Quiz 12 of 14

2015 Financial Accounting WAEC Theory Past Questions

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Question 1

a. Describe the following:

i. Bank statement

Answer

Bank Statement: this is a document prepared by a bank and issued to its customers, it shows the following: date, particulars or details, debit, credit, and balance.

ii. Bank reconciliation statement

Answer

 

b. Explain five causes of disagreement between the cash book and the bank statement balance

Answer

Causes of disagreement between the cash book and the bank statement balance are;

Question 2

a. What is a suspense account?

Answer

 

b. Explain five errors that would not affect the agreement of the trial balance.

Answer

Errors that would not affect the agreement of the trial balance are:

 

c. Mention a class of account that would always show

(i) Debit balance

Answer

Classes of accounts that would always show a debit balance are:

(ii) Credit balance

Answer

Classes of accounts that would always show a credit balance are:

Question 3

a. State two ratios which fall under the following classification of accounting ratios:

(i) Profitability

Answer

(ii) Activity ratio

Answer

(iii) Liquidity

Answer

(iv) Investment

Answer

(v) Leverage

 

b. Outline:

(i) Three uses of accounting ratios,

Answer

Uses of accounting ratio: Ratios assists users to:

(ii) Two limitations in the use of accounting ratios.

Answer

Question 4

a. What is a manufacturing account?

Answer

It is an account prepared by an organization involved in the production of goods.

 

b. Explain the following terms:

(i) Prime cost

Answer

Prime Cost: this is the cost that can be traced to a particular production unit. The components are direct materials, direct labour cost, and direct expenses.

(ii) Factory Overheads

Answer

Factory overheads: These are indirect costs incurred in the running of the factory. They are costs which cannot be traced to a particular labour cost.

(iii) Work-in-progress

Answer

Work-in-progress: these are partly finished goods or uncompleted work

(iv) Cost of goods transferred

Answer

Cost of goods transferred: this is the total production cost of finished goods. This is transferred from the manufacturing account to the trading account.

(v) Finished goods

Answer

(vi) Profit on manufacturing

Answer

Question 5

The following balances have been extracted from the books of Johnson

You are required to prepare

(a) total debtors account

Answer

(b) total creditor’s account

Answer

Question 6

Babou social club was formed on April 1, 2013, with 50 members, each paying an annual subscription of D12.

The following information was extracted from the books of the club on 31s March 2014.

i

Amount realized during Inauguration D3,000
Expenses paid on Inauguration D1,000

ii. All members paid their subscription with the exception of five members who were still owing by 31st March 2014

iii. Gate fees from organized football match were D500 and Expenses incurred D300

iv. Proceeds from the end of the year dance amount to 4,000 and expenses on dance D2,000

v. Honorarium to officers amounted to D500 and sundry expenses D1,120

vi. Amount paid for damages to furniture during dance D300.

You are required to prepare for the year ended 31st March 2014:

(a) Receipts and payments account

STEP I

ANSWER: PREPARATION OF RECEIPTS AND PAYMENT ACCOUNT

BABOU SOCIAL CLUB

RECEIPTS AND PAYMENT ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2014

 

NOTE: All income of the social club are recorded on the left side while all the expenses are recorded on the right side.

Balance c/d = Total income - Total expenses

 

 

(b) income and expenditure account

 Preparation of Income and expenditure Account for the year ended 31st March 2014

BABOU SOCIAL CLUB

Income and Expenditure Account for the year ended 31st March 2014

 

Wk2: proceeds from inauguration 3,000
Less Expenses 1,000
  2,000

 

Wk3: proceeds from football match 500
Less Expenses 300
  200

 

Wk4: proceeds from inauguration 4,000
Less Expenses 2,000
  2,000

Wk5: Excess of income over expenditure

= Total income - Total expenses
= 8,100 - 5,240 = 2,860

Wk6: Excess of income over expenditure 540
Less Expenses 60
  600

 

ALTERNATIVE SOLUTION FOR B

BABOU SOCIAL CLUB

Income and expenditure account for the year ended 31st March 2014

 

ALTERNATIVE VERTICAL REPRESENTATION FOR A

Receipts and payment Account for the year ended 31st March 2014

 

ALTERNATIVE VERTICAL REPRESENTATION FOR B

Income and Expenditure Account for the year ended 31st March 2014

Question 7

Odum Ltd keeps his books on simple entry basis and the following information relates to the business for the year 2014.

In addition, Odum withdrew an amount of GHC500 and introduced GHC200 as additional capital.

(a) You are required to ascertain

(i) opening capital

Answer

Preparation of statement of affairs as at 1st January 2014, to determine opening capital

From the above, opening capital = GHC3,500

 

 

(ii) closing capital

Answer

Preparation of statement of Affairs as at 31st December, 2014 to determine closing capital

From the above, closing capital = GHC5,150

 

 

(iii) net profit

Answer

Preparation of Net profit for the year ended 31st December 2014 to determine net profit

Statement of Net Profit for the year ended 31st December, 2014

 

 

(b) Prepare the balance sheet as at 31st December, 2014.

Answer

Preparation of balance sheet as at 31st December, 2014

 

ALTERNATIVE TO QUESTION 7B

Question 8

Weah CO. Ltd has an authorized capital of $20,000 divided into 100,000 ordinary shares and 20,000 5% preference share

Additional information: provide for depreciation on a motor vehicle at 20% and furniture and fittings at 10% per annum.

The directors decided to transfer $3,000 to reserve: recommend a dividend of 10% on ordinary shares and pay preference shares dividend.

You are required to prepare:

a. Appropriation account/ income surplus account for the year ended 31st December 2014

Answer

 

 

b. A balance sheet as at that date.

Answer

WEAH CO. LTD

WORKINGS:

1. Ordinary shares dividend

10% x 80,000 = 8,000

 

2. Preference shares dividend

5% x 20,000 = 1,000

 

3. Depreciation of Assets

Motor Vehicles = 20% x 30,000 = 6,000

 

4. Fixtures and fittings = 10% x 6,000 = 600

Question 9

The following balances were extracted from the books of Bonjuri, a retailer as at 31st March 2014.

Additional information:

i. Stock on 31st March 2014 was valued at Le60,000

ii. At 31st March, 2014 Le1,500 was outstanding on insurance; electricity was prepaid by Le500 and there was a doubtful debt of Le1,000

iii. Depreciation is to be provided on equipment at 10% on cost.

You are required to prepare:

(a) Trading profit and loss account for the year ended 31st March 2014

Answer

Preparation of Trading, profit and loss account for the year ended 31st March 2014

BONJURI

Trading profit and loss account for the year ended 31t March 2014

(b) Balance sheet as at that date

Answer

Preparation of balance sheet as at that date

BONJURI

Balance sheet as at 31st March, 2014

 

Question 1

a. Describe the following:

i. Bank statement

Answer

Bank Statement: this is a document prepared by a bank and issued to its customers, it shows the following: date, particulars or details, debit, credit, and balance.

ii. Bank reconciliation statement

Answer

 

b. Explain five causes of disagreement between the cash book and the bank statement balance

Answer

Causes of disagreement between the cash book and the bank statement balance are;

Question 2

a. What is a suspense account?

Answer

 

b. Explain five errors that would not affect the agreement of the trial balance.

Answer

Errors that would not affect the agreement of the trial balance are:

 

c. Mention a class of account that would always show

(i) Debit balance

Answer

Classes of accounts that would always show a debit balance are:

(ii) Credit balance

Answer

Classes of accounts that would always show a credit balance are:

Question 3

a. State two ratios which fall under the following classification of accounting ratios:

(i) Profitability

Answer

(ii) Activity ratio

Answer

(iii) Liquidity

Answer

(iv) Investment

Answer

(v) Leverage

 

b. Outline:

(i) Three uses of accounting ratios,

Answer

Uses of accounting ratio: Ratios assists users to:

(ii) Two limitations in the use of accounting ratios.

Answer

Question 4

a. What is a manufacturing account?

Answer

It is an account prepared by an organization involved in the production of goods.

 

b. Explain the following terms:

(i) Prime cost

Answer

Prime Cost: this is the cost that can be traced to a particular production unit. The components are direct materials, direct labour cost, and direct expenses.

(ii) Factory Overheads

Answer

Factory overheads: These are indirect costs incurred in the running of the factory. They are costs which cannot be traced to a particular labour cost.

(iii) Work-in-progress

Answer

Work-in-progress: these are partly finished goods or uncompleted work

(iv) Cost of goods transferred

Answer

Cost of goods transferred: this is the total production cost of finished goods. This is transferred from the manufacturing account to the trading account.

(v) Finished goods

Answer

(vi) Profit on manufacturing

Answer

Question 5

The following balances have been extracted from the books of Johnson

You are required to prepare

(a) total debtors account

Answer

(b) total creditor’s account

Answer

Question 6

Babou social club was formed on April 1, 2013, with 50 members, each paying an annual subscription of D12.

The following information was extracted from the books of the club on 31s March 2014.

i

Amount realized during Inauguration D3,000
Expenses paid on Inauguration D1,000

ii. All members paid their subscription with the exception of five members who were still owing by 31st March 2014

iii. Gate fees from organized football match were D500 and Expenses incurred D300

iv. Proceeds from the end of the year dance amount to 4,000 and expenses on dance D2,000

v. Honorarium to officers amounted to D500 and sundry expenses D1,120

vi. Amount paid for damages to furniture during dance D300.

You are required to prepare for the year ended 31st March 2014:

(a) Receipts and payments account

STEP I

ANSWER: PREPARATION OF RECEIPTS AND PAYMENT ACCOUNT

BABOU SOCIAL CLUB

RECEIPTS AND PAYMENT ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2014

 

NOTE: All income of the social club are recorded on the left side while all the expenses are recorded on the right side.

Balance c/d = Total income - Total expenses

 

 

(b) income and expenditure account

 Preparation of Income and expenditure Account for the year ended 31st March 2014

BABOU SOCIAL CLUB

Income and Expenditure Account for the year ended 31st March 2014

 

Wk2: proceeds from inauguration 3,000
Less Expenses 1,000
  2,000

 

Wk3: proceeds from football match 500
Less Expenses 300
  200

 

Wk4: proceeds from inauguration 4,000
Less Expenses 2,000
  2,000

Wk5: Excess of income over expenditure

= Total income - Total expenses
= 8,100 - 5,240 = 2,860

Wk6: Excess of income over expenditure 540
Less Expenses 60
  600

 

ALTERNATIVE SOLUTION FOR B

BABOU SOCIAL CLUB

Income and expenditure account for the year ended 31st March 2014

 

ALTERNATIVE VERTICAL REPRESENTATION FOR A

Receipts and payment Account for the year ended 31st March 2014

 

ALTERNATIVE VERTICAL REPRESENTATION FOR B

Income and Expenditure Account for the year ended 31st March 2014

Question 7

Odum Ltd keeps his books on simple entry basis and the following information relates to the business for the year 2014.

In addition, Odum withdrew an amount of GHC500 and introduced GHC200 as additional capital.

(a) You are required to ascertain

(i) opening capital

Answer

Preparation of statement of affairs as at 1st January 2014, to determine opening capital

From the above, opening capital = GHC3,500

 

 

(ii) closing capital

Answer

Preparation of statement of Affairs as at 31st December, 2014 to determine closing capital

From the above, closing capital = GHC5,150

 

 

(iii) net profit

Answer

Preparation of Net profit for the year ended 31st December 2014 to determine net profit

Statement of Net Profit for the year ended 31st December, 2014

 

 

(b) Prepare the balance sheet as at 31st December, 2014.

Answer

Preparation of balance sheet as at 31st December, 2014

 

ALTERNATIVE TO QUESTION 7B

Question 8

Weah CO. Ltd has an authorized capital of $20,000 divided into 100,000 ordinary shares and 20,000 5% preference share

Additional information: provide for depreciation on a motor vehicle at 20% and furniture and fittings at 10% per annum.

The directors decided to transfer $3,000 to reserve: recommend a dividend of 10% on ordinary shares and pay preference shares dividend.

You are required to prepare:

a. Appropriation account/ income surplus account for the year ended 31st December 2014

Answer

 

 

b. A balance sheet as at that date.

Answer

WEAH CO. LTD

WORKINGS:

1. Ordinary shares dividend

10% x 80,000 = 8,000

 

2. Preference shares dividend

5% x 20,000 = 1,000

 

3. Depreciation of Assets

Motor Vehicles = 20% x 30,000 = 6,000

 

4. Fixtures and fittings = 10% x 6,000 = 600

Question 9

The following balances were extracted from the books of Bonjuri, a retailer as at 31st March 2014.

Additional information:

i. Stock on 31st March 2014 was valued at Le60,000

ii. At 31st March, 2014 Le1,500 was outstanding on insurance; electricity was prepaid by Le500 and there was a doubtful debt of Le1,000

iii. Depreciation is to be provided on equipment at 10% on cost.

You are required to prepare:

(a) Trading profit and loss account for the year ended 31st March 2014

Answer

Preparation of Trading, profit and loss account for the year ended 31st March 2014

BONJURI

Trading profit and loss account for the year ended 31t March 2014

(b) Balance sheet as at that date

Answer

Preparation of balance sheet as at that date

BONJURI

Balance sheet as at 31st March, 2014