WAEC Accounting 2021 Theory Past Questions

Model answer

(a) Accounting concepts are basic assumptions, rules and principles which work as the basis for recording business transactions and preparing accounts. This assumes that, for accounting purposes, the business enterprise and its owners are two separate independent entities. There are other concepts such as materiality concept, matching concept, etc. (b) (i) Business entity concept: states that a business concern is a separate entity from its owner; it is an artificial person that can sue and be sued in its own name. (ii) Accrual concept: states that accounting transactions should be recognised in the year in which they occur and not when cash is actually paid for the transaction. (iii) Going concern concept: states that a business will continue to exist into the unforeseeable future; the business entity has no ending date. (iv) Consistency convention: states that the accounting method used in recording transactions should be consistent over the years — for instance, if the straight-line method is used for depreciation one year, the same should be used the following year on the same asset. (v) Periodicity concept: states that accounts should be prepared for a particular period every year, such as for the year ended 31st December each year. (vi) Historical cost: states that assets should be recorded based on their cost when purchased, i.e. recorded in the balance sheet based on the cost at which they were acquired.

Model answer

(a) Operation of the petty cash book based on the imprest system: a petty cash book is opened and handed over to the petty cashier; a particular amount is set aside for small expenses such as stationery and transport; all petty expenses are removed from this amount and recorded in the petty cash book; at the end of a period, or when the petty cashier needs reimbursement, the petty cash book is handed to the main cashier for examination; the petty cashier is then reimbursed to restore the original imprest amount; at the end of the accounting year, the balance on the petty cash book is transferred to the main cash book. (b) Disadvantages of the imprest system: it may at times require employing an extra person to handle the petty cash book; it is prone to fraud. (c) Uses of a petty cash voucher: it is used to record petty expenses; it is used to record re-occurring expenses; it serves as a book of original entry; it relieves the main cashier of handling small transactions.

Model answer

(a)(i) Entrance fees: the fee collected for entry into events; it could also be a fee charged to whoever wants to join the organisation as a member. (ii) Subscription: the annual compulsory levy imposed on all members so as to remain a member of the organisation. (b) Features of the Income and Expenditure Account: it records only cash transactions (of a revenue nature); all receipts are recorded on the debit side while payments are posted to the credit side; it can never have a credit balance, as an organization cannot spend what it does not have; it is a real account; it records both capital and revenue expenditures and receipts related to the period.

Model answer

(a) A bank reconciliation statement is a statement used to investigate the difference between the cash book balance and the bank statement balance; it is used to reconcile that difference. (b)(i) Bank charges: the amount which the bank charges on transactions occurring on the customer's account. (ii) Standing order: a periodic order given by a customer to their banker to pay a certain amount to a designated person on a periodic basis. (iii) Credit transfer: the amount paid directly into a customer's account with the bank. (iv) Dishonoured cheque: a cheque rejected by a bank due to one irregularity or another. (v) Unpresented cheques: cheques issued to customers for payment but which the customers have not yet tendered to the bank for payment. (vi) Uncredited cheques: cheques received by a customer from another party and submitted to the bank, but which are yet to be credited into the customer's account.

Model answer

(a) Total Debtors Account: Bal b/d N190,000 + Credit sales N276,000 = N466,000, balanced by Bank (receipts from debtors) N236,000 and Bal c/d N230,000. (b) Sales Account: Credit Sales N276,000 + Cash Sales N198,000 = Total Sales N474,000, transferred to Trading Account. (c) Total Creditors Account: Bal b/d N120,000 + Credit purchases N290,000 = N410,000, balanced by Bank (payments to creditors) N320,000 and Bal c/d N90,000. (d) Trading, Profit and Loss Account for year ended 31 December 2019: Opening stock N124,000 + Purchases N290,000 = Cost of goods available for sale N414,000, less Closing stock N140,000 = Cost of goods sold N274,000. Sales N474,000 less Cost of goods sold N274,000 = Gross profit N200,000. From gross profit, deduct depreciation on furniture and fittings (N150,000-N135,000) N15,000 and expenses (N58,000+N18,000) N54,000, and rent (N200,000+N8,000-N100,000) N108,000 to arrive at Net profit of N23,000.

Model answer

Departmental Trading, Profit and Loss Account for year ended 31 December 2019: Department A: Sales GH¢30,000; Cost of goods sold (Stock 500 + Purchases 23,600 - Closing stock 600) = GH¢23,500; Gross profit GH¢6,500 less Wages GH¢2,000 and Delivery expenses GH¢300 = Gross profit b/d GH¢4,500. Department B: Sales GH¢20,000; Cost of goods sold (Stock 400 + Purchases 16,400 - Closing stock 300) = GH¢16,500; Gross profit GH¢3,500 less Wages GH¢1,500 = Gross profit b/d GH¢2,000. Common expenses apportioned between A and B (based on sales for general office salaries/telephone/stationery/auditing, and one-fifth/four-fifths for the rest): General office expenses (A:900, B:600), Rates (A:52, B:208), Fire insurance (A:52, B:208), Electricity (A:48, B:192), Repairs (A:100, B:400), Telephone (A:300, B:200), Cleaning (A:120, B:480), Auditing charges (A:300, B:200), Stationery (A:720, B:480). Total expenses deducted from each department's gross profit b/d gives the departmental net profit figures as per the detailed workings.

Model answer

(a) Goods Sent to Branch Account: Returns D320 and Branch Trading A/c (balancing transfer) D7,680, total D24,000, against Stock (goods sent at invoice price) D24,000. (b) Branch Stock Account: Bal b/d D2,840 + Goods sent to branch D24,000 = D31,840, less Returns D320, Sales D20,000, leaving Bal c/d D11,520. (c) Branch Adjustment Account: Goods sent to branch (loading) D7,680 transferred to Profit and Loss Account as branch gross profit.

Model answer

(a) Revaluation Account: Increases — Plant and Machinery Le60,000 (credit); Decreases — Furniture and fittings Le20,000, Stock Le10,000, Provision for doubtful debts Le2,000 (debit). Net surplus on revaluation Le28,000 shared between Loly and Willy in the old ratio 3:2 — Loly Le16,800, Willy Le11,200. (b) Capital Account: Opening balances Loly Le200,000, Willy Le150,000, Joe Le100,000 (new capital). Add: share of revaluation surplus (Loly 16,800, Willy 11,200) and goodwill (Loly 27,000, Willy 18,000 from Joe's Le75,000, split 3:2). Deduct: motor vehicle taken by Loly Le10,000. Closing balances: Loly Le251,800, Willy Le191,200, Joe Le100,000. (c) Balance Sheet after admission of Joe: Capital — Loly Le251,800, Willy Le191,200, Joe Le100,000, Loan Le100,000, Creditors Le90,000, total Le733,000, matched by Fixed Assets (Plant and Machinery Le300,000, Furniture and fittings Le60,000, Motor vehicles Le20,000) plus Goodwill Le75,000 and Current Assets (Stock Le50,000, Debtors less provision Le53,000, Cash Le185,000).

Model answer

(a) Bank Account: Application receipts $80,000, Allotment $126,000, First and final call $162,000 = total receipts $368,000, less refund to unsuccessful applicants $8,000, leaving Bal b/d $360,000. (b) Ordinary Share Application Account: Bank (refund) $8,000 and transfer to Ordinary Share Capital $72,000, total $80,000 = Bank (application receipts) $80,000. (c) Allotment Account: Ordinary Share Capital $126,000 = Bank $126,000. (d) First and Final Call Account: Ordinary Share Capital $162,000 = Bank $162,000. (e) Ordinary Share Capital Account: Bal c/d $360,000 = Ordinary share application $72,000 + Allotment $126,000 + First and final call $162,000 = $360,000.