WAEC SSCE - Financial Accounting - 2002

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The accounting concepts are the basic assumptions or principles that guide the recording, presentation, and interpretation of financial transactions and statements. They are universally accepted and practiced in accounting to ensure accuracy, relevance, and comparability of financial information. Out of the given options, all are accounting concepts except for 'historical cost'. Historical cost is a convention in accounting that requires an asset or liability to be recorded at its original cost at the time of acquisition. It is a method of valuing assets and liabilities that does not necessarily reflect their current market value. While it is a widely used and accepted method, it is not technically a concept, but rather a convention or principle applied in accounting.

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To determine the value of current liabilities, we need to identify the liabilities that are due for payment within the next 12 months. From the given information, the following items are considered as current liabilities: - Rent owing: N400 - Creditors: N11,000 - Bank overdraft: N8,750 Therefore, the total current liabilities are: N400 + N11,000 + N8,750 = N20,150 Hence, the answer is N20,150.

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The amount for which a business is sold is called the "purchase consideration". It refers to the total value that the buyer is willing to pay to acquire the business, including any cash, securities, or other assets that are given to the seller as part of the transaction. The purchase consideration is typically negotiated between the buyer and seller and may be influenced by a variety of factors, such as the financial performance of the business, the assets and liabilities of the business, and the market conditions at the time of the sale. It is an important element in determining the value of the business and the return on investment for the buyer.

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The total of the purchases day book is posted to the purchases account in the General Ledger. The General Ledger is the principal accounting ledger that contains all the financial transactions of a business. It is used to create a complete record of all the financial transactions of a company by recording all the debits and credits of each account. The purchases day book is a subsidiary book that records all purchases made by a business on credit. At the end of each period, the total of the purchases day book is calculated and posted to the Purchases Account in the General Ledger, which is a nominal ledger account that records the cost of goods purchased by a business. This helps to keep track of the total amount spent on purchases during a given period.

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The capital sum which represents the difference between the assets and liabilities of a society or club is known as "accumulated fund". It is essentially the accumulated surplus generated by the society or club over time from its operations. The accumulated fund represents the retained earnings of the organization that have not been distributed as dividends or used for any other purpose. In other words, it is the portion of the organization's equity that has been accumulated over time and is available for reinvestment in the business or for use in meeting future contingencies. The accumulated fund is shown as a part of the equity or net worth of the organization in its balance sheet.

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The amount of N45,000 paid by the trader for insurance premium for 15 months ended 31st March, 2000 will have expired for 9 months (January to September) by 31st December. Therefore, the amount of N30,000 (45,000/15 x 9) will be classified as an expense in the Profit and Loss account for the year ended 31st December, while the remaining N15,000 (45,000/15 x 6) will be classified as a current asset in the Balance Sheet. This is because the insurance policy still covers the trader's business for the remaining 6 months (October to March) and can be claimed as an expense in the next accounting year when it expires. Therefore, the correct answer is a current asset.

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Carriage inward expenses of a business are expenses incurred in transporting goods and materials from the supplier to the business's premises. Since these expenses are directly related to the purchase of goods and materials, they are treated as part of the cost of goods sold and are included in the calculation of the cost of goods sold in the trading account. Therefore, the answer is trading account.

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The correct answer is "Debtors Account". Sales ledger is a record of all sales made by a business and the customers who owe the business money as a result of those sales. Debtors are customers who have bought goods or services from the business on credit and have not yet paid for them. Therefore, the sales ledger would include the Debtors Account, which tracks the amount owed by each debtor and the payment status of each debtor. The other options are not part of the sales ledger. Motor Van Disposal Account would be part of the fixed assets section, Bank Account would be part of the cash or bank section, and Rent and Rates Account would be part of the expenses section in a company's books of accounts.

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The correct answer is "printer". An input device is a hardware component used to provide data and control signals to a computer. It allows users to communicate with the computer and input data for processing. Diskette, card, and keyboard are all input devices. A diskette is a magnetic storage medium used for data storage, a card is a device used to input data through a card reader, and a keyboard is an electronic device used for typing and inputting data into a computer. A printer, on the other hand, is an output device. It prints out data and information that has already been processed by the computer.

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The concept described in the statement "Accountants do not count chickens before they are climbed" is the concept of realization. This concept is related to the recognition of revenue or income when it is earned or realized, not when the payment is actually received. It means that accountants should not recognize revenue until it has been earned or the goods or services have been delivered. This ensures that financial statements provide an accurate representation of the company's financial position and performance. In other words, revenue should only be recognized when it is certain that payment will be received for the goods or services provided.

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The value of current assets is the sum of the values of those assets which are expected to be converted into cash within a year. In the given table, the current assets are cash in hand, stock, debtors. The total value of these assets is: 1,000 (cash in hand) + 5,000 (stock) + 13,750 (debtors) = N19,750 Therefore, the value of current assets is N19,750. Option C is the correct answer.

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A provision is an amount of money set aside in a company's accounts to cover a future liability or expense that is uncertain in timing or amount. It is a type of reserve that is created to meet a specific expense or loss that is likely to occur in the future. Provisions are typically made for things like warranties, bad debts, or legal claims. By creating a provision, a company can ensure that it has enough funds to cover the expense when it arises and can avoid taking a big hit to its profits in that particular period.

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Accumulated depreciation is the total amount of depreciation charged on an asset since it was acquired. Using the straight-line method, the annual depreciation charged on the asset is 20% of N60,000 which is N12,000. So, from 1st January, 1995 to 31st December, 1997 (3 years), the accumulated depreciation will be N12,000 x 3 = N36,000. Since depreciation is charged fully in the year of disposal, the accumulated depreciation for the period from 1st January, 1998 to 30th October, 1998 will be 20% of N60,000 which is N12,000. Therefore, the total accumulated depreciation will be N36,000 + N12,000 = N48,000. Hence, the answer is N48,000.

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When a company issues shares and they are oversubscribed (i.e., more people want to buy shares than the company has available), the company may decide to scale down the number of shares each applicant is allocated. Scaling down is the process of reducing the number of shares to be issued to each applicant in proportion to the number of shares they applied for. This means that everyone who applied for shares will get a percentage of the shares they applied for, rather than receiving nothing at all or only a portion of the shares they applied for. This is known as issuing shares proportionately or on a pro-rata basis. The exact proportion of shares that each applicant receives is based on the total number of shares applied for and the number of shares available for issue.

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Depreciation is a charge for the reduction in the value of a fixed asset over time due to wear and tear, obsolescence or other factors. It represents the allocation of the cost of the asset over its useful life. Depreciation is a non-cash expense, meaning that no actual cash changes hands. Instead, it is a way of recognizing that an asset has been used up in the production of revenue and should be expensed over its useful life.

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The cost of raw materials consumed can be calculated by finding the cost of raw materials used in production. This can be done by subtracting the cost of raw materials at the end of the year from the cost of raw materials available for use during the year. Cost of raw materials available for use = Opening stock + Purchases = 4,500 + 30,000 = N34,500 Cost of raw materials at the end of the year = Closing stock = N6,000 Therefore, cost of raw materials consumed = Cost of raw materials available for use - Cost of raw materials at the end of the year = N34,500 - N6,000 = N28,500 So, the answer is N28,500.

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To find Baba's Current Account balance on 31st December, 2000, we need to calculate his share of the net profit for the year, which is calculated as follows: Baba's share of capital = N40,000 Baba's interest on capital (10% of N40,000) = N4,000 Baba's share of net profit (after deducting salaries) = N31,000 (i.e. N40,000 - N5,000) Baba's total credit balance in his Current Account during the year = N20,000 Baba's drawings during the year = N4,000 Therefore, Baba's Current Account balance on 31st December, 2000 is: N20,000 - N4,000 + N31,000 + N4,000 = N51,000 Therefore, the answer is option A, N35,500.

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Discounts allowed is charged to the profit and loss account. This is because discounts allowed are considered as an expense of the business and are deducted from the gross sales revenue to arrive at the net sales revenue. The net sales revenue is then used to calculate the gross profit, which is a key component of the profit and loss account. Therefore, discounts allowed reduce the profit of the business and are shown as an expense in the profit and loss account.

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The source document sent by the seller to the buyer when goods are returned is a credit note. A credit note is a commercial document that indicates the amount of money that a seller owes a buyer due to a previously issued invoice. It is sent to the buyer when goods are returned, and it serves as evidence of the return and the corresponding adjustment to the seller's account. The credit note contains details such as the reason for the return, the date of the original sale, the amount credited, and the seller's and buyer's details.

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The deduction from the sales price of goods that is allowed if payment is made within a specified period of time is known as a "cash discount". It is also known as a "prompt payment discount" or "early settlement discount". This discount is given as an incentive for the customer to pay their bill promptly and reduce the amount of time that the seller has to wait for their money. The cash discount is usually expressed as a percentage of the sales price and is often referred to as a "2/10 net 30" discount, which means that the customer can take a 2% discount if they pay within 10 days, or pay the full amount within 30 days.

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The document authorizing an officer to incur expenditure is known as a "warrant". It is an official document that gives the authorization to spend public money for a specific purpose. Warrants are usually issued by a government department or agency and must be used in accordance with the rules and regulations governing public spending. They are an important tool for ensuring accountability and transparency in the use of public funds.

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The concept illustrated in the scenario is the concept of "materiality." Materiality is a concept in accounting that states that financial information should be disclosed if its omission or misstatement would affect the decision-making process of users of the financial statements. In this case, the trader paid N15,000 on rent for 15 months, but only N12,000 was charged to the profit and loss account for the year. This could be due to the fact that the remaining N3,000 was considered immaterial and not necessary to be disclosed in the financial statements. This is an example of how the concept of materiality is applied in accounting.

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To calculate the interest on Tunde's capital, we need to multiply Tunde's capital balance at the beginning of the year by the interest rate. Tunde's capital balance at the beginning of the year is N50,000. So, the interest on Tunde's capital would be: N50,000 x 10% = N5,000 Therefore, the interest on Tunde's capital is N5,000. is the correct answer.

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The term bad debt is used to describe a debt that cannot be recovered. In other words, it is a debt that is unlikely to be paid by the debtor due to their financial situation, bankruptcy, or unwillingness to pay. When a company determines that a debt is bad, they will remove it from their accounts receivable and record it as a loss in their income statement. This helps to reflect the true financial position of the company and also reduces the amount of taxable income.

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Prepayment is not a liability. Prepayment refers to an amount that has been paid in advance for goods or services that will be received in the future. It is recorded as an asset on the balance sheet, not as a liability. The other options listed are all examples of liabilities. Accrued wages are wages that have been earned by employees but not yet paid, rent arrears are rent payments that are overdue, and insurance due but unpaid refers to insurance premiums that are owed but have not yet been paid.

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Subscriptions in arrears is treated as a current asset in the balance sheet of a club. It represents the amount of subscription fees owed to the club by its members. Since the club has a right to receive these payments in the future, subscriptions in arrears are considered as an asset. As the amount becomes due and collected, it will be moved to cash or bank account, which are also current assets.

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A suspense account is used to temporarily record transactions that cannot be properly identified or allocated to a specific account. It is a temporary account used to hold the difference between the debits and credits when preparing financial statements. It is mainly used to ensure that the books remain balanced and agree with the trial balance, while the transactions are being investigated or reconciled. Once the transaction is identified or allocated to a specific account, the suspense account is cleared by transferring the transaction to the appropriate account. Therefore, the correct option is "agree the trial balance."

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The financial plan of the government for a year is contained in the "budget". A budget is a financial plan that outlines the estimated revenues and expenses for the coming year. It serves as a guide for the government to manage its finances, allocate resources to different sectors, and ensure that the economy remains stable. The budget includes information on the government's revenue sources, such as taxes and fees, as well as its planned expenditures, such as infrastructure development, healthcare, education, and defense. It also outlines the government's fiscal policy, which includes measures to manage inflation, promote economic growth, and address any economic challenges that may arise. The budget is usually presented to the legislative body for approval before it can be implemented.

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The asset was bought on 1st January 1995 for N60,000 and depreciated annually at 20% on cost. The accumulated depreciation as at 30th October 1998 is calculated as follows: Depreciation for 1995 = 20/100 x 60,000 = N12,000 Depreciation for 1996 = 20/100 x 60,000 = N12,000 Depreciation for 1997 = 20/100 x 60,000 = N12,000 Depreciation for 1998 (up to 30th October) = 20/100 x 60,000 x 10/12 = N10,000 Total accumulated depreciation as at 30th October, 1998 = N46,000 The book value of the asset on 30th October, 1998 is calculated as follows: Cost price of the asset = N60,000 Accumulated depreciation = N46,000 Book value = Cost price - Accumulated depreciation Book value = N60,000 - N46,000 = N14,000 Since the asset was sold for N21,000, the profit on sale is calculated as follows: Profit on sale = Selling price - Book value Profit on sale = N21,000 - N14,000 = N7,000 Therefore, the profit on sale is N7,000. Answer option: (D) N9,000 is not correct.