WAEC Book Keeping 2024 Theory — Question 4

Model answer

(a) Drawings: these are monies or goods taken from the business by the owner for personal use. They are treated in the balance sheet as a leakage against the capital, i.e. it will be deducted from the capital of the business. (b) Creditors: these are all persons the business is indebted to, i.e. the people/organization the business is owing. They are recorded in the liability side of the balance sheet as a claim against the balance sheet. (c) Debtors: these are people who are owing the business, i.e. they are indebted to the business; they form part of the assets to the business, thus they are recorded in the asset side of the balance sheet. (d) Accruals: these are expenses which are due in the financial year but not yet paid by the business. They are expenses incurred but not paid. They appear in the current asset of the business (as accrued income) or current liability (as accrued expenses). (e) Stock: this is the goods or items which form the basis of the business of the company. They are bought for the purpose of resale but which are not yet sold. They are ready for resale immediately, and form part of the current assets of the business.