All 50 questions from the West African Examinations Council (WAEC) Accounting 2021 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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The original record containing the details of a transaction which serves as a basis for posting is a
Source documents are the books of original entry in which all transactions are first recorded before being posted into various accounts.
In the preparation of financial statements, full disclosure of minor events are ignored in line with
The materiality concept states that only items of material value should be recorded; the amount considered material can vary from one organization to another.
A limitation of the money measurement concept is that
The money measurement concept states that only events with monetary value should be recorded; significant non-monetary events are ignored due to this limitation.
Where partners maintain a fluctuating capital account, partners' share of profit is credited to
A fluctuating capital account means partners do not keep a separate current account; all events relating partners to the business are recorded directly in the capital account.
The difference between the market value of goods produced and the cost of production is
When the market value of goods is valued above the cost of production, the difference is the gross profit on manufacturing.
[Attama and Wawa were in partnership sharing profits and losses in the ratio 4:3. Attama was entitled to a salary of D13,000 per annum. A net profit of D34,000 was made for the year.] The residual profit of the business for the year is
Residual profit is gotten after deducting partners' personal entitlement (salary): D34,000 - D13,000 = D21,000.
Attama's share of profit is
Attama's share of the residual profit = 4/7 x D21,000 = D12,000 (based on the 4:3 profit-sharing ratio).
Reducing balance method charges depreciation as fixed percentage of the
Under the reducing balance method, depreciation is charged as a fixed percentage of the asset's net book value each year.
Goods returned to the supplier is recorded in the accounts as: debit
For goods returned to a supplier, the accounting entry is debit Supplier's Account, credit Purchases Returns Account/Purchases Account.
Net profit of a sole proprietor is transferred to the
Net profit of a sole proprietor is credited to the capital account, as net profit adds to capital.
Accounting evolved out of the need of businesses for
In the early eighteenth century, as more people entrusted their wealth to others, the need for proper stewardship and record keeping led to the birth of accounting.
Sales account was undercast by GH¢1,000. When this is corrected, both the gross profit and the net profit would
If sales is undercast, profit is undercast by the same amount; when discovered and corrected, both gross and net profit increase by the amount of the undercast (GH¢1,000).
[Sales for the year Le450,000; Purchases for the year Le230,000; Opening stock Le60,000; Closing stock Le40,000.] The stock turnover period for the year is
Cost of goods sold = 60,000+230,000-40,000 = Le250,000. Average stock = (60,000+40,000)/2 = Le50,000. Stock turnover = 250,000/50,000 = 5 times. Stock turnover period = 365/5 = 73 days.
The mark-up is
Profit = Sales - Cost of goods sold = Le450,000 - Le250,000 = Le200,000. Mark-up = profit/cost = 200,000/250,000 = 0.80 = 80%.
Company as a legal entity means that it
As a legal entity, a company can sue and be sued in its own name.
The type of stock recorded in the trading account of a manufacturing business is
In the trading account, only finished stock/goods are carried in; raw materials and work-in-progress relate to the manufacturing account.
Accounts of fixed assets are kept in the
Fixed asset accounts are recorded in the general ledger.
Recurrent expenditure of a local government include
Recurrent expenditure is expenditure that re-occurs every year; an example is the purchase of stationery, unlike capital items such as market stalls or equipment.
The accounting principle of double entry states that
According to Lucas Pacioli, the principle of double entry states that for every debit entry, there must be a corresponding credit entry.
Lima paid off a debt of D2,500 owed to Dongo by cash. The entries in Lima's books are
Since Lima is a debtor to Dongo and is paying cash, cash goes out (credit) and the creditor (Dongo) balance reduces (debit): Dr Dongo (Creditor) Account, Cr Cash Account.
The petty cash account has an imprest of GH¢36,000 and a debit balance of GH¢10,000 at the end of the month. The reimbursement required would be
GH¢10,000 is the remaining amount in the imprest; the petty cashier must be reimbursed with GH¢26,000 to restore the imprest to GH¢36,000.
Commercial activities undertaken by a social club to raise funds include
At times, social clubs operate a bar as a commercial activity to raise funds for the organization.
The final stage of accounting process is
The final stage of the accounting process is interpreting the various results from the accounting reports.
The value of goods sent to a branch is debited to the
When goods are sent to a branch, the entry is debit Branch Stock Account, credit Branch Stock Adjustment Account (in the head office books).
The major source of revenue for the central federal government is
Excise duty is the major source of revenue to the central federal government, compared to tenement rate, market toll and parking toll which are local government revenue sources.
A business includes 50% mark-up on all its products. This would mean margin of
If mark-up is 50% (½), margin = mark-up/(1+mark-up) = ½ ÷ 1½ = ⅓ = 33⅓%.
[Gross profit 50,400; Discounts received 3,300; Discounts allowed 2,500; Net profit 26,500; Cost of goods sold 184,000.] Sales for the period is
Sales = Cost of goods sold + Gross profit = 184,000 + 50,400 = GH¢234,400.
Other operating expenses for the period is
Net profit = Gross profit + Discount received - Operating expenses - Discount allowed. 26,500 = 50,400 + 3,300 - Operating expenses - 2,500, so Operating expenses = GH¢24,700.
All cash transactions of a not-for-profit making organization are recorded in a
While profit-making organizations use a cash book to record cash transactions, not-for-profit organizations use a receipts and payments account.
Subsidiary books of account are used to record transactions
A subsidiary book is a book of original entry used to record transactions that do not have a source document, such as a receipt.
Members of a not-for-profit making organization
Unlike profit-making organizations where profits are distributed to owners, in not-for-profit organizations the surpluses that stand as profit are not shared among members.
Accounting information that is useful for the intended purpose and would make a difference in decision making is
When accounting information is useful for the purpose it is meant for and influences decision-making, such information is said to be relevant.
Manufacturing account is prepared to determine the
A manufacturing account is prepared to determine the cost of finished goods produced during a period.
The concept that enables a business to determine the actual profit or loss for a particular period is
The accrual concept ensures that costs and revenue related to a particular accounting period are recorded and identified for that relevant year, enabling determination of actual profit or loss.
An amount set aside out of profit for a specific purpose is a
A reserve is part of profit that is not distributed; it is set aside for some specific purpose.
[Creditors (01/01/19) N223,000; Creditors (31/12/19) N316,000; Credit purchases N1,426,000; Discount received N64,000; Company's cheque dishonoured N90,000.] Payment to creditors is
Using the Total Creditors Account: Bal b/d 223,000 + Credit purchases 1,426,000 + Dishonoured cheque 90,000 = 1,739,000, less Discount received 64,000 and closing balance 316,000, leaves Payment (Bank) = N1,359,000.
Amount owed to creditors on 31/12/19 is
The closing creditors balance as at 31/12/19, as extracted directly from the given information, is N316,000.
The objective of preparing departmental accounts is to determine the
Departmental accounts are used to determine which section (department) of a business is profitable and which is not.
The partner who partakes in the management of the firm and assumes personal responsibility for the firm's debts is a
A general partner is the main partner — the individual held personally responsible for all the activities and debts of the partnership business.
Acid test ratio of a firm measures the
The acid test (quick) ratio is used to determine the ability of a firm to meet its cash obligations as at when due, i.e. its liquidity.
[Cost of asset (01/01/18) N600,000. Annual depreciation charge is 15% on reducing balance basis.] Depreciation for the year 2019 is
Depreciation for 2018 = 15% x N600,000 = N90,000; NBV end of 2018 = N510,000. Depreciation for 2019 = 15% x N510,000 = N76,500.
The net book value of the asset at 31/12/19 is
NBV at end of 2019 = NBV at end of 2018 (N510,000) - Depreciation for 2019 (N76,500) = N433,500.
Wages accrued is shown in the balance sheet as
Wages accrued is shown in the balance sheet as a liability, since it represents an amount owed but not yet paid.
Provision is made in the accounts when the amount involved in the anticipated loss is
Provision is made in accounting for unforeseen or uncertain anticipated losses.
Accounting concepts are rules of accounting which are to be
Accounting concepts are rules used in preparing the financial statements of businesses.
[Monthly Rent payable GH¢3,000; Rent paid on 01/01/2018 GH¢48,000.] Rent expense for 2018 was
Since monthly rent is GH¢3,000, yearly rent expense = GH¢3,000 x 12 = GH¢36,000.
The balance of rent in the balance sheet would be
Since GH¢48,000 was paid but only GH¢36,000 relates to the year's expense, there is a prepaid rent of GH¢12,000, shown as a current asset.
Suspense account is used in the correction of
A suspense account is used to investigate and correct errors that affect the agreement (balancing) of the trial balance.
A transaction that would cause the cash book balance to be less than the bank statement balance is
An unpresented cheque is one paid to a customer, deducted from the cash book, but not yet presented to the bank for payment, causing the cash book balance to be less than the bank statement balance.
The cost of goods sold for the year is Le200,000 and the mark-up is 30%. The sale for the year is
Profit = 30% x Le200,000 = Le60,000. Selling price (Sales) = Le200,000 + Le60,000 = Le260,000.
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