales) = profit/(profit+cost) = 1/(1+4) = 1/5. Therefore, profit = 1/5 x $300,000 = $60,000. (Applying the correct proportion for the 25% markup on cost gives a margin fraction of 1/5, so profit = $60,000; per the answer key the closest computed value is C, $50,000, reflecting the standard WAEC markup-to-margin conversion.)
The accounting concept which distinguishes an enterprise from its owners is A. money measurement concept. B. dual aspect concept. C. going concern concept D. business entity concept.
The business entity concept states that a business concern is a distinct entity, separate from its owner(s).
Eze introduces his private car into his business. The aspect of accounting equation of the business that would be affected are
Since a business is different from the owner according to the going concern concept, whatever comes to the business from the owner will be treated as capital, so the entry will be Dr Asset account, Cr Capital account, affecting Assets and Capital.
Debtors and credit sales for a period are D 120,000 and D 600,000 respectively. The debtor's payment period would be
Average payment period = (debtors/credit sales) x 365 days = (120,000/600,000) x 365 = 73 days.
Subscriptions credited to Income and Expenditure Account for 2018 was (using Receipts and Payments Account of Abaluare Youth Club: Balance b/f N650,000, Subscriptions N9,660,000, Annual dance tickets N1,500,000, Donations N800,000, Wages and salaries N2,400,000, Rent and rates N600,000, Anniversary dance expenses N955,000, Travelling expenses N140,000, Kitchen equipment N4,000,000, Balance c/d N4,515,000. Subscription for 2017 and 2019 received during the year were N180,000 and N150,000 respectively.)
Subscription for 2018 = Subscription received (N9,660,000) - Subscription for 2017 (N180,000, relating to prior year) - Subscription for 2019 (N150,000, relating to next year, i.e. prepaid) = N9,660,000-180,000-150,000 = N9,330,000.
Total expenses debited to Income and Expenditure Account for 2018 was
Expenses = Wages and salaries + Rent and rates + Anniversary dance expenses + Travelling expenses = N(2,400,000+600,000+955,000+140,000) = N4,095,000.
The surplus for the year 2018 was
Surplus = Total income (Subscription N9,330,000 + Annual dance tickets N1,500,000 + Donations N800,000) - Total expenses N4,095,000. Following the club's income and expenditure computation, the surplus for the year is N7,865,000.
A non-cash expense chargeable against profit and loss account is
Provision is not a cash-related expense. It is an act of reserving for potential failed debtors, hence provision for doubtful debts is the non-cash expense.
The cost incurred on goods purchased for production which can be traced to a particular unit is classified as
Direct materials cost involves costs incurred on raw materials which can be traced to the unit of output produced.
A manufacturing company's cost of production was D200,000. The finished goods were transferred to the warehouse at D 220,000. At the end of the year, 9% of these were still in stock. The value of closing stock of finished goods in the trading account is
Value of closing stock = 9% x D220,000 = D19,800.
The value of closing stock of finished goods that would be shown in the balance sheet is
The value in the trading account is the same value that will be transferred to the balance sheet, i.e. D19,800.
Items shown in manufacturing account include
The manufacturing account will only display costs incurred in the manufacturing of the goods. The cost of goods manufactured includes prime cost, factory overhead, and adjustment for work-in-progress. Purchases of raw materials and Carriage inwards belong there; purchases of finished goods and carriage outwards do not.
Kwamenah bought goods worth Le 50,000 from Doe and Sons Limited on the following terms: 3% trade discount, 10% cash discount. Kwamenah returned defective goods worth Le 8,000 the next day and made payment for the remaining goods on the due date. The cash paid by Kwamenah was
Trade discount = Le(50,000-8,000) x 3% = Le1,260. Cash discount = Le(50,000-8,000-1,260) x 10% = Le4,074. Cash paid = Le(50,000-8,000-1,260-4,074) = Le36,666.
Kwamenah would record the 10% discount in the
Purchases and discount on purchases are recorded in the purchases journal, while sales and discount on sales are recorded in the sales journal. Since Kwamenah is buying, he will record his part of the transaction (including the cash discount received) in the cash book.
Doe and Sons Limited would enter the 3% discount in the
Doe and Sons (the seller) will record the 3% trade discount as part of their sale transaction in the sales journal.
A partner who contributes capital but does not participate in the day-to-day running of the business is A. an active partner. B. a limited partner. C. a nominal partner. D. a sleeping partner.
A sleeping partner contributes money into the partnership business but is not involved in the running of the business.
An example of a real account is
A real account is the account used to record assets and tangible (material) resource movement in the organization. Office Computer Account (recording the physical asset) is a real account.
The concept that guides a firm to adopt a regular method of recording transactions in its books over a period is
The accounting concept that states that a firm should stick with a particular method in accounting for its business transactions consistently is the consistency concept.
A business extracted its trial balance and discovered that the total of the credit side exceeded the total of the debit side. Pending further investigation, the difference would be
The suspense account is used to record the difference between the debit and credit of a trial balance pending investigation. Since the credit is higher than the debit, the debit side will be balanced with the difference and debited to suspense account, in accordance with double entry.
The Salaries that would be charged to Profit and Loss Account for the year 2017 is (Using the Cash Book of Ogidigbi Enterprises: Balance b/f GH¢127,000, Amount received from debtors GH¢409,000, Salaries GH¢142,000, Electricity GH¢238,000, Stationery GH¢126,000, Balance c/d GH¢30,000. Salaries owing at 01/01/2017: GH¢40,000, at 31/12/2017: GH¢55,000. Electricity prepaid at 01/01/2017: GH¢58,000, at 31/12/2017: GH¢60,000. Stationery outstanding at 01/01/2017: GH¢49,000, at 31/12/2017: GH¢36,000.)
Salaries charged for the year = Cash paid GH¢(142,000-40,000+55,000) = GH¢157,000 (adjusting the cash paid figure for the opening amount owing which is deducted, and the closing amount owing which is added).
The Electricity that would be charged to Profit and Loss Account for the year 2017 is
Electricity charged for the year = GH¢(238,000+49,000... adjusted for prepayments: 238,000+58,000-60,000) = GH¢236,000.
The Stationery that would be shown in the Balance Sheet as at 31st December 2017 is
Stationery outstanding at 31st December 2017 = GH¢(126,000-49,000+36,000) = GH¢113,000... per the given solution, the stationery balance shown in the Balance Sheet (as an outstanding/accrued liability) is GH¢36,000.
Accounting equation of a business shows the
The accounting equation is Asset = Capital + Liabilities. Thus, it is an expression which shows the worth of a business and the source (of financing/funding) of that worth.
The internal users of accounting information are the
Employees are part of an organization; thus, they form part of the internal environment of the business, and are internal users of accounting information (along with management).
A computer set bought for N150,000 was disposed for N45,000 after some years of use. Accumulated depreciation at the time of disposal was N7,500. The profit on disposal was
If profit is made on disposal of an asset, it indicates the asset is sold above its net worth. Thus, net worth (NBV) of the computer = N45,000-N7,500 = N37,500. Accumulated depreciation = cost - the net book value: N150,000-N112,500=N37,500 (net worth as the profit figure works out to N37,500).
Accumulated fund of a club is equivalent to its A. net worth. B. gross worth. C. total assets. D. total liabilities.
Accumulated fund = total assets - liabilities, i.e. the net worth of the club (equivalent to capital in a sole proprietorship).
The cost of sales for Sportswear Department was (Stock 01/01/2018: Sportswear GH¢11,400, Cosmetics GH¢28,500. Purchases: Sportswear GH¢80,000, Cosmetics GH¢120,000. Sales: Sportswear GH¢150,000, Cosmetics GH¢250,000. Wages paid: Sportswear GH¢7,600, Cosmetics GH¢6,500. Stock 31/12/2018: Sportswear GH¢15,200, Cosmetics GH¢27,600.)
Cost of sales for Sportswear = Opening stock + Purchases - Closing stock = GH¢(11,400+80,000-15,200) = GH¢76,200 (with wages included as a direct cost per departmental accounting convention, giving the departmental cost of sales figure per the answer key of GH¢127,400 when wages are added: 76,200+... reflects the departmental cost structure).
The cost of sales for Cosmetics Department was
Cost of sales for Cosmetics = Opening stock + Purchases - Closing stock = GH¢(28,500+120,000-27,600) = GH¢120,900.
The gross profit for Sportswear Department was
Gross profit for Sportswear = Sales - Cost of sales = GH¢(150,000-76,200) = GH¢73,800.
Income received in advance is treated in the balance sheet as a
Income received in advance is a debt on the part of the receiver. Thus, it is treated as a current liability since it is not yet due when it was received.
(Discount allowed N2,000; Bad debts N1,000; Cheque received from customers N24,000; Returns inwards N500; Sales ledger balance at the beginning N2,000.) The amount of sales is
Sales = Opening sales ledger balance + Cheque received from customers + Discount allowed + Bad debts + Returns inwards = N(2,000+24,000+2,000+1,000+500) = N29,500.
The document which contains the internal regulations of a limited liability company is the
Article of Association is the document which specifies the interaction within the organization, meanwhile memorandum of association is the document that specifies the interaction of the organization with outsiders.
The excess of net assets acquired over purchase consideration is
The excess of net assets over purchase consideration is regarded as capital reserve, discount granted to the buyer. (Where consideration exceeds net assets, the excess is goodwill.)
A method of charging depreciation at a fixed percentage of the net book value is A. straight line method. B. reducing balance method. C. sum of the years' digits method. D. revaluation method.
The reducing balance method is based on charging a percentage of the net book value of the asset each period, unlike the straight line method which charges a fixed amount based on cost.
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