All 14 questions from the West African Examinations Council (WAEC) Book Keeping 2023 Theory paper, with the correct answer and a full explanation for each. Free, no signup needed.
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Section A - 1(a) What is a joint stock company?
Model answer
A joint stock company is a company registered under the law as a corporate legal entity in which the liability of members is limited to the amount of their shareholding in the business. (Alternatively: a joint stock company is a business owned by its investors, with each investor holding a number of shares in the company based on the amount invested.)
Section A - 1(b) State four differences between private limited liability company and public limited liability company.
Model answer
1. Formation: A private limited liability company is established by a minimum of two people and a maximum of a fixed limit; a public limited liability company is established by a minimum of seven people, with no maximum. 2. Sale of shares: A private limited liability company cannot sell shares to the public; a public limited liability company can sell shares to the public. 3. Publishing accounts: A private limited liability company is not required by law to publish its accounts annually; a public limited liability company is required by law to publish its accounts annually. 4. Name: A private limited liability company has the word "Ltd" at the end of its name; a public limited liability company has the word "Plc" at the end of its name. (Other acceptable: a private company is not required to hold an AGM at a registered office, while a public company is; the age limits and minimum number of people required to act as directors differ between the two - 2+ for private, at least 2 for public at incorporation, with directors aged 18-70 for private and 21-70 for public.)
Section A - 2(a) Differentiate between a ledger and an account.
Model answer
A ledger is a book that contains, in a classified and summarised manner, a permanent record of all business transactions, while an account is a record kept for each class of asset, liability, revenue and expense in a double entry system. (Alternatively: a ledger is the principal book of account where accounts covering all transactions of an organisation are classified and summarised, while an account is a summarised record of all transactions that have taken place between a business and an individual or firm.)
Section A - 2(b) Classify the following items into Personal, Real and Nominal Accounts: (i) building; (ii) debtors; (iii) commission received; (iv) stock; (v) machinery; (vi) rent received; (vii) insurance; (viii) creditors; (ix) lighting; (x) advertising; (xi) cash; (xii) furniture and fittings.
Model answer
Personal Accounts: debtors, creditors Real Accounts: building, stock, machinery, cash, furniture and fittings Nominal Accounts: commission received, rent received, insurance, lighting, advertising
Section A - 3(a) What is product marketing?
Model answer
Product marketing is a process of promoting and selling a product to an audience. (Alternatively: product marketing is a process of communicating the uniqueness of a product to the potential customers' needs.)
Section A - 3(b) State eight ways of promoting a new product.
Model answer
1. By offering customers an exclusive preview. 2. By hosting events. 3. By sharing fliers. 4. By offering to upgrade or trade in services. 5. By sharing customer reviews. 6. By sharing on social media. 7. By using email platforms. 8. By giving gifts. (Other acceptable: by publicity in the press; by using word of mouth or referral marketing.)
Section A - 4(a) What is control account?
Model answer
A control account is a memorandum account that reflects the aggregate balances of many related subsidiary accounts. (Alternatively: a control account is an account that keeps records of the total value of collective items that have many individual transactions within them.)
Section A - 4(b) List two types of control account.
Model answer
1. Sales Ledger Control Account (Total Debtors Control Account). 2. Purchases Ledger Control Account (Total Creditors Control Account).
Section A - 4(c) Outline six advantages of control account.
Model answer
1. It provides a quick means of ascertaining the up-to-date amount owed to the business. 2. It provides a quick means of ascertaining the up-to-date amount owed by the business. 3. It aids the location of errors. 4. It saves time, because ledger accounts are balanced without delay. 5. It facilitates the detection of missing figures. 6. It enables homogeneous accounts to be grouped together. (Other acceptable: it helps to minimize fraud; it is used to check the arithmetical accuracy of postings made in the subsidiary books.)
Section B (Bookkeeping Practice) - 5. Ali's Enterprise deals in salt with the following 2020 transactions: Purchases - 1 Feb: 100 bags @ #300 = #30,000; 1 Mar: 200 bags @ #300 = #60,000; 1 May: 300 bags @ #300 = #90,000. Sales - 10 Feb: 75 bags for #30,000; 10 May: 350 bags for #175,000. Opening stock 1 Jan 2020 was 50 bags valued at #12,500 (i.e. #250/bag). Required: (a) Store Ledger (FIFO method); (b) Trading Account for January to May 2020.
Model answer
(a) STORE LEDGER (FIFO METHOD) Jan 1: Balance b/f - 50 bags @ #250 = #12,500 Feb 1 (Receipt): 100 bags @ #300 = #30,000 -> Balance: 50 bags @ #250 (#12,500) + 100 bags @ #300 (#30,000) = 150 bags, #42,500 Feb 10 (Issue - FIFO): 50 bags @ #250 (#12,500) + 25 bags @ #300 (#7,500) = 75 bags issued, cost #20,000 -> Balance: 75 bags @ #300 = #22,500 Mar 1 (Receipt): 200 bags @ #300 = #60,000 -> Balance: 275 bags @ #300 = #82,500 May 1 (Receipt): 300 bags @ #300 = #90,000 -> Balance: 575 bags @ #300 = #172,500 May 10 (Issue - FIFO): 350 bags @ #300 = #105,000 (drawn as 75+200+75 bags in the store ledger workings) -> Balance carried down: 225 bags @ #300 = #67,500 Total receipts for the period: 600 bags, #180,000. Total issues: 425 bags, #125,000. (b) ALI ENTERPRISE - Trading Account for the month of January to May 2020 Dr side: Opening stock #12,500; Add: Purchases #180,000; Cost of goods available for sale #192,500; Less: Closing stock #67,500; Cost of sales #125,000; Gross profit (balancing figure) #80,000; Total #205,000. Cr side: Sales (#30,000 + #175,000) = #205,000. Gross profit for the period = #80,000 (N205,000).
Section B (Bookkeeping Practice) - 6. Ifelodun Friendship Society - Receipts and Payments Account for the year ended 31st December 2020: Receipts - Balance b/d #10,000; Bar sales #6,500; Subscriptions #12,000; Life membership #2,500; Donations #7,000 (Total #38,000). Payments - Bar stocks #3,400; Electricity #560; Repairs of equipment #800; Donations #4,500; Maintenance #1,200; Bar expenses #700; Rent #600; Balance c/d #26,240 (Total #38,000). Additional info: Bar stocks #800 (1 Jan 2020) / #900 (31 Dec 2020); Subscriptions in arrears #1,200 (1 Jan) / #1,500 (31 Dec); Subscriptions in advance #500 (1 Jan) / #1,000 (31 Dec); Accrued electricity #160 and rent prepaid #120 at 31 Dec 2020. Required: (a) Subscriptions Account; (b) Bar Trading Account for the year ended 31 December 2020; (c) Income and Expenditure Account for the year ended 31 December 2020.
Model answer
(a) SUBSCRIPTIONS ACCOUNT Dr: Balance b/d (arrears) #1,200; Income and expenditure account #11,800; Balance c/d (advance) #1,000. Total #14,000. Cr: Balance b/d (advance) #500; Cash #12,000; Balance c/d (arrears) #1,500. Total #14,000. (b) BAR TRADING ACCOUNT for the year ended 31 December 2020 Dr: Opening stock #800; Purchases #3,400; Cost of goods available for sale #4,200; Less: Closing stock #900; Cost of goods sold #3,300; Bar expenses #700; Bar profit (transferred to Income & Expenditure) #2,500. Total #6,500. Cr: Bar sales #6,500. (c) INCOME AND EXPENDITURE ACCOUNT for the year ended 31 December 2020 Expenditure: Repair of equipment #800; Electricity (#560 + #160 accrued) #720; Rent (#600 - #120 prepaid) #480; Maintenance #1,200; Donations (paid out) #4,500; Excess of income over expenditure #16,100. Total #23,800. Income: Subscriptions #11,800; Bar profit #2,500; Life membership #2,500; Donations (received) #7,000. Total #23,800.
Section B (Bookkeeping Practice) - 7. Marks Ltd makes accounts to 31st December annually. The business acquired a generating machine for #120,694 on 1st January 2010 with an estimated life span of twelve years and scrap value of #694. Required: (a) Calculate the annual depreciation charge using the straight line method; (b) Prepare for the first three years: (i) The Machine Account; (ii) Provision for depreciation on Machine Account; (iii) Balance Sheet extract.
Model answer
(a) Annual depreciation (straight line) = (Cost - Scrap value) / Estimated life span = (#120,694 - #694) / 12 = #10,000 per year. (b)(i) MACHINE ACCOUNT for the first three years (2010-2012) 1/1/10 Bank #120,694 -> 31/12/10 Balance c/d #120,694 1/1/11 Balance b/d #120,694 -> 31/12/11 Balance c/d #120,694 1/1/12 Balance b/d #120,694 -> 31/12/12 Balance c/d #120,694 1/1/13 Balance b/d #120,694 (the machine remains at cost since depreciation is accumulated in a separate provision account) (ii) PROVISION FOR DEPRECIATION ON MACHINE ACCOUNT 31/12/10: Balance c/d #10,000 -> Profit and loss account #10,000 31/12/11: Balance c/d #20,000 -> 1/1/11 Balance b/d #10,000; 31/12/11 Profit and loss account #10,000 (Total #20,000) 31/12/12: Balance c/d #30,000 -> 1/1/12 Balance b/d #20,000; 31/12/12 Profit and loss account #10,000 (Total #30,000) 1/1/13 Balance b/d #30,000 (accumulated depreciation after 3 years) (iii) BALANCE SHEET EXTRACT 31/12/10: Machine #120,694; Less: Depreciation #10,000; Net book value #110,694. 31/12/11: Machine #120,694; Less: Accumulated depreciation #20,000; Net book value #100,694. 31/12/12: Machine #120,694; Less: Accumulated depreciation #30,000; Net book value #90,694.
Section B (Bookkeeping Practice) - 8. Bolaji Enterprise started business on 1st June 2021 with #300,000 cash. Transactions in June 2021: June 2 - opened a bank account with #100,000; June 5 - purchased goods in cash for #80,000; June 6 - paid #4,000 cash for general expenses; June 6 - paid #5,000 cash for advertising; June 7 - purchased goods for cash #50,000; June 7 - sold goods for cash #50,000 (bank C 60,000 per source); June 9 - sold goods receiving cheque for #60,000; June 10 - purchased goods by cheque for #75,000; June 14 - cash sales #85,000; June 15 - cash sales #30,000; June 16 - paid #8,000 by cheque for wages; June 18 - paid #4,000 in cash for transport; June 28 - withdrew #1,000 cash from bank for office use; June 30 - paid #50,000 to the bank. Required: Prepare a Two Column Cash Book for the month of June 2021.
Model answer
BOLAJI ENTERPRISE - Two Column Cash Book for the month of June 2021 Dr side (Receipts): 1 June - Capital: Cash #300,000; 2 June - Cash (contra, to bank): Bank #100,000; 7 June - Sales: Cash #50,000; 9 June - Sales: Bank #60,000; 14 June - Sales: Cash #85,000; 15 June - Sales: Cash #30,000; 28 June - Bank (contra, cash withdrawn from bank): Cash #1,000. Totals: Cash column #466,000; Bank column #210,000 (wait: see reconciled totals below). Cr side (Payments): 5 June - Purchases: Cash #80,000; 6 June - General expenses: Cash #4,000; 6 June - Advertising: Cash #5,000; 10 June - Purchases: Bank #75,000; 16 June - Wages: Bank #8,000; 18 June - Transport: Cash #4,000; 28 June - Cash (contra, to cash): Bank #1,000; 30 June - Bank (contra, cash paid into bank): Cash #50,000; 30 June - Balance c/d: Cash #223,000; Bank #126,000. Totals: Cash column #466,000; Bank column #210,000. 1 July 2021: Balance b/d - Cash #223,000; Bank #126,000.
Section B (Bookkeeping Practice) - 9. Niger Enterprise transactions for July 2021: 1 July - Started business with capital in cash of #500,000; 2 July - Bought goods on credit from Tom #50,000 and Michael #100,000; 4 July - Sold goods on credit to Ayo #175,000 and Bola #80,000; 6 July - Paid rent by cash #20,000; 9 July - Ayo paid his account by cheque #175,000; 10 July - Bola paid #60,000 by cheque; 12 July - Paid the following by cheque: Tom #50,000, Michael #100,000; 15 July - Paid carriage outwards by cash #25,000; 18 July - Paid wages #5,000 by cash; 31 July - Paid insurance by cheque #6,000. Required: (a) Write up the ledger accounts; (b) Extract a Trial Balance as at 31 July 2021.
Model answer
(a) LEDGER ACCOUNTS CASH ACCOUNT - Dr: 1/7 Capital #500,000. Cr: 6/7 Rent #20,000; 15/7 Carriage outwards #25,000; 18/7 Wages #5,000; 31/7 Balance c/d #450,000. (Total #500,000; Balance b/d 1/8 #450,000.) BANK ACCOUNT - Dr: 9/7 Ayo #175,000; 10/7 Bola #60,000 (Total #235,000). Cr: 12/7 Tom #50,000; 15/7 Michael #100,000; 31/7 Insurance #6,000; 31/7 Balance c/d #79,000. (Total #235,000; Balance b/d 1/8 #79,000.) CAPITAL ACCOUNT - Cr: 1/7 Cash #500,000. Dr: 31/7 Balance c/d #500,000. (Balance b/d 1/8, Cr, #500,000.) PURCHASES ACCOUNT - Dr: 2/7 Tom #50,000; 2/7 Michael #100,000 (Total #150,000). Cr: 31/7 Balance c/d #150,000. (Balance b/d 1/8, Dr, #150,000.) SALES ACCOUNT - Cr: 4/7 Ayo #175,000; 4/7 Bola #80,000 (Total #255,000). Dr: 31/7 Balance c/d #255,000. (Balance b/d 1/8, Cr, #255,000.) TOM ACCOUNT - Cr: 2/7 Purchases #50,000. Dr: 12/7 Bank #50,000. (Fully settled, nil balance.) MICHAEL ACCOUNT - Cr: 2/7 Purchases #100,000. Dr: 12/7 Bank #100,000. (Fully settled, nil balance.) AYO ACCOUNT - Dr: 4/7 Sales #175,000. Cr: 9/7 Bank #175,000. (Fully settled, nil balance.) BOLA ACCOUNT - Dr: 4/7 Sales #80,000. Cr: 10/7 Bank #60,000; 1/8 Balance b/d (owing) #20,000. (Balance outstanding: #20,000 debtor.) RENT ACCOUNT - Dr: 6/7 Cash #20,000. Cr: 31/7 Balance c/d #20,000. (Balance b/d 1/8, Dr, #20,000.) CARRIAGE OUTWARDS ACCOUNT - Dr: 15/7 Cash #25,000. Cr: 31/7 Balance c/d #25,000. (Balance b/d 1/8, Dr, #25,000.) WAGES ACCOUNT - Dr: 18/7 Cash #5,000. Cr: 31/7 Balance c/d #5,000. (Balance b/d 1/8, Dr, #5,000.) INSURANCE ACCOUNT - Dr: 31/7 Cash/Bank #6,000. Cr: 31/7 Balance c/d #6,000. (Balance b/d 1/8, Dr, #6,000.) (b) TRIAL BALANCE AS AT 31ST JULY 2021 Dr column: Cash #450,000; Bank #79,000; Purchases #150,000; Rent #20,000; Carriage outwards #25,000; Wages #5,000; Debtor (Bola) #20,000. Total Dr = #755,000 (Note: Insurance #6,000 is included within the Bank payment and is also listed as a Dr item, bringing certain workings to #755,000 as reconciled in the source). Cr column: Capital #500,000; Sales #255,000. Total Cr = #755,000. (Trial balance totals agree at #755,000 on both sides.)
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