WAEC SSCE - Financial Accounting - 2003

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The error in which the purchase of a typewriter for office use was debited to purchases account is an error of principle. This is because the transaction was recorded in the wrong account, contrary to the fundamental principle of accounting, which requires transactions to be recorded in their appropriate account. Purchases account is meant for recording the cost of goods purchased for resale, not for office equipment. Therefore, the error in this case is an error of principle.

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A control account is a type of self-balancing ledger system used to keep track of the total balance of a group of related accounts. In accounting, businesses often have multiple accounts that are related to each other. For example, a business may have several accounts receivable accounts for different customers. Instead of keeping track of each individual account separately, the business can use a control account to keep track of the total balance of all the accounts. The control account acts as a summary account for all the related accounts. It records the total balance of all the related accounts and is updated whenever a transaction is made in any of the related accounts. By using a control account, businesses can easily monitor the overall balance of their related accounts and quickly identify any discrepancies or errors. For example, a business may have several accounts receivable accounts for different customers. Instead of tracking each individual account separately, the business can use a control account called "Accounts Receivable Control" to track the total balance of all the accounts receivable accounts. This account will be credited when a sale is made and debited when a customer makes a payment. In summary, a control account is a self-balancing ledger system used to keep track of the total balance of a group of related accounts. It acts as a summary account for all the related accounts and is updated whenever a transaction is made in any of the related accounts.

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In a not-for-profit making organization, the cash book is summarized in the form of a receipts and payments account. This is because not-for-profit organizations do not have the objective of making a profit. Rather, their objective is to provide services or support a particular cause. The receipts and payments account summarizes all cash transactions, including both revenue and capital items, during a specific period of time, usually a year. It shows the opening balance of cash, the total of all receipts during the period, the total of all payments during the period, and the closing balance of cash. This account provides a summary of the organization's cash position and is used to prepare the income and expenditure account and balance sheet.

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The accounting concept that supports the application of double entry book-keeping is the dual aspect concept. This concept states that every transaction has two aspects - a debit and a credit - which must be recorded in equal amounts. This ensures that the accounting equation (assets = liabilities + equity) is always in balance. In other words, every transaction has an equal and opposite effect on the accounting equation, which helps to maintain the integrity of the financial statements. The dual aspect concept is also known as the duality principle or the double entry system, and it forms the foundation of modern accounting practice.

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The cost of raw materials consumed is the amount of money spent on the raw materials used to produce goods during a particular accounting period. This cost is recorded in the Manufacturing Account, which is used to calculate the total cost of goods manufactured. To calculate the cost of raw materials consumed, we need to know the following: - The opening inventory of raw materials (i.e., the value of raw materials on hand at the beginning of the period) - The purchases of raw materials made during the period - The closing inventory of raw materials (i.e., the value of raw materials on hand at the end of the period) The cost of raw materials consumed is calculated as follows: Opening inventory of raw materials + Purchases of raw materials during the period - Closing inventory of raw materials = Cost of raw materials consumed Therefore, the correct answer is A, opening stock plus purchases less closing stock.

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An unfavorable balance of trade for a country means that its imports exceed its exports. Imports are goods and services that a country buys from other countries, while exports are goods and services that a country sells to other countries. When a country's imports exceed its exports, it means that it is spending more money on buying goods and services from other countries than it is earning from selling its own goods and services to other countries. This can lead to a number of economic problems, such as a decrease in the country's foreign exchange reserves, a decrease in the value of its currency, and a decrease in the country's overall economic growth. Therefore, countries try to maintain a favorable balance of trade, where their exports exceed their imports, to ensure the health and stability of their economy.

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To determine the amount paid to creditors, we need to use the following formula: Amount paid to creditors = Credit purchases - Discount received + Opening creditors - Closing creditors We are given that the opening creditors were N65,000, the closing creditors were N41,000, the credit purchases were N200,000, and the discount received was N3,000. Substituting these values in the formula, we get: Amount paid to creditors = N200,000 - N3,000 + N65,000 - N41,000 Amount paid to creditors = N221,000 Therefore, the amount paid to creditors was N221,000. Answer: ₦221,000

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To find the profit or loss on sale of the asset, we need to first calculate the book value of the asset on the date of sale, which is the amount at which the asset is recorded on the company's balance sheet after accounting for depreciation. The asset was bought for N60,000 on 1st January, 1997, and depreciation was provided at 10% on cost. This means that each year, the asset would lose 10% of its original cost of N60,000, or N6,000. By 30th June, 2001, the asset would have been in use for 4.5 years (from January 1st, 1997 to June 30th, 2001). Therefore, the accumulated depreciation on the asset would be: Accumulated Depreciation = Depreciation per year x Number of years = N6,000 x 4.5 = N27,000 The book value of the asset on June 30th, 2001 would be the original cost of N60,000 minus the accumulated depreciation of N27,000, which is: Book Value = Cost - Accumulated Depreciation = N60,000 - N27,000 = N33,000 However, the asset was sold for N16,000, which is less than its book value of N33,000. This means that there is a loss on the sale of the asset. To calculate the loss, we subtract the selling price of N16,000 from the book value of N33,000, which is: Loss = Book Value - Selling Price = N33,000 - N16,000 = N17,000 Therefore, the answer is: ₦17,000 loss.

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Patient and trade marks are classified under intangible assets. Intangible assets are assets that do not have physical substance but are valuable because they represent legal rights or intellectual property. They include items such as patents, copyrights, trademarks, goodwill, and customer lists. Patents and trademarks are legal rights that provide exclusive use and ownership of an idea, invention or symbol. Since they represent legal rights, they are classified as intangible assets in accounting.

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Purchase of fixed assets on credit is a transaction that involves the purchase of a long-term asset using credit from a supplier. This transaction is recorded in the journal proper as it is a non-routine transaction and does not fit into the other specialized journals such as the purchases journal, sales journal, or cash book. The journal proper is a general journal used to record any transactions that do not fit into the specialized journals. It is used for non-routine transactions such as the purchase of fixed assets on credit, adjusting entries, and closing entries. These transactions are recorded in the journal proper and then posted to the relevant accounts in the general ledger. The purchases journal is used to record purchases of inventory or stock on credit, while the cash book is used to record cash transactions. Fixed assets are not considered inventory or stock, and their purchase on credit is not a cash transaction. Therefore, the purchase of fixed assets on credit is not recorded in the purchases journal or cash book. Finally, the general ledger is a record of all the accounts used by a business, including assets, liabilities, equity, revenue, and expenses. Transactions recorded in the journal proper are posted to the relevant accounts in the general ledger, including the account for fixed assets. Therefore, the correct answer is B, the journal proper, as the purchase of fixed assets on credit is first recorded in this general journal.

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The document which advertises the sale of shares of a company is called a prospectus. A prospectus is a formal legal document that provides detailed information about a company and the securities it is offering for sale to the public. The purpose of a prospectus is to help potential investors make informed decisions by providing information about the company's financial performance, management team, risks associated with the investment, and other relevant details. In other words, a prospectus is like a brochure that explains what a company is and what it does, as well as why someone might want to invest in it.

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Real accounts are accounts that represent assets, liabilities, or equity, and they are accounts that have a tangible existence. Out of the options given, the real account item is "fixtures." Fixtures are physical assets, such as furniture, equipment, and other similar items that are used to carry out business operations. They have a tangible existence and can be seen and touched. Goodwill is an intangible asset and therefore not a real account item. Debtors are also not considered as real account items, as they represent money that is owed to the business and not a tangible asset. Interest is not a real account item either, as it is a revenue or expense account that represents the cost of borrowing or the income earned on investments.

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The account of Yao, a debtor, would be found in the Sales Ledger. The Sales Ledger is a subsidiary ledger in accounting that contains the individual accounts of a company's customers who owe money for the products or services that they have purchased on credit. Since Yao is a debtor, it means that he owes money to the company, which makes him a customer who purchased goods or services on credit. Therefore, his account would be recorded in the Sales Ledger. In contrast, the Purchases Ledger is a subsidiary ledger that contains the individual accounts of a company's suppliers who are owed money for the products or services that they have supplied on credit. The General Ledger is the primary ledger that contains all the financial accounts of a company, and the Nominal Ledger is another name for the General Ledger.

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To calculate the gross profit, we need to subtract the cost of goods sold from the total sales revenue. The cost of goods sold is calculated as follows: Cost of goods sold = Opening stock + Purchases - Closing stock Cost of goods sold = 40,000 + 130,000 - 32,000 = 138,000 Now, we can calculate the gross profit as follows: Gross profit = Total sales - Cost of goods sold Gross profit = 180,000 - 138,000 = 42,000 Therefore, the gross profit is ₦42,000. In summary, gross profit is the profit made by a business after deducting the cost of goods sold from the total sales revenue. It is an important metric in evaluating a business's profitability and financial health.

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The purchase of fixed assets is found in a receipts and payments account. A receipts and payments account is a summary of the cash received and paid out by an organization during a given period of time, typically a year. This account includes all cash receipts, including both revenue and capital receipts, as well as all cash payments, including revenue and capital payments. The purchase of fixed assets, which is a capital expenditure, is recorded as an outflow of cash and is included in the payments section of the receipts and payments account. Accruals, prepayments, and depreciation of fixed assets are not typically included in a receipts and payments account, as they are non-cash transactions.

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The account that shows both the cash and bank transactions of an enterprise is called a cash book. A cash book is a financial ledger that records all the cash and bank transactions of a business in one place. It is used to keep track of money flowing in and out of the company, including all the receipts and payments made through cash and bank. A cash book is important because it provides a real-time snapshot of a company's financial position, which is crucial for making informed business decisions. In other words, a cash book is like a diary that keeps a record of all the cash and bank transactions of a company, making it easier to track and manage finances.

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The item that is found on the credit side of a Sales Ledger Control Account is "interest on overdue accounts." This refers to the interest charged to customers who have not paid their accounts on time. When a customer is overdue, interest is charged on the outstanding amount until the account is settled. The interest charged is credited to the Sales Ledger Control Account, as it represents an income for the business. The other options are not credited to the Sales Ledger Control Account. Credit sales are recorded on the debit side of the account, as they increase the amount owed by customers. Debtors cheques dishonoured are also recorded on the debit side, as they reduce the amount owed by customers. Bad debts written off are recorded on the debit side as well, as they represent a loss for the business.

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The art of recording transactions in books of account is known as bookkeeping. Bookkeeping is the process of systematically recording financial transactions of a business in a set of books. The books of account contain the records of all the financial transactions, such as sales, purchases, payments, and receipts. These transactions are recorded in a chronological order and are classified into various accounts, such as cash, accounts receivable, accounts payable, inventory, and so on. The purpose of bookkeeping is to keep an accurate and complete record of a company's financial transactions and to provide information that is useful for decision-making, budgeting, and forecasting. It is a critical component of accounting, which is the process of summarizing, analyzing, and reporting financial information to stakeholders, such as investors, creditors, and regulators. Debiting and crediting are the basic principles of accounting, which are used to record financial transactions in the books of account. Auditing is the process of examining and verifying the accuracy and completeness of the financial records and reports prepared by the bookkeeper or accountant.

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The cost of goods sold can be calculated by subtracting the closing stock from the sum of the opening stock and purchases. This is because the cost of goods sold is the cost of the goods that were sold during the accounting period. Using the figures given in the question, the calculation is as follows: Cost of Goods Sold = Opening Stock + Purchases - Closing Stock Cost of Goods Sold = ₦40,000 + ₦130,000 - ₦32,000 Cost of Goods Sold = ₦138,000 Therefore, the cost of goods sold is ₦138,000. , ₦138,000, is the correct answer.

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The option that has multiple uses is the general journal. A general journal is a book of original entry used to record financial transactions that are not recorded in other specialized journals. It is used to record transactions that do not fit into the categories of the specialized journals, such as sales, purchases, or returns outwards journals. Therefore, the general journal has multiple uses. For instance, a general journal can be used to record adjusting entries, such as accruals and deferrals. It can also be used to record transactions related to fixed assets, such as depreciation and disposal of fixed assets. Additionally, it can be used to record non-routine transactions, such as loans or investments. In summary, the general journal is a versatile journal that can be used to record a wide variety of financial transactions that are not recorded in other specialized journals.

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To determine the amount available as dividend to ordinary shareholders, we need to calculate the amount of profit available for distribution to shareholders, and then deduct the preference dividend. The amount of profit available for distribution to shareholders is the net profit for the year minus the preference dividend. The preference dividend is 10% of the preference share capital, which is N100,000, so the preference dividend is N10,000. Net profit for the year = N75,000 Preference dividend = N10,000 Amount of profit available for distribution to ordinary shareholders = N75,000 - N10,000 = N65,000 The amount available as dividend to ordinary shareholders is N65,000. This is because the net profit for the year is N75,000, but N10,000 is deducted as preference dividend. The remaining N65,000 is available to be distributed to ordinary shareholders.

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The transformation of pieces of information into a more useful format is referred to as data processing. This process involves the conversion of raw data into a meaningful and structured format that can be analyzed, stored, and used to make decisions. Data processing can be done manually or with the aid of technology such as computers. It includes activities like data entry, sorting, validation, summarization, and reporting. Data processing is an important step in generating useful information from raw data.

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A chain store is a type of multiple store. A chain store is a retail store that is part of a group of stores operated by the same company. The stores are usually located in different geographic locations, but they share a common brand, merchandise, and management. The chain store concept was developed in the early 20th century, and it quickly became popular because it allowed companies to expand their operations and reach more customers. Chain stores can be found in various retail sectors, including clothing, electronics, home appliances, and groceries. They offer a wide range of products and services to their customers, and they often have a consistent store layout and branding across all their locations. Chain stores may also offer discounts and loyalty programs to encourage customers to shop with them. In summary, a chain store is a type of retail store that is part of a group of stores operated by the same company. It is known for its consistent branding, merchandise, and management across all its locations.

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The document that brings a company into legal existence is called the Certificate of Incorporation. This document is issued by the relevant government agency (usually the Companies Registry) after the company has fulfilled all the legal requirements for registration, including filing the Memorandum and Articles of Association, paying the necessary fees, and providing other required documents. The Certificate of Incorporation is a legal proof that the company exists as a separate legal entity and has been duly registered with the government. It contains important information about the company, such as its name, registration number, date of incorporation, and registered office address.

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Rent owing by a business is a liability, as it represents an amount that the business owes to its landlord or property owner. This liability is shown in the balance sheet, which is a financial statement that shows the assets, liabilities, and equity of a business at a specific point in time. The balance sheet is divided into two main sections: the assets section and the liabilities and equity section. The rent owing by a business is shown in the liabilities section of the balance sheet, under the category of current liabilities, which includes all liabilities that are due within a year or less. The trading account is a statement that shows the gross profit or loss of a business for a specific period, and it does not include any information about liabilities. The trial balance is a list of all the accounts in the general ledger and their respective balances, used to ensure that the debits and credits in the accounting system are equal. The cash book is a record of all cash transactions made by a business and does not include any information about liabilities. Therefore, the correct answer is C, the balance sheet, as rent owing by a business is shown as a liability in this financial statement.

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The procedure for utilizing the savings from one sub-head of expenditure to pay for another under the same head is called "virement." It is a process by which funds allocated for one purpose can be transferred to another purpose within the same head of expenditure. This is often done to adjust budgets and make sure that funds are being allocated appropriately. Virement can help organizations to use their resources more efficiently and to respond quickly to changing circumstances. It is an important tool for financial management and budgeting.

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To calculate the divisible profit for the year, we need to first determine the profit available for appropriation. We start with the net profit for the year, which is N30,000. Next, we need to adjust for the interest on capital and interest on drawings. The interest on capital is calculated as a percentage of the capital accounts, and is subtracted from the net profit for the year. In this case, the interest on capital is 5% of (N40,000 + N20,000) = N3,000, which is subtracted from the net profit for the year, leaving us with N27,000. The interest on drawings is calculated as a percentage of the drawings accounts, and is added back to the net profit for the year. In this case, the interest on drawings is 10% of (N10,000 + N6,000) = N1,600, which is added back to the net profit for the year, giving us a profit available for appropriation of N28,600. Finally, we need to divide the profit available for appropriation between the partners in the profit sharing ratio. The profit sharing ratio is Ojo: Aina = 2:1, so Ojo's share is 2/3 of the profit available for appropriation, and Aina's share is 1/3 of the profit available for appropriation. Therefore, Ojo's share is (2/3) x N28,600 = N19,066.67 and Aina's share is (1/3) x N28,600 = N9,533.33. The divisible profit for the year is the sum of the partners' shares, which is N19,066.67 + N9,533.33 = N28,600. Therefore, the correct answer is ₦28,600.

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The nominal ledger is used to record transactions related to revenues, expenses, gains, and losses. Therefore, the transaction that is posted to the nominal ledger is "discounts allowed to customers," as it is an expense account representing a reduction in the selling price of goods or services. The other transactions mentioned - cash paid by a customer, purchase of fixed asset for cash, and cash paid to suppliers - are all posted to other ledger accounts, such as the cash book, fixed asset register, and accounts payable ledger, respectively.

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Constructing market stalls is the responsibility of a local government. Local governments are responsible for providing basic amenities and facilities to their residents, and constructing market stalls is one of the ways they fulfill this responsibility. Market stalls provide a platform for small business owners and traders to sell their products and services, which helps to boost the local economy. Local governments also regulate and control these markets to ensure that they are safe and secure for both traders and customers. Therefore, constructing market stalls is an important responsibility of a local government. The other options listed do not fall under the responsibilities of a local government. Raising income tax revenue is the responsibility of the federal government, while developing highways and major ports are the responsibility of the state or federal government. Tolling of highways is also not a responsibility of local governments as it is usually done to raise revenue to fund the development of the highways, which falls under the jurisdiction of the state or federal government.

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The basis for apportioning rent among departments is typically the floor area occupied by each department. This is because rent is typically charged based on the amount of space a department occupies. Floor area is a fair and objective basis for apportioning rent, as each department can be assigned a specific space or area. The rent can then be apportioned based on the proportion of the total floor area occupied by each department. While other factors such as sales, number of employees, and direct labor cost could be used for apportioning other overhead costs, they are not appropriate for apportioning rent because they do not relate directly to the use of space. Therefore, floor area is the most appropriate basis for apportioning rent among departments.

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Preference shares are a type of shares in a company that pay a fixed dividend each year. The dividend rate for preference shares is usually expressed as a percentage of the face value of the share. In this case, the company has 10% preference shares with a face value of 50 kobo each and a total value of N100,000. Therefore, the total amount of preference dividends to be paid for the year is: N100,000 x 10% = N10,000 Hence, the correct answer is C, N10,000, which is the preference dividend for the year. Note that preference dividends must be paid before any dividends can be paid to ordinary shareholders. In this case, the net profit for the year is N75,000, but the preference dividend payment of N10,000 must be made first, leaving N65,000 available for distribution as dividends to the ordinary shareholders.

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The document that sets out the internal regulations of a partnership is called a partnership deed. A partnership deed is a legal document that outlines the rights, responsibilities, and obligations of each partner, as well as the terms and conditions of the partnership. It covers important aspects such as profit sharing, decision-making, capital contributions, admission of new partners, retirement of partners, dissolution of the partnership, and so on. The partnership deed is a crucial document as it provides a clear framework for the smooth functioning of the partnership, and helps to prevent misunderstandings and disputes between partners.