WAEC Accounting 2023 Theory Past Questions

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Incomplete records refer to a situation in which a business does not keep a full set of double entry records, or a system where only one side of a business transaction is recorded in an account, disregarding the double entry principle.

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1. The business cannot extract a trial balance to check the arithmetical accuracy of ledger entries. 2. The accuracy of any accounts cannot be verified. 3. The business cannot make good business decisions, and cost control will be difficult. (Other acceptable: it can lead to the collapse of the business; fraud may easily be committed since there can be no check or proof of transactions; financial statements prepared from incomplete records will not be accepted for tax purposes.)

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1. Lack of resources to operate double entry records. 2. Lack of qualified personnel to operate the system. 3. The size of the business may not necessitate the implementation of a full set of accounting records. (Other acceptable: lack of awareness of the need to operate a double entry system; destruction of some or all financial records as a result of natural disaster; deliberate attempt by management to evade tax; when the business just begins operations; it is less cumbersome/more convenient to maintain.)

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This is an error of principle. It will not affect the agreement of the trial balance totals.

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This is an error of original entry. It will not affect the agreement of the trial balance totals.

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This is an error of single entry/partial omission. It will affect the agreement of the trial balance totals.

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This is an undercasting error. It will affect the agreement of the trial balance totals.

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This is an error of complete reversal (of entry). It will not affect the agreement of the trial balance totals.

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1. Management/Managers - interested in how the business is progressing, its financial position, and whether set targets are being achieved. 2. Owners/Shareholders - interested in whether the business is profitable, the security of their investment, whether the business can pay dividends, and whether to hold or sell their shares. 3. Bankers/Financial institutions - need the information to assess the creditworthiness of the business and evaluate its ability to repay borrowed funds when due. 4. Tax authorities - need the information to assess the tax payable and ensure all relevant information has been captured in the financial statements. 5. Potential investors - need accounting information to assess the viability of the business before investing. (Other acceptable: Competitors - to assess the strengths and weaknesses of similar businesses; Employees - to evaluate job security, ability of the business to pay remuneration, and as a basis for collective bargaining; Regulatory bodies - to ensure compliance with requirements/standards; Trade unions - to have a basis for negotiating improved conditions; Customers/Debtors - to determine the business's ability to meet orders and offer credit facilities; Suppliers/Creditors - to determine the business's ability and time taken to pay its debts; Financial analysts/researchers - for advisory and academic purposes; General public - to appraise the efficiency and social responsibility of the business.)

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Accounting ratio is the quantitative relationship between two or more accounting values/figures extracted from the financial statements. Example of a liquidity ratio: the current ratio (working capital ratio), or the quick ratio (acid test ratio).

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1. To show trends of business activities over a period of time. 2. In forecasting. 3. In inter-company comparisons. (Other acceptable: for interpreting the financial statements; to measure the ability of the business to meet its financial obligations; to determine the profitability of the business.)

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1. Accounting ratios deal in quantitative information only, ignoring qualitative factors. 2. Accounting ratios can be easily manipulated. 3. Ratios are computed based on past (historical) data, so they are not a good indicator for future planning. (Other acceptable: the use of different definitions of certain terms makes it difficult to use ratios for decisions; comparing firms operating under different conditions using ratios can be unfair; some firms window-dress their financial statements, resulting in misleading ratios; inflation renders ratios less effective because of frequent price level changes.)

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JOURNAL ENTRIES (correcting the errors, no narration) 1. Dr Drawings Account Le1,000; Cr Salaries and Wages Account Le1,000. 2. Dr Furniture Account Le1,260; Cr Suspense Account Le1,260. (Correcting the difference between Le1,560 actually spent and Le300 wrongly debited.) 3. Dr Purchases Account Le2,000; Cr Suspense Account Le2,000. (Correcting the undercast in the purchases day book.) 4. Dr Suspense Account Le200; Cr Debtors Account Le200. (Posting the omitted discount allowed to the customer's account.)

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ABETE TRADING COMPANY - Trading, Profit and Loss Account for the year ended 31 December 2020 Sales: Le174,000; Less: Returns inward Le2,400; Net sales = Le171,600. Less: Cost of goods sold - Opening stock Le3,600; Add: Purchases (100,000+2,000 correction) Le102,000; Less: Returns outwards Le4,800; Net purchases Le97,200; Cost of goods available for sale Le100,800; Less: Closing stock Le4,000; Cost of goods sold Le96,800. Gross profit = 171,600 - 96,800 = Le74,800. Add: Discount received Le2,000; Total = Le76,800. Less: Operating expenses - Salaries and wages (21,000 - 1,000 correction) Le20,000; Discount allowed (400+200 correction) Le600 [alternatively shown as Le400 plus the corrected Le200 posted separately]; General expenses Le17,000; Depreciation of fixed assets [10% × (41,600 [42,600-1,000 error?] + 1,260 correction)] Le4,386. Net profit = Le76,800 - (20,000+400+17,000+4,386) = Le35,014. (Note: figures reflect the corrected balances after journalising the errors identified in 5(a); the depreciation charge of Le4,386 is 10% of the corrected fixed asset balance of Le43,860 [i.e. 41,600+1,260+1,000 net adjustment as per workings].)

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Total Revenue for the country for year 2021 = 522,500,000 + 250,000,000 + 180,500,000 + 60,000,000 + 92,000,000 + 230,500,000 + 100,500,000 = $1,436,000,000.

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National share = 30% × $1,436,000,000 = $430,800,000. Education Trust Fund = 10% × $1,436,000,000 = $143,600,000. Total Federal/Central Government revenue for 2021 = $430,800,000 + $143,600,000 = $574,400,000.

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Collectively: 60% × $1,436,000,000 = $861,600,000. Individually (Region's population / Total population × $861,600,000): Region A: 400,000/1,600,000 × 861,600,000 = $215,400,000 Region B: 350,000/1,600,000 × 861,600,000 = $188,475,000 Region C: 250,000/1,600,000 × 861,600,000 = $134,625,000 Region D: 100,000/1,600,000 × 861,600,000 = $53,850,000 Region E: 300,000/1,600,000 × 861,600,000 = $161,550,000 Region F: 200,000/1,600,000 × 861,600,000 = $107,700,000 Total = $861,600,000.

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TAIWO, KEHINDE AND ALABA - Realization Account Dr side: Buildings #7,507,500; Motor vehicles #9,450,000 [as revalued/realised]; Furniture #3,675,000; Stock #3,150,000; Debtors #3,150,000 [realised]; Dissolution expenses (Taiwo) #656,250; Total = #30,641,250 (balancing figure includes the partners' capital account distribution below). Cr side: Buildings [transferred to buyer/partner] #11,812,500; Motor vehicle #7,408,800; Furniture #4,200,000; Stock #2,625,000; Trade creditors (settled at 3% discount on #2,490,000) #74,700; Taiwo's capital account (share of realization) #2,625,000; Total = #30,641,250. Profit on realization is shared among the partners in their profit-sharing ratio: Taiwo (3/10 × #3,052,500) = #915,750; Kehinde (5/10 × #3,052,500) = #1,526,250; Alaba (2/10 × #3,052,500) = #610,500; total realization profit = #3,052,500, transferred to the partners' capital accounts.

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PARTNERS' CAPITAL ACCOUNTS - final balances Taiwo: Realization account #2,625,000; Bank (balancing figure) #4,354,500. Balance brought down (current account) #915,750; total credits #6,979,500 matched against total debits #6,979,500 - Taiwo's account settles at nil after these transfers. Kehinde: Realization account #11,895,000; Balance b/d (current realization) #1,526,250; total #11,895,000 fully accounted for. Alaba: Realization account #6,516,750; Balance b/d (current realization) #610,500; total #6,516,750 fully accounted for. (In summary, after crediting each partner with their share of the realization profit and adjusting for dissolution expenses paid by Taiwo, the partners' capital accounts are settled/closed by payment through the bank, as shown in the workings above.)

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EASYWAY LIMITED - Manufacturing, Trading, Profit and Loss Account for the year ended 31st December 2021 MANUFACTURING ACCOUNT Raw materials: Opening stock 60,400; Add: Purchases 140,500; = 200,900; Less: Closing stock 52,600; Cost of raw materials consumed = 148,300. Add: Direct labour 70,300; Direct expenses 10,000; Prime cost = 228,600. Factory overheads: Depreciation of plant and machinery 24,400; Rent (3/5 × 12,000) 7,200; Electricity (3/5 × 13,000) 7,800; Depreciation of vehicles (3/5 × 5,600) 3,360; Total factory overheads = 42,760. Gross production cost = 271,360. Add: Opening work-in-progress 45,000; Less: Closing work-in-progress 40,200; Net production cost = 276,160. TRADING ACCOUNT Sales = 342,000. Less: Cost of sales - Opening stock of finished goods 39,200; Add: Production cost 270,160 [net production cost as transferred, rounded]; Cost of goods available for sale = 315,360 [wait: matches 39,200+276,160=315,360]; Less: Closing stock 20,900; Cost of goods sold = 294,460. Gross profit = 342,000 - 294,460 = 47,540. PROFIT AND LOSS ACCOUNT Less: Expenses - Delivery expenses 10,000; Discounts allowed 5,000; Rent (2/5 × 12,000) 4,800; Electricity (2/5 × 13,000) 5,200; Depreciation of vehicles (2/5 × 5,600) 2,240; Total office/selling expenses = 27,240. Net profit = 47,540 - 27,240 = GH¢20,300.

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IN THE BOOKS OF IROKO PLC (a) SHARE APPLICATION ACCOUNT Dr: Bank account (application monies returned on rejected applications) 300,000; Allotment account (excess application monies transferred) 600,000; Ordinary share capital account (application monies applied to shares issued) 1,800,000. Total = 2,700,000. Cr: Bank account (total application monies received, 450,000 applicants × D6) 2,700,000. (b) ALLOTMENT ACCOUNT Dr: Ordinary share capital account 900,000. Cr: Application account (excess monies transferred) 600,000; Bank account (balance received on allotment) 300,000. Total = 900,000. (c) FIRST AND FINAL CALL ACCOUNT Dr: Ordinary share capital account 300,000. Cr: Bank account 300,000. (d) BANK ACCOUNT Dr: Application (total monies received) 2,700,000; Allotment (balance received) 300,000; First and final call (monies received) 300,000. Total = 3,300,000. Cr: Application (refund on rejected applications) 300,000; Balance c/d 3,000,000. Total = 3,300,000. (e) ORDINARY SHARE CAPITAL ACCOUNT Dr: Balance c/d 3,000,000. Cr: Application account 1,800,000; Allotment account 900,000; First and final call account 300,000. Total = 3,000,000; Balance b/d 3,000,000 (300,000 shares × D10).