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SS1: FINANCIAL ACCOUNTING - 1ST TERM

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  1. Introduction to Booking Keeping and Accounting | Week 1
    11 Topics
    |
    1 Quiz
  2. Introduction to Books of Account | Week 2
    6 Topics
    |
    1 Quiz
  3. Subsidiary Books of Account I | Week 3
    4 Topics
    |
    1 Quiz
  4. Subsidiary Books of Account II | Week 4
    4 Topics
    |
    1 Quiz
  5. Principles of Double Entry Book Keeping | Week 5
    1 Topic
    |
    1 Quiz
  6. Cash Book | Week 6
    6 Topics
    |
    1 Quiz
  7. Petty Cash Book | Week 7
    1 Topic
    |
    1 Quiz

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Topic Content:

  • Theory Questions & Answers – Introduction to Booking Keeping and Accounting

Theory Questions – Introduction to Booking Keeping and Accounting:

1. (a) Mention three disadvantages to a business that does not keep proper accounting records.

(b) Explain the following characteristics of accounting information
i. Relevance
ii. Comparability 
iii. Consistency
iv. Reliability

(c) State two limitations in the use of accounting information for business decision-making. (WAEC 2018)

View Solution

2. (a) Define:

i. Bookkeeping
ii. Accounting

(b) Outline two differences between bookkeeping and accounting.

View Solution
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Question 1

(a) Mention three disadvantages to a business that does not keep proper accounting records.

Answer:

Disadvantages to a Business that does not keep Proper Accounting Records:

(i) Inability to ascertain accurate profit or loss.

(ii) It could lead to a wrong assessment of taxes.

(iii) There’s the possibility of arbitrary spending leading to business collapse.

(iv) Fraud and dishonesty will not easily be detected/checked.

(v) It could lead to loss of vital business records.

(vi) It makes it difficult to prepare a financial statement.

(vii) It could lead to difficulty in planning business activities.

(viii) It could lead to inaccurate decisions.

(ix) It makes it difficult for businesses to obtain credit facilities.

(x) It makes it difficult to detect errors.

 

(b) Explain the following characteristics of accounting information.

 

(i) Relevance:

Answer:

Accounting information is relevant if it is useful for the intended purpose.

 

(ii) Comparability:

Answer

This means that accounting information should be capable of being compared with those of similar entities and from one period to another.

 

(iii) Consistency:

Answer

This characteristic requires accounting information to be prepared following similar procedures and methods.

 

(iv) Reliability:

Answer:

This characteristic requires accounting information to be verifiable and factual.

 

(c) State two limitations in the use of accounting information for business decision-making.

Answer:

Limitations in the use of accounting information:

(i) The use of historical cost reduces the relevance of accounting information in making current decisions.

(ii) Information that cannot be measured in monetary terms is not recorded in accounting and this makes accounting information incomplete.

(iii) Possibility of error in accounting can reduce the usefulness of accounting information.

(iv) Where precise information is not available accountants rely on estimates which may be inaccurate for decision-making.

(v) Some businesses window-dress their financial statements thereby misleading users.

(vi) Businesses use different accounting policies which makes comparisons misleading.

Question 2

(a) Define:

i. Bookkeeping:

Answer:

Bookkeeping is the systematic recording of transactions on a daily basis in the appropriate books of account. It is the process of recording data relating to accounting transactions in the accounting books.

 

ii. Accounting:

Answer:

Accounting is the process of recording, classifying, selecting, measuring, interpreting, identifying, and communicating financial data of an organization to enable users to make decisions.

 

(b) Outline two differences between bookkeeping and accounting.

Answer:

 S/n 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.
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