WAEC SSCE - Financial Accounting - 2007

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A source of revenue to a local government authority is a tax or fee that the local government charges to generate funds for their operations and services. Out of the options given, poll tax is a tax that is collected by the local government on individuals who are eligible to vote within a community. Therefore, poll tax is the correct answer to the question. Excise duty is a tax on goods produced within a country, while paye tax is a tax on individual salaries or income. Value added tax is a tax on goods and services consumed in a country. However, none of these taxes are directly collected by local government authorities.

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The subscriptions shown in the balance sheet as at 31st December 2005 would be considered a liability, as they are amounts owed to the club by its members. Since 8 members had not paid their subscriptions, the total amount of outstanding subscriptions would be calculated as follows: 8 members x ₦50 per member = ₦400 Therefore, the subscriptions shown in the balance sheet as at 31st December 2005 would be ₦400, listed as a liability owed to the club.

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The correct sequence in data processing is input $\to$ process $\to$ output. This means that data is entered or collected (input), then it is processed or analyzed (process), and finally, the results are displayed or communicated (output). For example, when a salesperson enters the details of a sale into a computer system (input), the system then calculates the total amount of the sale, updates the inventory, and generates an invoice (process). The invoice is then printed or sent to the customer (output). It is important to follow this sequence to ensure that the data is accurate and the results are reliable.

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The maximum amount which a company is allowed to raise through the sale of shares is called authorized capital. Authorized capital is the maximum amount of share capital that a company is authorized to issue to shareholders. It is specified in the company's memorandum of association and can be changed only with the approval of shareholders and regulators. The authorized capital represents the upper limit of the company's equity capital, and it is not necessary for the company to issue all the authorized capital immediately. The company can issue shares up to the authorized capital in one or more tranches over time, depending on its funding requirements.

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In the absence of a partnership agreement, the interest rate charged on a loan made by a partner to the partnership is determined by the Partnership Act, which specifies that such loans attract interest at a rate of 5% per annum. This means that if a partner lends money to the partnership, they are entitled to receive interest on the loan at a rate of 5% per annum, unless otherwise agreed in writing by the partners. Therefore, the correct option is 5%.

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The accounting principle which states that for every debit entry, there is a corresponding credit entry is known as the dual aspect concept. This concept forms the basis of double-entry bookkeeping, which is a system used in accounting to record financial transactions. According to this principle, every transaction has two effects - a debit effect and a credit effect - and the total debits must always equal the total credits. In other words, every debit must have a corresponding credit entry, and vice versa. This helps to ensure that the accounting records are accurate and balanced.

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Closing stock is not shown in the trial balance. The trial balance is a statement that lists all the ledger accounts and their balances to check if the total of all debits equals the total of all credits. It is used to identify errors in accounting records. Closing stock is an asset, and it is not included in the trial balance because it is not an account that has been debited or credited during the accounting period. Instead, it is reported separately on the balance sheet under the current assets section. Therefore, the answer to the question is "closing stock."

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In the absence of a partnership agreement, profits and losses are shared equally among the partners. This is based on the assumption that all partners contribute equally to the partnership, regardless of their individual capital contributions or the amount of work they put in. However, if there is a partnership agreement in place, it may specify a different method for allocating profits and losses, such as in the ratio of capital contributions or based on the amount of work each partner contributes to the partnership.

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When Adobaw extracted the trial balance and found that the total of debit balances exceeded the total of credit balances, there is likely an error or omission in the accounts. In this case, to ensure that the accounts still balance, the difference should be temporarily recorded in a suspense account until the error is identified and corrected. Therefore, the difference should be debited to a suspense account, which is a temporary account used to record such differences until they are resolved. Once the error is identified and corrected, the suspense account will be cleared by transferring the balance to the appropriate accounts.

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A debit entry in the cash account and a corresponding credit in Alieu's account indicate a receipt of cash from Alieu. This means that Alieu has paid cash to the business, and the business has recorded the transaction by debiting the cash account (an asset account) and crediting Alieu's account (a personal account). The debit in the cash account represents an increase in cash, while the credit in Alieu's account represents a decrease in his account balance since he has paid cash to the business.

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The double entry in Taiwo's books would be: Debit Rent Account: The rent paid is an expense, therefore, it should be debited to the Rent Account. Credit Bank Account: The rent was paid by cheque, hence it is a decrease in Taiwo's bank balance, and should be credited to the Bank Account. Therefore, the correct answer is: debit Rent account, credit Bank account.

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Motor vehicles is not used for determining working capital. Working capital refers to the funds that a company uses to finance its day-to-day operations, such as paying bills and buying inventory. It is calculated as the difference between a company's current assets (such as cash and debtors) and its current liabilities (such as overdraft and accounts payable). Motor vehicles are considered as a fixed asset and not a current asset, so it is not used in the calculation of working capital. Fixed assets are long-term assets that are not expected to be converted into cash within a year, and they are not used in day-to-day operations.

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The mark-up is the percentage difference between the selling price and the cost price of a product. To calculate the mark-up percentage, we use the formula: Mark-up percentage = (Selling price - Cost price) / Cost price x 100% In this case, the cost price of the book is Le 9,000 and the selling price is Le 12,000. So the mark-up percentage is: Mark-up percentage = (12,000 - 9,000) / 9,000 x 100% Mark-up percentage = 3,000 / 9,000 x 100% Mark-up percentage = 0.3333... x 100% Mark-up percentage = 33.33...% Therefore, the correct answer is 33\(\frac{1}{3}\)%. Option C, 33\(\frac{1}{2}\)%, is the closest option to the correct answer.

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The total of the discount received from creditors is transferred to the credit side of the discounts received account. This account is used to record any discounts received by the business from its suppliers for early or prompt payment of accounts payable. The balance of the discounts received account is eventually transferred to the credit side of the profit and loss account at the end of the accounting period.

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Preference shares attract a fixed rate of dividend. This means that the dividend paid on preference shares is predetermined and fixed, and it is paid out before any dividends are paid to ordinary shareholders. The fixed dividend rate on preference shares is usually expressed as a percentage of the face value of the shares. In contrast, dividends paid on ordinary shares may vary depending on the company's profits and other factors, and they are not fixed.

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A total debtors account is a type of account in the sales ledger that records the total amount owed to a company by its customers. The left-hand side of this account represents all the debits or increases in the amount owed by customers to the company. This includes sales made on credit to customers, as well as any adjustments made to those sales such as returns or allowances. Therefore, items on the left-hand side of a total debtors account are debits, and they represent the amounts owed by customers to the company.

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The formula used to calculate stock turnover rate is \(\frac{\text{cost of sales}}{\text{average stock}}\). This formula is used to determine how many times a company has sold and replaced its stock over a given period of time, usually a year. The cost of sales represents the total cost of goods sold during the period, while the average stock is calculated by adding the opening and closing stock and dividing by two. The stock turnover rate indicates how effectively a company is managing its inventory and turning it into sales, and it can be used to identify areas for improvement in the inventory management process.

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To find the current ratio, we need to divide the total current assets by the total current liabilities. Total current assets = Stock + Debtor + Cash = ₦2,000 + ₦10,000 + ₦10,000 = ₦22,000 Total current liabilities = Creditors = ₦20,000 Current ratio = Total current assets / Total current liabilities = ₦22,000 / ₦20,000 = 1.1 : 1 Therefore, the current ratio is 1 : 1. Note: The current ratio of 2:1 is generally considered a healthy ratio for a business. However, it varies based on industry standards and specific business requirements.

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Holder of ordinary shares do not have the right to receive dividends at a predetermined rate. Ordinary shares, also known as common shares, represent ownership in a company and generally carry voting rights and the right to receive dividends when declared by the company's board of directors. However, the rate of dividends is not predetermined and can vary based on the company's financial performance and other factors. Ordinary shareholders also have the right to participate in additional issues of shares, vote at annual general meetings, and elect the board of directors.

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To calculate the quick ratio, we need to add up all the quick assets and divide it by the current liabilities. Quick assets refer to assets that can be easily converted into cash, such as cash, debtors, and stock. Current liabilities refer to liabilities that need to be paid off within a year, such as creditors. In this case, the quick assets are cash, debtor, and stock, which sum up to ₦22,000. The current liabilities are ₦20,000. Quick ratio = Quick assets / Current liabilities = ₦22,000 / ₦20,000 Simplifying, we get: Quick ratio = 1.1 : 1 Therefore, the answer is 1 : 1 (option d). This means that for every ₦1 of current liabilities, the company has ₦1 of quick assets to cover it.

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The going-concern concept is the assumption that a business will continue to operate indefinitely and will not be liquidated or forced to cease operations in the near future. This concept recognizes that a business has perpetual existence, and thus, its assets are not valued based on their liquidation value but on their ability to generate revenue for the business over time. The going-concern concept is important in accounting because it allows businesses to prepare financial statements that reflect their long-term performance and helps investors make informed decisions about the future prospects of the business.

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The profit of a sole trader increases his capital. When a business earns a profit, it means that its revenues exceed its expenses. This increase in revenue results in a higher profit, which, in turn, increases the owner's equity in the business. For a sole trader, the owner's equity is the same as their capital. Therefore, a profit will increase the owner's capital, making the business more financially stable and able to invest in growth opportunities or pay down liabilities.

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To calculate the cost of sales, we need to use the formula: Cost of sales = Opening stock + Purchases - Closing stock Here, we are not given the total purchases, but we can calculate it using the information given about creditors and cash paid to creditors: Purchases = Creditors at the end + Cash paid to creditors - Creditors at the beginning Purchases = ₦1,140 + ₦6,900 - ₦1,274 = ₦6,766 Now, we can calculate the cost of sales: Cost of sales = Opening stock + Purchases - Closing stock Cost of sales = ₦1,800 + ₦6,766 - ₦1,350 = ₦7,216 Therefore, the cost of sales for the year was ₦7,216. The closest option to this answer is option C, which is ₦7,215.

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The manufacturing account is prepared to determine the cost of production. This account is used in the manufacturing industry to calculate the cost of producing finished goods during a specific period. The manufacturing account includes direct materials used, direct labor costs, and factory overheads (such as rent, utilities, and depreciation). By totaling these costs, the manufacturing account shows the total cost of production during the accounting period, which can then be used to determine the cost of goods sold and the gross profit for that period. Therefore, the manufacturing account is an important tool for a manufacturer to monitor production costs and make informed decisions about pricing and inventory management.

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The sum of money given to a petty cashier out of which small payments are made is known as a "float". It is an amount of money that is provided by a company or organization to the petty cashier to facilitate small, routine transactions. The petty cashier uses the float to make purchases, pay for small expenses, or provide change to customers. At the end of the day, the petty cashier is required to account for the expenses incurred using the float, and any unused funds are returned to the company or organization. The float helps to simplify and speed up small transactions and reduce the need for the petty cashier to access the company's main cash account for small expenses.

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The total of the sales journal represents the total amount of credit sales made during a period. This total is posted to the credit side of the sales account, which is an account in the general ledger that records all sales transactions made by the business. The credit side of the sales account reflects an increase in sales revenue, which is a component of the income statement, and represents the total amount of credit sales made by the business during the period. Therefore, the correct answer is the "credit side of sales account".

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The closing balance of ₦3,368 Dr represents the amount of money owed by customers to the business at the end of the accounting period. This amount is classified as a current asset in the balance sheet because it is an amount of money that the business expects to receive within the next accounting period, usually one year. A current asset is an asset that is expected to be used up or converted to cash within a year, and it includes items such as cash, accounts receivable, inventory, and prepaid expenses. Therefore, the closing balance of ₦3,368 Dr would be classified as a current asset in the balance sheet.

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Factory costs excluding prime cost is called overhead. Prime cost refers to the direct costs involved in producing a product, such as the cost of raw materials and labor. Factory costs, on the other hand, refer to the indirect costs of production, such as rent, utilities, and maintenance of equipment. When we subtract prime costs from total factory costs, we get overhead. Overhead is a significant expense for most manufacturing businesses, and it's important to track and manage it effectively to ensure profitability.