WAEC SSCE - Financial Accounting - 2011

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The method of ascertaining capital from income record is by preparing the "Statement of Affairs". The statement of affairs is a financial statement that presents the assets and liabilities of a business or individual at a specific point in time. It is prepared to determine the amount of capital invested in the business, which is calculated by subtracting the total liabilities from the total assets. The statement of affairs is particularly useful when there is no accurate record of the capital that has been introduced or withdrawn from the business, or when the business is going through a period of transition. By preparing the statement of affairs, the owner or accountant can determine the true financial position of the business and make informed decisions about its future.

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The document used in government accounting to show evidence of cash receipt and payments is called a voucher. A voucher is a written record of a financial transaction that shows the amount, date, and purpose of the transaction. It is used to support the authenticity of a financial transaction and to ensure that proper approvals have been obtained. In government accounting, vouchers are used to document both cash receipts and payments, and they are used to provide evidence of compliance with budgetary and accounting rules and regulations.

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The reduction in value of goodwill is known as amortization. Amortization refers to the process of spreading out the cost of an intangible asset over its useful life. Goodwill is an intangible asset that represents the value of a company's reputation, customer relationships, and other non-physical assets. Goodwill is considered to have a finite useful life and therefore, its value is gradually reduced over time through the process of amortization. This reduction in value is recorded as an expense in the company's financial statements.

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Goods returned by the buyer is recorded in the seller's book as "returns inwards". This is because it is a return of goods to the seller by the buyer. Returns inwards is also known as sales returns or returns from customers. It is recorded as a reduction in sales revenue and accounts for goods returned by customers. By recording returns inwards, the seller can keep track of the amount of goods returned by customers, the reason for returns, and take corrective measures to minimize such returns in the future.

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When a transaction is completely left out from the books, it is an error of omission. An error of omission occurs when a transaction is not recorded in the accounting records. This can happen due to oversight or mistake, and can result in inaccurate financial statements. It is important to carefully review all transactions and ensure they are properly recorded to avoid errors of omission.

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The two fundamental books of accounting are the journal and the ledger. The journal is the first book where transactions are recorded in chronological order, and the ledger is the second book where transactions are classified and summarized. In the journal, transactions are initially recorded using debits and credits, while in the ledger, each account has its own page, and entries are made in a specific format based on whether they are debits or credits. Together, the journal and the ledger provide a complete record of all financial transactions for a business or organization.

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An error in addition will affect the totals of a trial balance. When amounts are added incorrectly or transposed, the totals will not match, resulting in an imbalance in the trial balance. Other errors like compensating errors, complete reversal of entry, or error of original entry may not affect the totals of the trial balance as they may still balance out. However, an error in addition will affect the total and will result in an imbalance in the trial balance.

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Provision for depreciation on delivery van is charged to the Profit and Loss account. Depreciation is the allocation of the cost of a fixed asset over its useful life. It is treated as an expense in the Profit and Loss account since it reduces the value of the asset over time. As the delivery van is a fixed asset, its depreciation is charged to the Profit and Loss account, which is an account that shows the company's net profit or loss over a period of time.

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A flow chart is a diagrammatic representation of the workings of a computer program. It is a visual representation that outlines the sequence of steps and decision points within a program, and the flow of data between them. The flow chart uses symbols and arrows to illustrate the logical steps and decision points within a program. It provides a graphical representation of the program's logic and can be used to identify errors or inefficiencies in the program's design. Flow charts are used in programming, business, engineering, and many other fields where complex processes need to be documented and analyzed.

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In departmental accounts, rent is appointed on the basis of floor area occupied. This means that the total rent paid by a company is divided among the different departments based on the amount of space each department occupies in the building. This method is considered to be a fair and objective way of allocating rent expenses because it takes into account the actual amount of space used by each department. Other methods, such as allocating rent based on the number of personnel in each department or volume of sales, may not accurately reflect the amount of space used and can lead to unfair distributions of rent expenses.

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A subsidiary book is a type of book used in accounting to record specific types of transactions. Out of the options given, only the cash book is a subsidiary book as it is used to record cash transactions. Bank statement is a record of the transactions that occur in the bank account of a company. Control accounts are used to summarize and monitor the transactions of a particular ledger account, whereas trial balance is a statement that shows the balances of all ledger accounts in a double-entry accounting system.

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Rent owed by a department is treated in the Balance sheet as a liability of the business. This is because the rent owed by the department is a debt or obligation that the business owes to its landlord, and it represents a future outflow of economic resources. Therefore, it is classified as a liability, which is a type of obligation that the business has to pay in the future. On the other hand, an asset is a resource that is expected to provide future economic benefits to the business.

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The going concern concept is an accounting principle that assumes that a business will continue to operate in the future and will not be forced to liquidate or cease operations due to financial difficulties. In other words, the business is expected to remain in operation for the foreseeable future. This assumption enables companies to prepare their financial statements on the basis that the business will continue operating, without having to adjust the values of their assets and liabilities to reflect a potential forced sale or closure. Therefore, the going concern concept implies that the company's financial statements reflect the assumption that the business will continue to operate indefinitely.

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The concept which states that assets are not to be recorded at their current market value is "cost." This concept is also known as the historical cost concept. It states that assets should be recorded at the amount they were acquired for, and not their current market value. This is because recording assets at their current market value would require frequent revaluation of assets, which is not practical for most businesses. Additionally, it is difficult to determine the exact market value of an asset at any given time. Therefore, the cost concept is used as a more practical and reliable way to record and value assets.

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The first calculating machine in data processing was the abacus. An abacus is a simple device used for arithmetic calculations. It consists of a frame with rods and beads, where each bead represents a number. By moving the beads on the rods, one can perform arithmetic calculations such as addition, subtraction, multiplication, and division. The abacus was used for centuries and was widely used in many parts of the world before the invention of modern electronic calculators and computers.

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A debenture is a loan capital raised by a company. It is a type of long-term financial instrument that companies can use to raise money from the public or institutional investors. When investors purchase a debenture, they are essentially lending money to the company that issued it, and in return, the company agrees to pay them interest on a regular basis and to repay the principal amount at a specified date in the future. Unlike shares, debentures do not represent ownership in the company and do not give investors voting rights.

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Computer memory sizes are measured in kilobytes (KB), megabytes (MB), gigabytes (GB), terabytes (TB), and so on. A kilobyte is a unit of measurement that represents 1,024 bytes of data. One byte is the amount of storage space required to store a single character of data, such as a letter or a number. So, for example, 1 KB is equal to 1,024 bytes, 1 MB is equal to 1,024 KB, and so on. These measurements are used to determine the amount of data that can be stored in a computer's memory or on a storage device, such as a hard drive or a flash drive.

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Pre-incorporation profits is not an example of capital reserve. Capital reserves are reserves created from the capital profits of a company, and are not distributable as dividends. Share premium, retained profits and surplus on revaluation of assets are all examples of capital reserves. Pre-incorporation profits, on the other hand, are the profits earned by a company before it was incorporated and are therefore not considered a capital reserve.

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Petty cash is a fund of cash that is kept on hand for making small payments instead of issuing a check. The imprest system is a method used to manage petty cash by providing the petty cashier with a fixed amount of money, and requiring that the petty cashier submits receipts to support any disbursements made from the fund. In this question, the petty cashier has an imprest of D1,000 per week, but at the end of the week, he had only disbursed D920. To restore the imprest, the petty cashier would need to be reimbursed with the amount he initially received, which is D1,000. Therefore, the amount needed to restore the imprest is D1,000 - D920 = D80. So the answer is option D, D80.

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When shares are issued to the public and the issuing company has not requested for payments, it is referred to as "unissued capital". In other words, unissued capital refers to the number of authorized shares that have not been sold or issued to investors. These shares can be used at a later time by the company to raise additional capital or to finance future projects. The company may also choose to cancel or reduce the number of authorized shares that have not been issued.

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The concept that deals with the exclusion of trivial items in the accounting records is Materiality. Materiality concept in accounting refers to the principle of only reporting significant or material items in the financial statements. This means that items that are immaterial, insignificant or trivial can be disregarded or excluded from the financial records. The determination of materiality depends on the specific circumstances of the business, and items that are material for one company may not be material for another. The materiality concept is important because it helps to ensure that financial statements are concise, relevant and useful to users.

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Okoro and Osula are in partnership with a profit sharing ratio of 3:2 respectively. This means that Okoro will get three parts out of a total of five parts and Osula will get two parts out of five parts. The interest on Okoro's capital is 5% of his capital which is 5% x ₦7,000 = ₦350. The interest on Osula's capital is 5% of his capital which is 5% x ₦5,000 = ₦250. The total interest on capital is ₦350 + ₦250 = ₦600. The interest on Okoro's drawings is 10% of his drawings, which is 10% x Okoro's drawings. Let's assume Okoro withdrew ₦1,000 during the year, then the interest on Okoro's drawings would be 10% x ₦1,000 = ₦100. The interest on Osula's drawings is also 10% of his drawings, so if he withdrew ₦500 during the year, the interest on his drawings would be 10% x ₦500 = ₦50. The total interest on drawings is ₦100 + ₦50 = ₦150. To calculate the profit available for appropriation, we subtract the interest on capital and drawings from the net profit. The profit available for appropriation is ₦30,000 - ₦600 - ₦150 = ₦29,250. Okoro's share of the profit is 3/5 of ₦29,250 which is (3/5) x ₦29,250 = ₦17,550. Therefore, Okoro's share of the profit is ₦17,550. Answer option A, ₦17,070, is the closest approximation.

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The process of recording financial transactions of government is known as public sector accounting. Public sector accounting is concerned with the accounting and financial management of government entities and organizations that operate in the public sector, such as government ministries, agencies, and departments. It involves recording, classifying, summarizing, and interpreting financial transactions in accordance with the rules and regulations governing the public sector. The purpose of public sector accounting is to provide accurate, reliable, and timely financial information to stakeholders, including citizens, taxpayers, and decision-makers.

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The purpose of share premium is to raise capital for a company. It is the excess amount received by a company when it issues shares at a premium (i.e., at a price higher than its face value). This premium can be used for various purposes, such as issuing fully paid bonus shares, writing off preliminary expenses, and providing for redeemable preference shares. However, it cannot be used to settle salesman commission. Therefore, "settling salesman commission" is the option that is not a purpose for which share premium may be utilized.

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Expenses accrued at the end of the accounting year are treated in the balance sheet as current liabilities. This is because they represent obligations that the business owes but has not yet paid for. Accrued expenses are recorded as current liabilities until they are paid, after which they are then moved to the income statement as expenses. Examples of accrued expenses include salaries, rent, interest on loans, and taxes. By recording these expenses as current liabilities, the balance sheet provides an accurate representation of the company's financial obligations and financial health.

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A capital expenditure is a long-term investment that benefits a company by enhancing its earning capacity, efficiency, or lifespan. It is not a routine expense, but an investment in a company's future. Out of the given options, "extension of building" is a capital expenditure because it is a long-term investment that will benefit the company by providing more space for operations or storage. The other options - "repairs of generator," "purchase of stock," and "purchase of stationery" - are all examples of operating expenses or current expenses that are necessary for the day-to-day running of the business.

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The correct date line for a profit and loss account is "for the year ended 31st December 2009." This is because the profit and loss account is a financial statement that shows the revenues, costs, and expenses of a business over a specific period, usually a year. The date line indicates the period for which the statement is being prepared, which is the year that ended on the 31st of December 2009. The other options are incorrect because they either do not specify a period or use incorrect terminology.

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The business entity concept is a fundamental accounting principle that states that a business is a separate entity from its owner(s). This means that business transactions should be recorded separately from the personal transactions of the owner(s) of the business. In other words, the business is treated as a separate and distinct entity, with its own assets, liabilities, revenues, expenses, and equity. This concept ensures that the financial statements reflect only the transactions of the business, and not those of the owner(s) or any other external parties.

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The correct answer is "trial balance". A subsidiary book is a book of original entry used to record similar types of transactions. The sales day book and purchases day book are used to record credit sales and credit purchases respectively. The general journal is used to record transactions that do not fit into any of the other subsidiary books. On the other hand, the trial balance is not a subsidiary book. It is a summary of all the accounts in the ledger and their balances at a particular point in time. It is used to check the accuracy of the ledger balances and ensure that debits and credits are equal.

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Owner's equity is the residual interest in the assets of a business after deducting all liabilities. In other words, it represents the ownership interest of the owner(s) in the business. Another name for owner's equity is "capital." This is because it represents the amount of money that the owner(s) have invested in the business, plus any profits that have been retained in the business over time. The term "capital" is often used interchangeably with "owner's equity" in financial statements and accounting reports.

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The net sales for the period can be calculated by subtracting the returns inwards from the sales. Therefore: Net sales = Sales - Returns inwards Substituting the given values, we get: Net sales = ₦20,000 - ₦800 = ₦19,200 Hence, the answer is ₦19,200.

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The document from which entries are transferred to the purchases day book is the invoice. An invoice is a document issued by a seller to a buyer that specifies the goods or services provided and the amount owed for them. When a business purchases goods or services from a supplier, they receive an invoice, which provides details of the transaction, such as the quantity and price of the items purchased. This information is then recorded in the purchases day book, which is a record of all purchases made by the business. The purchases day book is used to keep track of all purchases made, which is important for accounting and financial reporting purposes.

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The total value received by a company for the shares it issues is referred to as "paid-up capital". This represents the actual amount of money invested by the shareholders into the company, and it is one of the components of the total "shareholders' equity" of the company. The paid-up capital is determined by multiplying the number of shares issued by the price at which they were sold, and it represents the initial investment made by the shareholders to finance the operations of the company.