Quiz 4 of 14

2019 Financial Accounting WAEC Theory Past Questions

Responses

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Question 1

Explain the following terms and outline how they are treated in the final account

(a) Increase in provision for doubtful debts

Answer

(i) This occurs when the current year’s provision for doubtful debt is more than the previous year’s provision

(ii) In the final account increase in the provision for doubtful debt is debited from the profit and loss account but in the balance sheet increase is added to the previous provision and the total subtracted from the debtor balance

 

(b) Decrease in provision for doubtful debts

Answer

(i) This occurs when the current year provision for doubtful debt less than the previous year’s provision

(ii) In the final account decrease in the provision for doubtful debt is credited to the profit and loss account but in the balance sheet it is deducted from the previous provision and the balance is subtracted from the debtors total

 

(c) Provision for discount on debtors

Answer

(i) This is a percentage calculated in the total amount of debtors after the deduction of provision for doubtful debts

(ii) Provision for discount on debtor is debited to the profit and loss account but in the balance sheet, the amount provided is deducted from debtors balance

 

(d) Provision for discount on creditors

Answer

(i) This is a percentage calculated on the total amount of creditors

(ii) In the final account, Provision for discount on creditors is credited to the profit and loss account but in the balance sheet the amount provided is deducted from the creditors total

 

(e) Provision for depreciation

Answer

(i) This is the provision made for the part of the cost of a fixed tangible or non-current asset consumed during its period of use by an organization

OR

It is the provision made for the reduction in the economic value of a fixed tangible non-current asset as a result of wear and tear, usage and passage of time

Question 2

(a) What are closing entries

Answer

Closing entries are journal entries made at the end of an accounting period which are later transferred to the income statement
OR
Closing entries are journal entries passed to close the account relating to income, expenses, gains, and losses at the end of the accounting period

 

(b) Distinguish between a branch and a department

Answer

Branch is a segment/ unit of a business located outside the head office but a department is a unit of an organization under the same roof
OR
A branch replicates all the activities of the head office, but a department operates only a single line of production or service of the firm which differs from those of the other unit

 

(c) State four reasons for the preparation of branch account

Answer

Reason for the preparation of branch account: branch accounts are prepared to:
(i) Be used as a basis to reward hardworking staff

(ii) Serve as a basis for management decision making

(iii) Compare the result performance of various branches

(iv) Know the profitable and unprofitable branches

(v) Determine which of the branches could be closed down

(vi) Help management control the organization activities

Question 3

(a) State three effects of drawings on the business of a sole proprietor

The effects of drawings on the business of a sole proprietor are: They

(i) Decrease the stock of goods available

(ii) Lead to capital reduction

(iii) Lead to a reduction in cash flows

(iv) Reduce the profit of the business

(v) Reduce the fixed assets of the business

(vi) Slows down the growth of a business

(vii) May lead to the collapse of the business

 

(b) Explain how the following items are treated in the balance sheet

(i) Accrued expenses

Answer

These are treated as accruals under the current liabilities in the balance sheet

 

(ii) Prepaid expenses

Answer

These are treated as current assets in the balance sheet

 

(iii) Accrued income

Answer

This is treated as a current asset in the balance sheet

Question 4

(a) Outline the reasons for which a cheque would be dishonoured

Answer

The reasons for which a cheque would be dishonoured are:

(i) Insufficient funds in the drawer’s account

(ii) Irregular signature on the drawer

(iii) Omission of the date on the cheque

(iv) When the amount in figures differs from the amount in words

(v) If there is any alteration that is not endorsed

(vi) When a cheque is stale

(vii) If the cheque is not signed by the drawer

(viii) When the drawer directs the bank not to honour the cheque

 

(b)Explain the following terms:

(i) Petty cash float

Answer

It is the maximum amount a petty cashier is allowed to hold at any point in time for the payment of minor expenses

(ii) Contra entries

Answer

These are entries which are recorded on the opposite sides of an earlier entry to reverse or offset their effects on their account balances
OR
They are entries for transactions whose debit and credits are in the same book

(iii) Imprest system

Answer

This is a system whereby a fixed amount of money is given to a petty cashier for the payment of minor expenses and he is reimbursed with the amount disbursed over a period of time

 

(c) State three advantages of keeping petty cash book using the imprest system

Answer

The advantages of keeping petty cash book using imprest system are:

(i) It saves the main cashier’s time so as to concentrate on larger disbursements

(ii) It provides a training opportunity for young and inexperienced cashiers that enables them to take up higher cash responsibilities

(iii) It provides support for internal checks/detection of errors

(iv) It minimizes delays in cash disbursements

(v) It enables the petty cashier to analyze expenditures as they occur

(vi) It de-congests the main cash book

Question 5

The following transactions were extracted from the books of Adamu, a sole trade for the month of March 2016

March 4 sold 80 bags of maize on credit to Papuk at GHc225 per bag to a trade discount of 5%

March 10 sold goods on credit to Abass for GHc1,170

March 15 received a cheque from Papuk for the amount due less a discount of 10%

March 20 received cash of GHc900 from Abass

You are required to prepare;

(a) Sales journal

(b) Customers account in the sales ledger

(c) Sales ledger control account

 

Answer

Question 6

Ubochi and Hassah started a partnership business on 1st January 2015. they contributed D300,000 and D250,000 respectively as capitals, their partnership deed stated that:

(i) Interest of 8% should be paid on capital per annum

(ii) Hassah would be paid D10,000 monthly as salary

(iii) Interest on drawings is 5%

(iv) The profits are to be shared in the ratio 3:2 respectively

(v) At the end of the year, the profit made was N300,000 during the period, Ubochi and Hassah made drawings of D20,000 and D15,000 respectively

You are required to prepare

(a) Profit and loss appropriation account for the year ended 31st December 2015

(b) Partners current accounts

 

Solution


Question 7

On the 30th of September 2017, Adedeji’s cash book showed a debit balance of GHc7,600 however, his bank statement showed an overdraft balance of GHc1,880. on investigation, the following details were discovered:

(i) A standing order of GHc 160 has not been entered in the cash book

(ii) Bank charges of GHc40 did not appear in the cash book

(iii) Cash paid for GHc400 had been entered in the cash book as GHc360

(iv) A cheque of GHc 200 received from a customer was dishonoured

(v) The bank received a credit transfer of GHc 400 from a customer

(vi) A cheque of GHc1,360 paid to Dexteri Ltd has been entered in the cash book as GHc1,720

(vii) A receipt of GHc40 shown on the bank statement had not been entered in the cash book

(viii) A cheque was drawn amounting to GHc160 still with the supplier

(ix) Receipts of GHc3,600 paid into the bank on 31st September 2017 did not appear on the bank statement until October 2017

(x) A cheque of GHc1,080 paid into the bank wrongly credited by the bank as GHc600

(xi) A transfer of GHc6,000 to the bank had not been recorded in the cash book

You are required to prepare:

(a) Adjusted cash book

(b) Bank reconciliation statement as at 30th September 2017

 

Solution

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