WAEC SSCE - Financial Accounting - 1990

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Prime cost consists of direct expenses, direct labour, and direct material. Direct material refers to the cost of all materials that are used in the production process, including the cost of raw materials and any other materials that are used in the manufacturing process. Direct labour refers to the wages, salaries, and other expenses associated with the workers who are directly involved in the manufacturing process. Direct expenses refer to all expenses that can be traced back to the production process, such as the cost of utilities used in the manufacturing process or the cost of any equipment that is specifically used in the manufacturing process. In summary, prime cost is the total cost of direct expenses, direct labour, and direct material used in the manufacturing process.

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The Nominal Ledger is a ledger account that records all the revenues, expenses, gains, and losses of a business, i.e., all the transactions that relate to the income statement. Out of the options provided, the "salaries account" belongs to the Nominal Ledger since it is an expense account used to record the salaries paid to employees. The "creditors account" and "debtors account" belong to the Personal Ledger, which is used to record the transactions related to individual persons or organizations. The "fixtures account" and "stock account" belong to the Real Ledger, which is used to record the transactions related to tangible assets such as property, plant, and equipment or inventory. Therefore, the correct answer is "salaries account".

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The method that could be used to consolidate the two accounts of Prof. Bush with Olive Brother is a contra entry. A contra entry is a bookkeeping entry that offsets or cancels out an existing account balance. It is used when there are two accounts with opposite balances that need to be consolidated into one. In this case, since Prof. Bush has two accounts with Olive Brother, a contra entry could be used to consolidate the two balances into one. The contra entry involves transferring the balance of one account to the other account, effectively canceling out the balance of the first account. For example, if Prof. Bush has an outstanding balance of N10,000 in Account A and a balance of N8,000 in Account B, a contra entry can be made by transferring N8,000 from Account B to Account A, leaving a single balance of N18,000 in Account A. To summarize, a contra entry could be used to consolidate the two accounts of Prof. Bush with Olive Brother by transferring the balance of one account to the other account, effectively canceling out the balance of the first account. This would result in only one outstanding balance for Prof. Bush with Olive Brother.

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The journal proper is a book of prime entry used for recording infrequent or non-routine transactions that cannot be recorded in any other specialized journal. Out of the options provided, "i" and "iii" are true of the uses of the journal proper. The correction of errors is one of the primary uses of the journal proper. When errors are made in the original accounting records, the journal proper is used to make the necessary adjustments to correct these errors. Recording cash purchases is also a use of the journal proper. When a business makes a cash purchase, and there is no specialized journal for recording such a transaction, the journal proper is used. However, opening and closing the accounting books are not uses of the journal proper. The opening and closing entries are made in the general journal, which is a separate book of prime entry used for recording adjusting and closing entries. Therefore, the correct answer is "i and iii".

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The entries for posting credit purchases into the purchases ledger control account are: - Debit the purchases account: This is because the purchases account represents the total amount of credit purchases made by the business during a given period. - Credit the purchases ledger control account: This account represents the total amount owed by the business to its suppliers for credit purchases made during the same period. By crediting this account, we are increasing the amount owed to suppliers, which is a liability for the business. When a credit purchase is made, the invoice received from the supplier is recorded in the purchases day book. The details from the purchases day book are then posted to the individual supplier's account in the purchases ledger. Once all the individual supplier accounts have been updated, the total amount of credit purchases for the period is calculated, and this total is then posted to the purchases account in the general ledger. Finally, the same total amount of credit purchases is also posted to the purchases ledger control account in the general ledger, but as a credit entry. This allows us to keep track of the total amount owed to suppliers at any given time. To summarize, when posting credit purchases into the purchases ledger control account, we debit the purchases account to record the total amount of credit purchases made by the business, and we credit the purchases ledger control account to keep track of the total amount owed to suppliers for credit purchases made during the same period.

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The error described is a transposition error. A transposition error occurs when the digits in a number are accidentally reversed or swapped, resulting in an incorrect value. In this case, the original balance of N102 was mistakenly recorded as N120, which means the digits were swapped. The correct balance should have been recorded as N201.

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To find the cost of goods sold, we need to subtract the value of the closing stock from the sum of the cost of goods purchased and the value of the opening stock. The cost of goods purchased is N2,055, and the opening stock is valued at N200, so the total value of goods available for sale is: N2,055 + N200 = N2,255 The value of the closing stock is N320, so the cost of goods sold can be calculated as: Cost of goods sold = N2,255 - N320 = N1,935 Therefore, the cost of goods sold is N1,935. In summary, to find the cost of goods sold, we need to subtract the value of the closing stock from the sum of the cost of goods purchased and the value of the opening stock. The cost of goods sold in this problem is N1,935.

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The rial balance is a type of accounting report that shows the total debits and credits for each account in a company's financial records. The agreement of the rial balance means that the total debits equal the total credits. Compensating errors occur when two or more errors cancel each other out, so the net effect is zero. These errors can affect individual accounts but do not affect the overall agreement of the rial balance since they offset each other. Debiting an item instead of crediting it, or vice versa, will affect the agreement of the rial balance because it will result in an imbalance between the total debits and total credits. Making only a single entry will also affect the agreement of the rial balance since it does not capture both the debit and credit aspects of a transaction, resulting in an imbalance between the total debits and total credits. Therefore, the option that will not affect the agreement of the rial balance is (i), compensating errors.

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To calculate the percentage of net profit on sales, we need to find the net profit and divide it by the total sales. First, we need to calculate the cost of goods sold. We can do this by finding the difference between the stock at the beginning of the year and the stock at the end of the year, and adding to it the cash paid for goods during the year: Cost of goods sold = 6,500 - 5,500 + 20,000 = 21,000 Next, we can calculate the gross profit by multiplying the cost of goods sold by 25%: Gross profit = 21,000 x 25% = 5,250 To find the net profit, we need to subtract the administrative and selling expenses from the gross profit: Net profit = 5,250 - 2,750 = 2,500 Finally, we can calculate the percentage of net profit on sales by dividing the net profit by the total sales, which is the sum of the cost of goods sold and the gross profit: Percentage of net profit on sales = (2,500 / (21,000 + 5,250)) x 100% = 10% Therefore, the percentage of net profit on sales is 10%. In summary, we can calculate the percentage of net profit on sales by dividing the net profit by the total sales, which is the sum of the cost of goods sold and the gross profit. The percentage of net profit on sales for this problem is 10%.

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To calculate the amount charged in the profit and loss account, we need to start by calculating the cost of goods sold (COGS) for the year. COGS = Opening Stock + Purchases - Closing Stock We are given the opening stock as N6,500, and the closing stock as N5,500. We also know that N20,000 was paid for goods during the year. Therefore, the calculation for COGS is as follows: COGS = N6,500 + N20,000 - N5,500 = N21,000 Next, we need to calculate the gross profit. We are told that the gross profit is 25% on cost. Therefore, we can calculate the gross profit as follows: Gross Profit = COGS x Gross Profit Percentage Gross Profit = N21,000 x 25% = N5,250 Finally, we need to subtract the administrative and selling expenses from the gross profit to get the amount charged in the profit and loss account: Amount Charged in the Profit and Loss Account = Gross Profit - Administrative and Selling Expenses Amount Charged in the Profit and Loss Account = N5,250 - N2,750 = N2,500 Therefore, the correct answer is N2,500. "N2,750," is the amount of the administrative and selling expenses, but not the amount charged in the profit and loss account.

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The gross amount of the sale to Mr. A.F.P. is N12,000, and he is entitled to a trade discount of 15%. This means he will only have to pay 85% of the gross amount. Gross amount after Trade discount = Gross amount - Trade discount Gross amount after Trade discount = N12,000 - (15/100 x N12,000) Gross amount after Trade discount = N10,200 Next, Mr. A.F.P. is entitled to a cash discount of 10%. This means he will receive a discount of N1,020 if he pays within 30 days of delivery. Cash discount = Cash discount % x Gross amount after trade discount Cash discount = 10/100 x N10,200 Cash discount = N1,020 Therefore, the amount due from Mr. A.F.P. if he pays within 30 days of delivery would be: Amount due = Gross amount after trade discount - Cash discount Amount due = N10,200 - N1,020 Amount due = N9,180 However, if Mr. A.F.P. fails to settle his account in time, he will lose the cash discount of N1,020, and the full amount due would be N10,200. Therefore, if Mr. A.F.P. fails to settle his account in time, the amount due from him would be N10,200.

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Based on the information provided, the trial balance will show Return Outwards account N60 as a credit and Discount Allowed account N100 as a debit. Return Outwards account is used to record the value of goods that customers have returned to the business, so it has a normal credit balance. On the other hand, Discount Allowed account is used to record the discounts given to customers for early payment, and it has a normal debit balance. When these accounts are presented in the trial balance, they will be shown in the side opposite to their normal balance. Therefore, Return Outwards account will be shown as a credit, and Discount Allowed account will be shown as a debit. So the answer is: N60 credit, N100 debit.

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The option that does not belong to the group is "insurance policy." The other options are all related to financial and accounting terms used to describe different methods of calculating the value of assets or liabilities. - Straight line is a method of depreciation where the same amount is deducted from the value of an asset every year over its useful life. - Diminishing balance and reducing balance are both methods of calculating the decreasing value of an asset over time, with diminishing balance using a fixed percentage rate and reducing balance using a fixed amount. - Accumulated depreciation is the total amount of depreciation that has been recorded for an asset since its acquisition. On the other hand, an insurance policy is a contract between an insurance company and an individual or organization that provides financial protection or reimbursement against losses. It is not directly related to the calculation of asset values or liabilities, making it the odd one out.

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Carriage inwards refers to the transportation cost incurred by a business when purchasing goods from a supplier. It is a cost that is directly related to the purchase of goods and is therefore recorded as part of the cost of goods sold. As a result, carriage inwards is shown on the debit side of the trading account, which is used to calculate the gross profit earned by the business. Therefore, the correct answer is "debit side of the trading account".

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The statement that is not true of revenue expenditure is "iii. it includes items for replacement and repairs". Revenue expenditure is the type of expenditure incurred in a business that is related to the day-to-day operations of the business and is aimed at maintaining the revenue-generating capacity of the business. It is usually incurred in one period of account and its full benefits are consumed in the period incurred. However, it does not include items for replacement and repairs since these are capital expenditures that are aimed at improving the revenue-generating capacity of the business over the long term. Therefore, option (iv) is not correct as it incorrectly implies that revenue expenditure includes depreciation, which is a non-cash expense that is used to allocate the cost of a long-term asset over its useful life.

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The purchase of a typewriter for office use for N2,500 should be debited to the assets account. This is because an asset is something that a business owns and that has value, and the typewriter is a tangible asset that will be used by the business to generate revenue. The purchase of an asset is recorded as a debit to the assets account, and this will increase the value of the assets owned by the business. It's important to note that if the purchase was made using cash, the cash account would also be credited to show the decrease in the cash balance. However, the primary account to debit would still be the assets account.

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Straight-line depreciation is a method of calculating the decrease in the value of an asset over its useful life. This method assumes that the asset will lose its value evenly over its useful life. To calculate straight-line depreciation, you divide the cost of the asset by its useful life. The result is a fixed percentage of the cost of the asset that is written off each year. Therefore, the correct option is: "a fixed percentage of the cost of the asset written off each year."

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To find the gross profit for the year, we need to know the cost of goods sold (COGS) first, which can be calculated using the following formula: COGS = Beginning Inventory + Purchases - Ending Inventory We are given the beginning and ending stock levels, but we need to calculate purchases. We can use the information about cash paid for goods during the year to calculate this: Purchases = Cash Paid + Ending Accounts Payable - Beginning Accounts Payable Plugging in the given values, we get: Purchases = 20,000 + 5,000 - 4,000 = 21,000 Now we can calculate COGS: COGS = 6,500 + 21,000 - 5,500 = 22,000 Finally, we can use the gross profit percentage given to calculate the gross profit: Gross Profit = COGS x Gross Profit Percentage Gross Profit = 22,000 x 0.25 = N5,500 Therefore, the answer is option D: N5,500.

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The gross amount of the transaction is N12,000, and the trade discount is 15%. This means that the customer, Mr. A.F.P., is entitled to a discount of N1,800 (15% of N12,000). The terms of payment state that Mr. A.F.P. has 30 days to settle his account, and if he does so, he will also receive a cash discount of 10%. This means that he will receive a discount of N1,200 (10% of N12,000). Therefore, if Mr. A.F.P. settled his account after 30 days of delivery, he would receive a total discount of N3,000 (N1,800 + N1,200). This is, N10,800. In summary, Mr. A.F.P. would receive a trade discount of N1,800 and a cash discount of N1,200, totaling a discount of N3,000 if he settles his account after 30 days of delivery.