WAEC SSCE - Financial Accounting - 1997

To correct an error, the purchases account was debited while Suspense account was credited. Which of the following was the cause of the error?

A suspense account is used to

When a share is sold for less than its nominal value, the difference is called

Answer Details

When a share is sold for less than its nominal value, the difference is called a "discount." Nominal value is the face value of a share or stock, and it represents the minimum amount for which the share can be issued. When a company issues shares at a price below their nominal or face value, it means that the shares are being sold at a discount. This can happen when a company needs to raise capital quickly or when the market conditions are not favorable. The amount of the discount is the difference between the nominal value of the share and the price at which it is being sold.

An expense becomes an accrual because it

Answer Details

An expense becomes an accrual because it has been incurred in a period, but the payment for it has not yet been made. In other words, it is an expense that has been recognized but not yet paid. Accrued expenses are recognized in the period in which they occur, regardless of when they are paid. This is important because it allows financial statements to show a more accurate picture of a company's financial position by recognizing all expenses that have been incurred, even if they have not yet been paid. Therefore, 2, 3, 4, and 5 are not correct because they do not fully capture the concept of accruals.

Where a business is purchased, the full amount of the purchase consideration is credited to

Use the following information to answer this question

A business whose assets consisted of stock N15,000 and debtors N8,000 was bought by issuing 20,000 ordinary shares of N1 each at a premium of 20 percent.

The amount of goodwill was

Answer Details

Goodwill is the amount of money that a buyer is willing to pay over and above the net assets of a business. To calculate the goodwill in this scenario, we need to find the total value of the net assets and subtract it from the total cost of acquiring the business. The total value of the net assets of the business is the sum of the stock and debtors, which is N15,000 + N8,000 = N23,000. The total cost of acquiring the business is the value of the shares issued, which is 20,000 x N1.20 = N24,000. Therefore, the goodwill is the difference between the total cost of acquiring the business and the total value of its net assets, which is N24,000 - N23,000 = N1,000. Hence, the amount of goodwill is N1,000.

use the following information to answer the given question
\(\begin{array}{c|c} \text{Opening stock} & \text{- Footwears Department} & N800 \\ & \text{- Stationary Department} & N600 \\ Purchases & \text{- Footwears Department} & N1,600 \\ & \text{- Stationary Department} & N2,800 \\ \text{Wages of shoe packers} & & N600 \\ & -Salaries & N1,200 \\ & \text{-Footwares} & N4,000 \\ Sales & \text{- stationery} & N6,000\end{array}\)
The cost goods for the stationery is

Use the following to answer the given question
Creditors Control Account:
\(\begin{array}{c|c} & & & N \\ \hline Bank & \text{"X"} & \text{Balanxe b/d} & 1,200 \\ Discount & 30 & \text{"Y"} & 1,800 \\ \text{Balance c/d} & 450 & & \\ \hline & & & & \hline \end{array}\)
"Y" represents

A cash discount is a

Use the following information to answer this question

An asset was bought on 1st January, 1992 for N20,000. Depreciation was provided for annually at 20% on cost. It was sold for N7,000 on 1st July, 1995.

The net book value at the time of sale was

Answer Details

The asset was purchased for N20,000 and depreciated at a rate of 20% per annum on cost. After three and a half years, the total depreciation provided would be 20% * 3.5 = 70%. The accumulated depreciation would be N20,000 * 70% = N14,000. The net book value at the time of sale can be calculated by subtracting the accumulated depreciation from the original cost of the asset. Net Book Value = Cost of Asset - Accumulated Depreciation Net Book Value = N20,000 - N14,000 = N6,000 Therefore, the net book value at the time of sale was N6,000. N6,000, is the correct answer.

Subscription in advance is treated in the Balance sheet of non-profit making organizations as

Answer Details

Subscription in advance is treated as a current liability in the Balance sheet of non-profit making organizations. This is because the organization has received the payment for the subscription in advance but the services or benefits will be provided in the future. Therefore, it is a liability that the organization owes to its members until the services or benefits are provided. Once the services or benefits are provided, the subscription in advance will be transferred to the revenue side of the Income and Expenditure account as income.

Use the following information to answer the given question

Kudi Local Government Council incurred the following expenditure in 1995:
\(\begin{array}{c|c} & N \\ \hline \text{Payment of salaries} & 140,000 \\ \text{Purchase of drugs for dispensaries} & 80,000 \\ \text{Purchase of books for Library} & 30,000 \\ \text{Sinking of wells} & 70,000 \\ \text{Extension of Council offices} & 160,000 \end{array}\)
The amount of revenue expenditure for 1995 was

Which of the following serves the same purpose as a Trading Account?

Use the following information to answer the given question. The Receipts and Payments Account of Acada Club for the year ended 31st December, 1995 is as follows:
\(\begin{array}{c|c} & N & & N \\ \hline \text{Balance b/f} & 800 & \text{Printing and stationery} & 320 \\ Subscriptions & 3,600 & \text{Postages and Telephone} & 160 \\ \text{Donations} & 650 & Rent & 1,200 \\ \text{Dace tickets} & 1,200 & \text{Library books} & 2,500 \\ & & \text{Anniversary dance expenses} & 945 \\ & & \text{balance c/d} & 1,125\\ & \overline{6,250} & & \overline{6,250} \end{array}\)
The capital expenditure of the club for the year was

Answer Details

The capital expenditure refers to the expenditure incurred on the acquisition or improvement of long-term assets such as land, building, machinery, etc. We can determine the capital expenditure of the club by identifying the items in the Receipts and Payments Account that relate to the acquisition or improvement of long-term assets. From the given information, we can see that there is an item called "Library books" with a value of N2,500. This item represents the purchase of a long-term asset (books for the club's library), which is a capital expenditure. Therefore, the capital expenditure of the club for the year was N2,500.

Use the following to answer the given question
Creditors Control Account:
\(\begin{array}{c|c} & & & N \\ \hline Bank & \text{"X"} & \text{Balanxe b/d} & 1,200 \\ Discount & 30 & \text{"Y"} & 1,800 \\ \text{Balance c/d} & 450 & & \\ \hline & & & & \hline \end{array}\)
The balance of 450 in the above accounts represents

Answer Details

The balance of 450 in the Creditors Control Account represents a current liability. The Creditors Control Account is a summary account that shows the total amount owed to all creditors. The balance of 450 on the credit side of the account represents the total amount owed to creditors at the end of the accounting period. This balance is carried forward to the next period as the balance brought down (b/d) on the debit side of the account. Therefore, the 450 represents the amount that the company owes to its creditors as a current liability.

Which of the following best described the path of a transaction?

Answer Details

The correct answer is "Source documents to Journal to Ledger". When a transaction occurs, it is initially recorded on a source document such as a sales invoice or receipt. The information from the source document is then transferred to the journal as a journal entry, which summarizes the transaction. The journal entries are then posted to the ledger accounts, where each account is updated with the relevant information. Therefore, the correct path of a transaction is from source documents to journal to ledger.

Use the following information to answer this question

A company charges out goods to a branch at cost plus 25 percent. It invoiced N12,00 worth of goods

The double entry required for the mark-up is debit Branch

Use the following information to answer this question

An asset was bought on 1st January, 1992 for N20,000. Depreciation was provided for annually at 20% on cost. It was sold for N7,000 on 1st July, 1995.

Accumulated depreciation at the time of sale was

Answer Details

The annual depreciation rate for this asset is 20%, which means that every year, the value of the asset decreases by 20% of its original cost. Therefore, the accumulated depreciation for the asset at the time of sale can be calculated as follows: Depreciation for 1992 = N20,000 x 20% = N4,000 Depreciation for 1993 = N20,000 x 20% = N4,000 Depreciation for 1994 = N20,000 x 20% = N4,000 Depreciation for 1995 (up to 1st July) = N20,000 x 20% x 6/12 = N2,000 Total accumulated depreciation = N4,000 + N4,000 + N4,000 + N2,000 = N14,000 Therefore, the accumulated depreciation at the time of sale was N14,000.

A financial plan of action expressed in monetary terms is known as

Answer Details

A financial plan of action expressed in monetary terms is known as a budget. A budget is a comprehensive financial plan for a specific period, usually one year, that outlines an organization's goals and objectives and how it intends to achieve them. It usually involves estimating income and expenses and allocating resources to specific areas of the organization. The budgeting process helps organizations to plan and control their financial activities, as well as monitor progress towards their goals. Budgets can be used by individuals, businesses, non-profit organizations, and government agencies to achieve financial stability and growth.

Which of the following is a normal account?

use the following information to answer the given question
\(\begin{array}{c|c} \text{Opening stock} & \text{- Footwears Department} & N800 \\ & \text{- Stationary Department} & N600 \\ Purchases & \text{- Footwears Department} & N1,600 \\ & \text{- Stationary Department} & N2,800 \\ \text{Wages of shoe packers} & & N600 \\ & \text{-Salaries} & N1,200 \\ & \text{-Footwares} & N4,000 \\ Sales & \text{- stationery} & N6,000\end{array}\)
Additional Information (i) No closing stock
(ii) Common expenses are to be shared in the ratio sales
The net profit of Footwares Department is

The amount for which a business is sold is known as

Answer Details

The amount for which a business is sold is known as the "purchase consideration". This represents the total value of the consideration given by the purchaser to the seller in exchange for the ownership of the business. The purchase consideration can be paid in various forms, such as cash, stocks, or other assets. It is important to determine the correct value of the purchase consideration as it has an impact on the financial statements of both the buyer and seller. The value of the purchase consideration is usually negotiated by the parties involved in the transaction and is based on factors such as the assets, liabilities, goodwill, and future earnings potential of the business.

Use the following information to answer this question

A business whose assets consisted of stock N15,000 and debtors N8,000 was bought by issuing 20,000 ordinary shares of N1 each at a premium of 20 percent.

The purchase consideration was

Answer Details

The purchase consideration is the amount paid by the buyer to acquire the business. In this case, the business was bought by issuing 20,000 ordinary shares of N1 each at a premium of 20 percent. The total amount of shares issued can be calculated as follows: 20,000 shares x N1 per share = N20,000 The premium on the shares can be calculated as follows: 20 percent x N20,000 = N4,000 Therefore, the total purchase consideration is the sum of the value of the shares and the premium on the shares, which is: N20,000 + N4,000 = N24,000 Therefore, the purchase consideration is N24,000.

A ledger is a

In a partnership goodwill is recognized when

Answer Details

Goodwill is recognized in a partnership when a new partner is admitted. Goodwill is the value of the reputation and customer loyalty of the partnership that is not directly attributable to any specific partner. When a new partner is admitted, they are entitled to a share of the partnership's goodwill, which is usually calculated based on the profits of the partnership over a certain number of years. This share of goodwill is recorded in the partnership's books and is then distributed among the partners based on their agreed profit-sharing ratio.

An example of appropriation of profit in a company is

Answer Details

Appropriation of profit in a company refers to the allocation of the company's profits to various uses such as payment of dividends, taxation, transfer to reserves, etc. Among the options provided, the example of appropriation of profit in a company is dividend. Dividend is a portion of the company's profits that is distributed to its shareholders as a return on their investment. It is usually declared by the board of directors and paid out to the shareholders in the form of cash or additional shares.

Use the following information to answer the given question. The Receipts and Payments Account of Acada Club for the year ended 31st December, 1995 is as follows:
\(\begin{array}{c|c} & N & & N \\ \hline \text{Balance b/f} & 800 & \text{Printing and stationery} & 320 \\ Subscriptions & 3,600 & \text{Postages and Telephone} & 160 \\ \text{Donations} & 650 & Rent & 1,200 \\ \text{Dace tickets} & 1,200 & \text{Library books} & 2,500 \\ & & \text{Anniversary dance expenses} & 945 \\ & & \text{balance c/d} & 1,125\\ & \overline{6,250} & & \overline{6,250} \end{array}\)
The total expenses debited to Income and Expenditure Account for the year was

A provision is

Which of the following is not a personal account?

Which of the following is not a revenue receipt?

Use the following information to answer this question

An asset was bought on 1st January, 1992 for N20,000. Depreciation was provided for annually at 20% on cost. It was sold for N7,000 on 1st July, 1995.

The profit on sale was

Answer Details

The asset was bought on 1st January, 1992 for N20,000. The depreciation rate is 20% per annum on cost, so the annual depreciation charge would be N4,000. The asset was sold on 1st July, 1995, so it was used for 3 years and 6 months, or 3.5 years. The total depreciation charged would be N4,000 x 3.5 = N14,000. The book value of the asset at the time of sale would be N20,000 - N14,000 = N6,000. The selling price of the asset was N7,000, so the profit on the sale would be N7,000 - N6,000 = N1,000. Therefore, the profit on the sale was N1,000. Option (E) is the correct answer.

use the following information to answer the given question
\(\begin{array}{c|c} \text{Opening stock} & \text{- Footwears Department} & N800 \\ & \text{- Stationary Department} & N600 \\ Purchases & \text{- Footwears Department} & N1,600 \\ & \text{- Stationary Department} & N2,800 \\ \text{Wages of shoe packers} & & N600 \\ & -Salaries & N1,200 \\ & \text{-Footwares} & N4,000 \\ Sales & \text{- stationery} & N6,000\end{array}\)
Additional Information (i) No closing stock
(ii) Common expenses are to be shared in the ratio sales
The profit of the Stationery Department is

Answer Details

To find the profit of the Stationery Department, we need to calculate the gross profit and then deduct the common expenses shared in the ratio of sales. First, let's calculate the gross profit for the Stationery Department: Sales - Cost of Goods Sold = Gross Profit N6,000 - N2,800 = N3,200 Next, let's calculate the total common expenses: Wages of shoe packers + Salaries = N600 + N1,200 = N1,800 These common expenses need to be shared between the Footwears and Stationery departments in the ratio of sales. Sales ratio = Stationery Department Sales : Footwears Department Sales = N6,000 : N1,600 = 15 : 4 To calculate the share of the Stationery Department, we multiply the total common expenses by the ratio of Stationery Department Sales to total Sales: Share of Stationery Department = Total Common Expenses x (Stationery Department Sales / Total Sales) = N1,800 x (6,000 / 7,600) = N1,421.05 (rounded to the nearest kobo) Finally, we can calculate the net profit of the Stationery Department by deducting the share of common expenses from the gross profit: Net profit of the Stationery Department = Gross profit - Share of common expenses = N3,200 - N1,421.05 = N1,778.95 (rounded to the nearest kobo) Therefore, the profit of the Stationery Department is N1,778.95. The answer closest to this is N1,880, which may be due to rounding errors in the calculation or incorrect sharing of common expenses.

Which of the following is a factory overhead?

Answer Details

Depreciation of factory equipment is a factory overhead. Factory overheads are indirect costs that are incurred during the production process but cannot be directly traced to a specific product or job. They are costs that are necessary to keep the factory running and producing goods. Depreciation is the systematic reduction in the value of an asset over time due to wear and tear or obsolescence. It is a non-cash expense that reflects the loss of value of the factory equipment and is therefore considered a factory overhead.

Which of the following is not a capital expenditure to a local government?

Answer Details

Among the options given, the item that is not a capital expenditure to a local government is "drugs". Capital expenditures are expenditures that are made on the acquisition, construction, or improvement of long-term assets, such as buildings, equipment, and land, that will provide benefits over an extended period of time. Items such as beds, theatre equipment, incubators, and x-ray machines are typically large, expensive assets that would be considered capital expenditures for a local government, as they would provide benefits over a period of years. However, drugs are consumable items that are used up in the process of providing healthcare services. They are typically purchased and used within a short period of time and do not provide benefits over an extended period. Therefore, drugs would not be considered a capital expenditure for a local government.

In Manufacturing Account, prime cost plus factory overhead is known as

Which of the following is not a source document for recording sales?

Use the following information to answer the given question

Kudi Local Government Council incurred the following expenditure in 1995:
\(\begin{array}{c|c} & N \\ \hline \text{Payment of salaries} & 140,000 \\ \text{Purchase of drugs for dispensaries} & 80,000 \\ \text{Purchase of books for Library} & 30,000 \\ \text{Sinking of wells} & 70,000 \\ \text{Extension of Council offices} & 160,000 \end{array}\)
The amount of capital expenditure for 1995 was

Answer Details

Capital expenditure is the money spent on acquiring, upgrading or maintaining fixed assets such as land, buildings, vehicles, and equipment that will provide economic benefit to the organization over a long period of time. From the information provided, the expenses for "Payment of salaries," "Purchase of drugs for dispensaries," "Purchase of books for Library," are revenue expenses as they are incurred in the day-to-day running of the Local Government Council. On the other hand, the expenses for "Sinking of wells" and "Extension of Council offices" are capital expenditures as they are long-term investments that will benefit the council for an extended period. Therefore, the total capital expenditure for 1995 is the sum of the expenses for "Sinking of wells" and "Extension of Council offices," which is N70,000 + N160,000 = N230,000. Hence, the answer is N230,000.

Use the following to answer the given question
Creditors Control Account:
\(\begin{array}{c|c} & & & N \\ \hline Bank & \text{"X"} & \text{Balance b/d} & 1,200 \\ Discount & 30 & \text{"Y"} & 1,800 \\ \text{Balance c/d} & 450 & & \\ \hline & & & & \hline \end{array}\)
How much "X" ?

Use the following information to answer this question

Kudi Local Government Council incurred the following expenditure in 1995:
N
Payment of salaries 140,000
Purchase of drugs for dispensaries 80,000
Purchase of books for Library 30,000
Sinking of wells 70,000
Extension of Council offices 160,000

The amount of revenue expenditure for 1995 was

Answer Details

The revenue expenditure is the amount of money spent on the day-to-day running of an organization or business, including items such as salaries, supplies, and maintenance expenses. In this case, the revenue expenditure incurred by Kudi Local Government Council in 1995 is the sum of the payments made for salaries, drugs, and books. Therefore, the revenue expenditure for 1995 is: Revenue expenditure = Payment of salaries + Purchase of drugs for dispensaries + Purchase of books for Library Revenue expenditure = 140,000 + 80,000 + 30,000 Revenue expenditure = 250,000 Therefore, the correct answer is N220,000.

Use the following information to answer the given question. The Receipts and Payments Account of Acada Club for the year ended 31st December, 1995 is as follows:
\(\begin{array}{c|c} & N & & N \\ \hline \text{Balance b/f} & 800 & \text{Printing and stationery} & 320 \\ Subscriptions & 3,600 & \text{Postages and Telephone} & 160 \\ \text{Donations} & 650 & Rent & 1,200 \\ \text{Dace tickets} & 1,200 & \text{Library books} & 2,500 \\ & & \text{Anniversary dance expenses} & 945 \\ & & \text{balance c/d} & 1,125\\ & \overline{6,250} & & \overline{6,250} \end{array}\)
The amount of income credited to Income and Expenditure Account for the year was

A sales day book is used to record

Answer Details

A sales day book is a book of prime entry used to record credit sales of stock. It is a chronological record of all credit sales made by a business during a specific period, usually a day or a week. The book contains details of the sales, such as the name of the customer, the date of the sale, the invoice number, the amount of the sale, and any relevant notes. The purpose of the sales day book is to provide a complete record of all credit sales transactions that occur in the business, which will be used for subsequent accounting and financial reporting purposes.

An item is fictitious because it

Answer Details

An item is fictitious because it does not exist in reality or cannot be physically seen or touched. In accounting, fictitious items are usually used to balance accounts or adjust financial statements. They are not real transactions or assets, but rather entries made for accounting purposes only. Examples of fictitious items include depreciation, bad debts, and provisions for contingencies.

A real account is the account of

Rent receivable is a

Which of the following is an advantage of the impurest system?

Answer Details

The advantage of the imprest system is that it enables the meeting of small items of expenditure. In this system, a fixed amount of money is given to a person known as the imprest holder to meet small expenses that occur regularly. When the imprest holder spends the money, they account for the expenditure and are reimbursed back to the original fixed amount. This system helps to ensure that small expenses are met without having to go through the full process of authorization and reimbursement, which can be time-consuming and costly. Thus, it is an advantage of the imprest system.

The amount of a company's profit given to a shareholder is known as

Answer Details

The correct answer is "dividend." A dividend is the portion of a company's profit that is distributed to its shareholders as a return on their investment. The amount of dividend to be paid to shareholders is usually approved by the company's board of directors and can be in the form of cash, stock, or other property. In short, a dividend is a reward or benefit that a shareholder receives for owning shares in a company.

The person who is responsible for the formation of a company is called the

Answer Details

The person who is responsible for the formation of a company is called a promoter. A promoter is someone who identifies a business opportunity and takes the necessary steps to form and organize a company to pursue that opportunity. Promoters may perform a variety of tasks such as raising capital, developing a business plan, organizing legal and financial documents, and recruiting key personnel. Once the company is formed, the promoter may continue to play a role in the management of the business or may sell their shares to other investors.

A Receipt and Payments Account reveals

Answer Details

A Receipts and Payments Account is a summary of all cash transactions that have been received and paid during a specific period of time, typically used by non-profit organizations. It reveals the cash balance at the beginning and end of the period, as well as the total amount of cash received and spent during that period. It helps to show the organization's sources of income and the nature of its expenses, thereby providing an overview of the financial position of the organization. Therefore, the correct answer is "cash in hand."

Use the following information to answer this question

A company charges out goods to a branch at cost plus 25 percent. It invoiced N12,00 worth of goods

The mark-up is

Where there are no proper books of account , the capital at the commencement of a period is ascertained by preparing

Answer Details

When proper books of account are not available, the capital at the beginning of a period can be ascertained by preparing a Statement of Affairs. The Statement of Affairs is a statement that shows the value of the assets and liabilities of a business at a particular point in time. In this case, the statement would show the assets that the business has at the beginning of the period, such as cash, stock, debtors, etc., and the liabilities it owes, such as creditors, loans, etc. The difference between the total assets and total liabilities is the capital of the business at the beginning of the period.