WAEC Accounting 2024 Theory Past Questions

Model answer

(i) Purchase of office equipment on credit — General Journal. (ii) Credit purchases — Purchases Day Book. (iii) Bank charges — Cash Book. (iv) Goods returned by a customer — Sales (Returns) Day Book.

Model answer

(i) Purchases — Purchases Day Book. (ii) Cash payments — Cash Book. (iii) Returns outwards — Purchases (Returns) Day Book. (iv) Discount received — Cash Book. (v) Petty cash payments — Petty Cash Book.

Model answer

(i) Sales ledger: records all credit sales transactions and the resulting debtor balances; it excludes cash sales and shows amounts owed by customers (debtors) at the start and end of the period. (ii) Purchases ledger: records all credit purchase transactions; the balance shows the amount owed to creditors at the beginning and end of the period. (iii) General ledger: records all transactions that do not have a specific ledger of their own, such as assets, liabilities, equity, income and expense accounts, since separating every single account would be impractical.

Model answer

1. Rent in arrears or in advance. 2. Salaries in arrears or in advance. 3. Provision for bad or doubtful debts. 4. Depreciation of non-current assets. 5. Goods taken by the owner (drawings in kind). 6. Income in arrears or in advance / Provision for discount on doubtful debts.

Model answer

1. Capital expenditure occurs occasionally (e.g. once, on acquiring an asset such as a building), while revenue expenditure recurs regularly, such as salaries paid every year. 2. Capital expenditure usually involves a large financial commitment, whereas revenue expenditure does not. 3. Capital expenditure leads to the acquisition of assets with a long useful life, while revenue expenditure is consumed within the accounting period.

Model answer

(a) Ose operates a single-entry system of bookkeeping — transactions are not recorded using the double-entry system, so there are no full ledger accounts or a formal balance sheet; records are incomplete. (b) Advantages: 1. It is cheap, since there is no need to employ a trained accountant. 2. It is easy for a layman to understand. 3. It is simple to maintain with minimal technical error. Disadvantages: 1. It cannot be used for formal purposes such as loan or grant applications. 2. It does not clearly show whether the business is making a profit or loss. 3. It does not reveal the true financial position of the business.

Model answer

(a) Differences: 1. Equity shareholders are part-owners of the company, while debenture holders are lenders who receive interest, not dividends, as return on their investment. 2. Equity share capital is generally permanent/perpetual, while debentures usually have a fixed maturity date on which they are repaid. 3. Equity shareholders can vote at company meetings and share in company profits (dividends), while debenture holders have a fixed claim (interest) regardless of profit and generally do not vote. (b)(i) Cumulative preference shares: unpaid dividends in a particular year accumulate and are carried forward to be paid in a later year once profits allow. (ii) Redeemable preference shares: shares that the company can buy back (redeem) at a future date, either by paying cash or converting them to ordinary shares. (iii) Participating preference shares: in addition to their fixed preferential dividend, holders are entitled to share in any additional/surplus profits along with ordinary shareholders.

Model answer

(a) Trading, Profit and Loss Account (year ended 31 Dec 2020): Sales GH¢184,900 less returns inward GH¢4,500 = Net Sales GH¢180,400. Cost of goods sold: Opening stock 16,300 + Purchases 60,300 + Carriage inward 4,000 - Returns outward 3,000 = Cost of goods available 77,600; less Closing stock 24,200 = Cost of sales 53,400. Gross profit = 180,400 - 53,400 = GH¢127,000. Less expenses: Depreciation (fixtures 18,060, motor vehicle 6,600), Electricity 2,460, Discount allowed 2,900, Distribution expenses 2,200, Rent 24,000, Interest expenses 3,500 — Net profit GH¢129,500. (b) Balance Sheet as at 31 Dec 2020 balances fixed assets (net of depreciation), current assets (closing stock, debtors, prepaid electricity, cash) against capital (opening capital + net profit) and current liabilities (creditors, accrued rent, loan).

Model answer

Prime cost = Raw materials used (Opening 140,000 + Purchases 1,489,000 - Closing 220,000 = 1,409,000) + Direct wages 850,000 + Royalties 77,000 = #2,336,000. Factory overheads = Factory fuel 660,000 + 75% of Electricity (48,000) + 75% of Maintenance (36,000) = #744,000, adjusted for work-in-progress (opening 260,000, closing 340,000) to give Manufacturing (production) cost of #3,300,000, matching the market value of the 60,000 units produced (60,000 x #55). Trading account: Finished goods (opening 550,000 + goods manufactured 3,300,000 = 3,850,000) all sold, giving Cost of goods sold #700,000... Sales #4,550,000 less Cost of goods sold gives Gross profit #700,000. Profit and Loss account: Gross profit #700,000 less Discount allowed 92,000, Administrative expenses 44,000, 25% Electricity 16,000, 25% Maintenance 12,000, Selling & distribution expenses 33,000 = Net profit #503,000.

Model answer

(a) Closing capital = Total assets (Premises 280,000 + Stock 62,000 + Debtors 4,800 + Bank 12,400 = 359,200) less Total liabilities (Loan 150,000 + Creditors 13,200 = 163,200) = D196,000. (b) Statement of Net Profit: Closing capital 196,000 + Drawings 17,300 = 213,300; less Opening capital 100,000 and Additional capital 8,000 (108,000) = Net profit for the year D105,300. (c) Balance Sheet as at 31 Dec 2022: Fixed assets — Premises D280,000; Current assets — Stock 62,000, Debtors 4,800, Bank 12,400 (total 79,200); Financed by Opening capital 100,000 + Additional capital 8,000 + Net profit 105,300 - Drawings 17,300 = Closing capital 196,000; Liabilities — Loan 150,000, Creditors 13,200; totalling D359,200.

Model answer

(a) Statement of Affairs as at 1/1/2021: Assets — Club equipment 45,000, Bar stocks 6,000, Subscriptions in arrears 30,000, Furniture and fittings 28,000, Bank 20,000 = 129,000; less Liabilities — Subscriptions in advance 50,000, Creditors 15,000 (65,000) = Accumulated fund $64,000. (b) Bar Trading Account: Bar sales 221,400 less Bar cost of sales (Opening bar stock 6,000 + Bar supplies 140,000 = 146,000) = Bar gross profit 75,400; less Bar expenses 71,000 = Bar net profit $4,400. (c) Subscriptions Account: Balance b/d (arrears) 30,000 + Income and expenditure (subscriptions earned) 300,000 = 330,000, matched against Balance b/d (advance) 50,000 + Cash received 280,000 = 330,000. (d) Income and Expenditure Account: Income — Subscriptions 300,000, Donations 50,000, End of year dinner 170,000 (total 520,000); Expenditure — Expenses on dinner 105,000, Donation to hospital 190,000, Affiliation fees 6,000, General expenses 183,000, Depreciation on equipment (10% x 50,000) 5,000, Depreciation on furniture & fittings (10% x 28,000) 2,800, giving a surplus of $20,000.

Model answer

(a) Returns on shareholders' fund = Net profit / Shareholders' fund = Le140,000 / Le200,000 = 0.70 (Le0.70 per Le1 invested). (b) Acid test ratio = (Current assets - Stock) / Current liabilities = (Le220,000 - Le140,000) / Le50,000 = Le80,000/Le50,000 = 1.60 : 1. (c) Net profit margin = Net profit / Sales x 100% = Le140,000 / Le1,040,000 x 100% = 13.46%. (d) Working capital ratio = Current assets / Current liabilities = Le220,000 / Le50,000 = 4.40 : 1. (e) Stock turnover ratio = Cost of goods sold / Average stock. Average stock = (Le110,500 + Le140,000)/2 = Le125,250. Stock turnover = Le700,000 / Le125,250 = 5.59 times.