Quiz 2 of 14

2020 Financial Accounting WAEC Theory Past Questions

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Question 1

(a) Outline two differences between bookkeeping and accounting

Answer

  Book Keeping Accounting
1. It refers to the mechanical aspect of recording transactions on daily basis in the appropriate book of account. It records, classifies, summarizes, analyzes, communicates, and interprets financial data to enable users to make decisions.
2. It is only a small part of the field of accounting and it is limited in scope. It has a wider scope and goes beyond the recording of transactions only.
3. It may be performed by staff with fewer skills in accounting. It is performed by staff with special skills in accounting.
4. One can become a proficient bookkeeper within a few weeks or months. To become a professional accountant requires several years of studies and experience.

 

(b) List one source document used for each of the following transactions:

(i) Sales

Answer

Receipt

Goods dispatched note

Sales Invoice

Sales order

Bank Statement

(ii) Purchases

Answer

Deposit slip

Purchase Invoice

Receipt

Goods received note

Purchase order  

(iii) Cash deposit

Answer

Teller

Bank statement

Receipt

Deposit slip

(iv) Salary

Answer

Cheque

Payslip

Job sheet

Payroll register

Time book or sheet  

 

(c) State three purposes of source documents

Answer

i. They serve as evidence or proof of financial transactions.

ii. They help in the location of errors.

iii. They serve as sources of verification for auditing purposes.

iv. They help to minimize fraudulent activities in an organization.

v. They provide detailed information used in the preparing of books of account

vi. They serve as evidence in legal matters.

Question 2

(a) What is a not-for-profit making organization?

Answer

Not-for-profit making organizations are organizations set up for the purpose of catering for the welfare of their members. They are not set up to make a profit.  

 

(b)Outline two differences between not-for-profit making organizations

Answer

Differences between for profit-making organizations and Not-for-profit making organizations.

  For-Profit Making Not-For-Profit Making
i. It is set up for making profit. It is not set up for profit-making but to cater to the welfare of members.
ii. Tax is paid on taxable profit They are tax-exempt, except for commercial activities undertaken by them.
iii. They are usually in the form of a Sole proprietorship, Partnership, and Companies. They are usually in the form of clubs, societies, schools, hospitals, charity organizations, etc.
iv. Sources of income are from sales of goods and services rendered Their source of income is from donations, subscription membership fees, grants, dues from members.
v. Management is vested on the owner of Sole proprietorship, Partners, or Directors in the case of a company. Management is vested on the board of Trustees, committees, or governing bodies.

 

(c) Explain the following sources of funding in a not-for-profit making organization:

(i) Subscription

Answer

Subscription: This is the contribution made by the members to the club or society at regular intervals. Subscription can be paid in advance or arrears.

(ii) Life membership fee

Answer

Life membership fee: This is an amount paid once by a member of the organization. In order to enjoy the facilities throughout the period of membership.

(iii) Entrance fee

Answer

Entrance Fees: This is the amount paid once at the point of admission into membership of an organization.

(iv) Donation

Answer

Donations: This is the cash or any items received by the organization as gift from other people.

Question 3

(a) Explain the term fixed capital account

Answer

This is a type of capital account where the capital amount will remain at the same figure during the partnership.

 

(b) State three conditions that would result in a change in profit and loss sharing ratio of a partnership

Answer

Conditions that would result in the change in profit and loss sharing ratio of a partnership:

i. Where a partner dies.

ii. On the admission of a new partner

iii. Changes in skill contributed by partner

iv. On the retirement of a partner

v. On the resignation of a partner

vi. When there is a takeover of a partnership

vii. On the amalgamation of partnership

viii. When there is a change in status of a partner e.g. from dormant partner to an active partner.

 

(c) Outline three circumstances that would give rise to the creation of goodwill in a partnership

Answer

Circumstances that would give rise to the creation of goodwill in a partnership:

i. On the admission of a new partner

ii. When there is a change in sharing profit ratio

iii. On the death of a partner

iv. On dissolution of the partnership

v. On the retirement of a partner

vi. On amalgamation of partnership

Question 4

(a) List:
(i.) Three books of accounts used in public sector accounting

Answer

Books of Accounts used in Public Sector Accounting:

i. Payment voucher

ii. Receipt voucher

iii. Vote book

iv. Cashbook

v. Imprest cash book

vi. Register of vouchers

vii. Salary abstract

viii. Stores receipt vouchers

ix. Stores issue voucher

x. Revenue collectors cash book

 

(ii.) Four users of public sector accounting information

Answer

Users of Public Sector Accounting:

i. Auditors

ii. Accountants

iii. Governments

iv. Financial institutions or analysts

v. Foreign Investors

vi. General public or Employees

vii. International organization e.g. World bank

viii. Suppliers

ix. Trade Unions

x. Civil society organization

 

(b)State four differences between the private sector accounting and the public sector accounting

Answer

Differences between Private sector and Public Sector Accounting:

Private Sector Accounting Public Sector Accounting
i. It uses an entity or proprietorship system of accounting Uses the fund and vote system of accounting.
ii. Its objective is to ascertain profit. Its objective is to ascertain the efficiency of the collection and use of public funds.
iii. Accounts prepared are the statement of comprehensive income and statement of financial position. Accounts mainly prepared are Revenue and Expenditure Accounts and the statements of Assets and Liabilities.
iv. Costs of fixed assets are spread over the useful life of the assets. The cost of fixed assets is written off immediately after purchase.
v. Accounts are prepared for owners, shareholders, and other stakeholders. Accounts are prepared for the general public.
vi. Accounts are mainly prepared on an accrual basis of accounting. Accounts are prepared on a cash basis of Accounting.

Question 5

The following transactions were extracted from the books of Odis Enterprises for the year ended 31st December 2018:

i. Cash received from trade debtors GH¢100,000

ii. Cash paid to suppliers GH¢72,000

iii. Expenses paid during the year were: rent GH¢2,500 general expenses GH¢1,800

iv. A cash of GH¢5,200 was withdrawn by the proprietor for personal use

v. Fixed assets valued at GH¢8,000 on 31st December 2017 were to be depreciated at 10% per annum

Additional Information

You are required to prepare:

(a) Statement of Affairs as at 1st January 2018;

Solution

 

(b) Cashbook:

Solution

 

(c) Trading Profit and Loss for the year ended 31st December 2018

Solution

Question 6

The books of Omiye Social Club showed the following information for the year ended 31st December, 2015.

You are required to prepare:

(a)Income and Expenditure Account for the year ended 31st December 2015.

Solution

 

 

(b)Balance sheet as at that day.

Solution

 

Question 7

The following balances were extracted from the books of Abobaku Local Government for the year ended 31st December, 2019.

You are required to prepare for the ended 31st December, 2019:

(a) Statement of Recurrent Expenditure

Answer

 

(b) Statement of Capital Expenditure

Answer

 

(c) Statement of Revenue.

Answer

Question 8

Yallawa Stores Ltd. has two departments. The following balances were extracted from its books as at 31st December, 2017.

 

Additional Information:

Expenses are to be apportioned to the department as follows:

i. Commission – on the basis of sales:

ii. Salaries and wages – 3:2 for Department A and B respectively

iii. Discount received – 10% of purchases:

iv. Other expenses are to be apportioned equally.

You are required to prepare a Departmental Trading, Profit, and Loss Account for the year ended 31st December 2017

Answer

YALLAWA STORES LTD. DEPARTMENTAL, TRADING, PROFIT, AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER, 2017

Workings

1. Rent and Rates - 50,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 50,000 = 25,000 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 50,000 = 25,000 \)

 

2. Commission - 55,000

Dept. A → \( \frac{55,000 \: \times \: 1,500,000}{2,750,000} \scriptsize = 30,000 \)

Dept. B →\( \frac{55,000 \: \times \: 1,250,000}{2,750,000} \scriptsize = 25,000 \)

 

3. Insurance - 5,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 5,000 = 2,500 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 5,000 = 2,500 \)

 

4. Discount Received - 124,000

Dept. A → \( \frac{10}{100} \scriptsize \: \times \: 720,000 = 72,000 \)

Dept. B → \( \frac{10}{100} \scriptsize \: \times \: 520,000 = 52,000 \)

 

5. Advertising - 20,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 20,000 = 10,000 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 20,000 = 10,000 \)

 

6. Salaries & Wages - 250,000

Dept. A → \( \frac{3}{5} \scriptsize \: \times \: 250,000 = 150,000 \)

Dept. B → \( \frac{2}{5} \scriptsize \: \times \: 250,000 = 100,000 \)

 

7. Depreciation - 35,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 35,000 = 17,000 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 35,000 = 17,000 \)

Question 9

The following information was extracted from the books of Okere Manufacturing Company for the year ended 31st December 2016.

You are required to prepare a Manufacturing, Trading, Profit, and Loss Account for the year ended 31st December 2016.

Answer

Question 1

(a) Outline two differences between bookkeeping and accounting

Answer

  Book Keeping Accounting
1. It refers to the mechanical aspect of recording transactions on daily basis in the appropriate book of account. It records, classifies, summarizes, analyzes, communicates, and interprets financial data to enable users to make decisions.
2. It is only a small part of the field of accounting and it is limited in scope. It has a wider scope and goes beyond the recording of transactions only.
3. It may be performed by staff with fewer skills in accounting. It is performed by staff with special skills in accounting.
4. One can become a proficient bookkeeper within a few weeks or months. To become a professional accountant requires several years of studies and experience.

 

(b) List one source document used for each of the following transactions:

(i) Sales

Answer

Receipt

Goods dispatched note

Sales Invoice

Sales order

Bank Statement

(ii) Purchases

Answer

Deposit slip

Purchase Invoice

Receipt

Goods received note

Purchase order  

(iii) Cash deposit

Answer

Teller

Bank statement

Receipt

Deposit slip

(iv) Salary

Answer

Cheque

Payslip

Job sheet

Payroll register

Time book or sheet  

 

(c) State three purposes of source documents

Answer

i. They serve as evidence or proof of financial transactions.

ii. They help in the location of errors.

iii. They serve as sources of verification for auditing purposes.

iv. They help to minimize fraudulent activities in an organization.

v. They provide detailed information used in the preparing of books of account

vi. They serve as evidence in legal matters.

Question 2

(a) What is a not-for-profit making organization?

Answer

Not-for-profit making organizations are organizations set up for the purpose of catering for the welfare of their members. They are not set up to make a profit.  

 

(b)Outline two differences between not-for-profit making organizations

Answer

Differences between for profit-making organizations and Not-for-profit making organizations.

  For-Profit Making Not-For-Profit Making
i. It is set up for making profit. It is not set up for profit-making but to cater to the welfare of members.
ii. Tax is paid on taxable profit They are tax-exempt, except for commercial activities undertaken by them.
iii. They are usually in the form of a Sole proprietorship, Partnership, and Companies. They are usually in the form of clubs, societies, schools, hospitals, charity organizations, etc.
iv. Sources of income are from sales of goods and services rendered Their source of income is from donations, subscription membership fees, grants, dues from members.
v. Management is vested on the owner of Sole proprietorship, Partners, or Directors in the case of a company. Management is vested on the board of Trustees, committees, or governing bodies.

 

(c) Explain the following sources of funding in a not-for-profit making organization:

(i) Subscription

Answer

Subscription: This is the contribution made by the members to the club or society at regular intervals. Subscription can be paid in advance or arrears.

(ii) Life membership fee

Answer

Life membership fee: This is an amount paid once by a member of the organization. In order to enjoy the facilities throughout the period of membership.

(iii) Entrance fee

Answer

Entrance Fees: This is the amount paid once at the point of admission into membership of an organization.

(iv) Donation

Answer

Donations: This is the cash or any items received by the organization as gift from other people.

Question 3

(a) Explain the term fixed capital account

Answer

This is a type of capital account where the capital amount will remain at the same figure during the partnership.

 

(b) State three conditions that would result in a change in profit and loss sharing ratio of a partnership

Answer

Conditions that would result in the change in profit and loss sharing ratio of a partnership:

i. Where a partner dies.

ii. On the admission of a new partner

iii. Changes in skill contributed by partner

iv. On the retirement of a partner

v. On the resignation of a partner

vi. When there is a takeover of a partnership

vii. On the amalgamation of partnership

viii. When there is a change in status of a partner e.g. from dormant partner to an active partner.

 

(c) Outline three circumstances that would give rise to the creation of goodwill in a partnership

Answer

Circumstances that would give rise to the creation of goodwill in a partnership:

i. On the admission of a new partner

ii. When there is a change in sharing profit ratio

iii. On the death of a partner

iv. On dissolution of the partnership

v. On the retirement of a partner

vi. On amalgamation of partnership

Question 4

(a) List:
(i.) Three books of accounts used in public sector accounting

Answer

Books of Accounts used in Public Sector Accounting:

i. Payment voucher

ii. Receipt voucher

iii. Vote book

iv. Cashbook

v. Imprest cash book

vi. Register of vouchers

vii. Salary abstract

viii. Stores receipt vouchers

ix. Stores issue voucher

x. Revenue collectors cash book

 

(ii.) Four users of public sector accounting information

Answer

Users of Public Sector Accounting:

i. Auditors

ii. Accountants

iii. Governments

iv. Financial institutions or analysts

v. Foreign Investors

vi. General public or Employees

vii. International organization e.g. World bank

viii. Suppliers

ix. Trade Unions

x. Civil society organization

 

(b)State four differences between the private sector accounting and the public sector accounting

Answer

Differences between Private sector and Public Sector Accounting:

Private Sector Accounting Public Sector Accounting
i. It uses an entity or proprietorship system of accounting Uses the fund and vote system of accounting.
ii. Its objective is to ascertain profit. Its objective is to ascertain the efficiency of the collection and use of public funds.
iii. Accounts prepared are the statement of comprehensive income and statement of financial position. Accounts mainly prepared are Revenue and Expenditure Accounts and the statements of Assets and Liabilities.
iv. Costs of fixed assets are spread over the useful life of the assets. The cost of fixed assets is written off immediately after purchase.
v. Accounts are prepared for owners, shareholders, and other stakeholders. Accounts are prepared for the general public.
vi. Accounts are mainly prepared on an accrual basis of accounting. Accounts are prepared on a cash basis of Accounting.

Question 5

The following transactions were extracted from the books of Odis Enterprises for the year ended 31st December 2018:

i. Cash received from trade debtors GH¢100,000

ii. Cash paid to suppliers GH¢72,000

iii. Expenses paid during the year were: rent GH¢2,500 general expenses GH¢1,800

iv. A cash of GH¢5,200 was withdrawn by the proprietor for personal use

v. Fixed assets valued at GH¢8,000 on 31st December 2017 were to be depreciated at 10% per annum

Additional Information

You are required to prepare:

(a) Statement of Affairs as at 1st January 2018;

Solution

 

(b) Cashbook:

Solution

 

(c) Trading Profit and Loss for the year ended 31st December 2018

Solution

Question 6

The books of Omiye Social Club showed the following information for the year ended 31st December, 2015.

You are required to prepare:

(a)Income and Expenditure Account for the year ended 31st December 2015.

Solution

 

 

(b)Balance sheet as at that day.

Solution

 

Question 7

The following balances were extracted from the books of Abobaku Local Government for the year ended 31st December, 2019.

You are required to prepare for the ended 31st December, 2019:

(a) Statement of Recurrent Expenditure

Answer

 

(b) Statement of Capital Expenditure

Answer

 

(c) Statement of Revenue.

Answer

Question 8

Yallawa Stores Ltd. has two departments. The following balances were extracted from its books as at 31st December, 2017.

 

Additional Information:

Expenses are to be apportioned to the department as follows:

i. Commission – on the basis of sales:

ii. Salaries and wages – 3:2 for Department A and B respectively

iii. Discount received – 10% of purchases:

iv. Other expenses are to be apportioned equally.

You are required to prepare a Departmental Trading, Profit, and Loss Account for the year ended 31st December 2017

Answer

YALLAWA STORES LTD. DEPARTMENTAL, TRADING, PROFIT, AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER, 2017

Workings

1. Rent and Rates - 50,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 50,000 = 25,000 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 50,000 = 25,000 \)

 

2. Commission - 55,000

Dept. A → \( \frac{55,000 \: \times \: 1,500,000}{2,750,000} \scriptsize = 30,000 \)

Dept. B →\( \frac{55,000 \: \times \: 1,250,000}{2,750,000} \scriptsize = 25,000 \)

 

3. Insurance - 5,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 5,000 = 2,500 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 5,000 = 2,500 \)

 

4. Discount Received - 124,000

Dept. A → \( \frac{10}{100} \scriptsize \: \times \: 720,000 = 72,000 \)

Dept. B → \( \frac{10}{100} \scriptsize \: \times \: 520,000 = 52,000 \)

 

5. Advertising - 20,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 20,000 = 10,000 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 20,000 = 10,000 \)

 

6. Salaries & Wages - 250,000

Dept. A → \( \frac{3}{5} \scriptsize \: \times \: 250,000 = 150,000 \)

Dept. B → \( \frac{2}{5} \scriptsize \: \times \: 250,000 = 100,000 \)

 

7. Depreciation - 35,000

Dept. A → \( \frac{1}{2} \scriptsize \: \times \: 35,000 = 17,000 \)

Dept. B → \( \frac{1}{2} \scriptsize \: \times \: 35,000 = 17,000 \)

Question 9

The following information was extracted from the books of Okere Manufacturing Company for the year ended 31st December 2016.

You are required to prepare a Manufacturing, Trading, Profit, and Loss Account for the year ended 31st December 2016.

Answer