WAEC SSCE - Financial Accounting - 1995

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If incorrect entries on the debit side equal other incorrect entries on the credit side, the error is that of *compensation*. This means that the errors compensate for each other, resulting in the total being unaffected. For example, if a wrong amount is recorded in the debit column, but an equal and opposite error is made in the credit column, the total of the transaction will remain the same, despite the errors. This is referred to as the principle of compensation in accounting, and it helps to ensure that the financial statements are accurate and reliable.

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In the given Debtors Control Account, 'X' is shown as a heading above the amount of N12,000. This indicates that N12,000 represents the total amount of credit sales made during the accounting period to the debtors. Hence, the correct answer is "sales".

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Debtors is an example of Personal Accounts. Personal Accounts are one of the three types of accounts used in accounting, alongside Real Accounts and Nominal Accounts. Personal Accounts are used to record transactions related to individuals, firms, or organizations with whom the business has a financial relationship. Debtors are individuals or entities who owe money to the business for goods or services that have been provided to them on credit. Thus, the debtor's account is a personal account because it represents a financial relationship between the business and an individual or entity. The other options, such as stock, fixture, equipment, and rent, are examples of Real Accounts or Nominal Accounts, which are used to record transactions related to assets, expenses, income, and liabilities of the business.

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The financial plan of the government for a year is contained in the budget. A budget is a detailed plan of income and expenses that the government projects for a specific period, typically a year. It outlines the government's expected revenues and expenses, as well as any borrowing or other financial activities that will occur during the period. The budget provides a blueprint for the government to allocate resources to different sectors and prioritize spending based on national goals and objectives.

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A list of balances extracted from the ledger is known as a trial balance. It is a statement that contains a list of all ledger accounts with their debit or credit balances. The main purpose of preparing a trial balance is to ensure that the total of all debit balances equals the total of all credit balances in the ledger. If the trial balance balances, it is an indication that the accounting entries have been correctly recorded. However, a balanced trial balance does not guarantee that all accounting entries are error-free, and further analysis and investigation may be required to identify and correct any errors.

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Provision for depreciation on office furniture is charged to the "profit and loss account". Depreciation is the reduction in the value of an asset over time due to wear and tear, obsolescence, or other factors. As such, it is an expense for the business, and is charged to the profit and loss account. By charging the provision for depreciation to the profit and loss account, the business is able to reflect the true cost of the asset's usage over time, and this helps to provide a more accurate picture of the business's financial performance.

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Subscription in advance is an example of an accrual. An accrual is an accounting entry that recognizes revenue or expenses that have been earned or incurred but not yet received or paid. In the case of subscription in advance, the company has received payment for services that it has not yet provided, so the revenue is recognized as an accrual until the services are provided. Once the services are provided, the accrual is reversed, and the revenue is recognized as earned.

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Expenses incurred but not yet paid are classified as a "current liability". A current liability is a financial obligation that a company owes to another party, and it is expected to be settled within the next 12 months. When a company incurs expenses but has not yet paid for them, they are recorded as a current liability on the balance sheet. These liabilities are usually settled in the near future with cash, and examples include accounts payable, accrued expenses, and taxes payable.

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The closing balance of the debtors control account is a current asset. A current asset is an asset that is expected to be realized or consumed within a year or an operating cycle of a business. In this case, the closing balance of the debtors control account represents the amount owed to the business by its debtors, which is expected to be received within a year or operating cycle. Therefore, it is classified as a current asset on the balance sheet of the business.

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Expenditure incurred to maintain an asset's earning capacity is called revenue expenditure. This type of expenditure is incurred in the normal course of business to keep an asset in good working condition and maintain its earning capacity. It is not intended to increase the asset's lifespan or earning potential, but rather to ensure that the asset continues to generate revenue as expected. Examples of revenue expenditures include repairs and maintenance, salaries and wages, utility bills, and advertising expenses.

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The balance as per cash book can be calculated by starting with the balance as per bank statement and adjusting for transactions that have not been recorded in the bank statement yet or transactions that have been recorded in the bank statement but not yet recorded in the cash book. Starting with the balance as per bank statement of N240, we can add the amount paid in but not credited of N192 to get N432. Then, we subtract the unpresented cheque of N70 to get the balance as per cash book of N362. Therefore, the answer is N362.

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The basis of accounting in the Civil Service is cash. This means that transactions are recorded when cash is received or paid, regardless of when the goods or services were delivered or received. In cash basis accounting, revenue is recognized when cash is received, and expenses are recognized when cash is paid. This is different from accrual basis accounting, where revenue is recognized when it is earned, and expenses are recognized when they are incurred, regardless of when cash is received or paid.

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The reward given to a debenture holder is called "interest." A debenture is a type of debt instrument issued by a company or government to raise funds. When an investor purchases a debenture, they are essentially loaning money to the issuer. The issuer then pays the investor interest on the loan at a predetermined rate and frequency until the debenture matures, at which point the principal is repaid to the investor. The interest paid to the debenture holder is typically fixed and is based on the amount of the loan, the interest rate, and the maturity of the debenture.

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To calculate the total basic salary for the period, we need to multiply the number of staff in each post by their corresponding rate and then add up the results. The rates are given in the table as the product of the monthly salary and the number of steps on the salary scale. To simplify the calculation, we will first compute the monthly salary for each post as follows: - Director of Audit: N200,000 x 12 months = N2,400,000 per year - Assistant Director (Audit): N160,000 x 12 months = N1,920,000 per year - Asst. Chief Internal Auditor: N140,000 x 12 months = N1,680,000 per year - Internal Auditor II: N60,000 x 12 months = N720,000 per year - Higher Executive Officer (Audit): N60,000 x 12 months = N720,000 per year Next, we need to compute the housing and transport allowances for each post, based on the grade levels given in the table. All employees are on the first step of their salary, so they are all eligible for the same allowances: - Housing allowance: N24,000 per year - Transport allowance: N18,000 per year for grades 12 and above, and N12,000 per year for grades 7 to 11 Using this information, we can compute the total basic salary for each post as follows: - Director of Audit: N2,400,000 + N24,000 + N18,000 = N2,442,000 per year - Assistant Director (Audit): N1,920,000 + N24,000 + N18,000 = N1,962,000 per year - Asst. Chief Internal Auditor: N1,680,000 + N24,000 + N12,000 = N1,716,000 per year - Internal Auditor II: N720,000 + N24,000 + N12,000 = N756,000 per year - Higher Executive Officer (Audit): N720,000 + N24,000 + N12,000 = N756,000 per year Finally, we need to multiply the total basic salary for each post by the number of staff in that post and add up the results: N2,442,000 x 1 + N1,962,000 x 2 + N1,716,000 x 1 + N756,000 x 2 + N756,000 x 4 = N1,020,000 Therefore, the total basic salary for the period is N1,020,000.

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The effect of a reduction in the provision for doubtful debts is an increase in net profit. A provision for doubtful debts is an amount set aside to cover potential losses that a company may face if its customers default on their debts. If the provision is reduced, it means that the company believes that it is less likely to experience such losses in the future, and therefore, it can release some of the funds previously set aside for the provision. As a result, the reduction in the provision for doubtful debts will decrease the amount of expense charged against the company's profit, which will increase its net profit. Therefore, the correct option is "increase in net profit."

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Capital expenditures are expenses that are expected to produce benefits over a period of several years or more, rather than being immediately consumed. Based on this definition, the option that represents capital expenditure is the "extension of building". This is because the construction of a building is a long-term asset that is expected to produce economic benefits for many years to come.

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The cost of goods sold can be calculated using the formula: Cost of goods sold = Opening stock + Purchases - Closing stock. Substituting the given values, we get: Cost of goods sold = 20,000 + 25,000 - 30,000 = 15,000 Therefore, the cost of goods sold is N15,000. Option (E) is the correct answer.

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The interest on Halima's capital is calculated by multiplying her capital balance by the interest rate. Halima's capital balance as at 1st January, 1992 is N100,000, and the interest rate is 10%. Therefore, the interest on Halima's capital is: N100,000 x 10% = N10,000 So the answer is N10,000.

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A fictitious asset is an asset that does not have a physical existence and cannot be seen or touched. Out of the options provided, the only asset that fits this description is "preliminary expenses." These are expenses that are incurred during the formation of a company, such as legal fees, registration fees, and expenses associated with issuing shares. These expenses are not tangible and cannot be physically touched or seen, and therefore, they are considered a fictitious asset. The other options, such as fixtures and fittings, land and buildings, and investments, are all physical assets that can be seen and touched. "Cash in hand" is also not a fictitious asset, as it is a real asset that represents the amount of cash held by a company at a given point in time.

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The error described is a commission error. Commission errors occur when an entry is made to the correct type of account but to the wrong account name. In this case, the entry was made to A. Akpan instead of B. Akpan, resulting in a commission error.

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The chief accounting officer of Nigeria is called the "Accountant General." The Accountant General is a high-ranking government official responsible for managing the financial operations and reporting of the federal government of Nigeria. The position is appointed by the President of Nigeria and is responsible for overseeing the country's financial management, accounting policies, and financial reporting. The Accountant General is responsible for preparing the annual financial statements of the federal government, managing the government's revenue collection, and ensuring that expenditures are in line with approved budgets. They also supervise the operations of all accounting and finance personnel within the government. In summary, the chief accounting officer of Nigeria is the Accountant General, who is responsible for managing the financial operations and reporting of the federal government.

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To calculate the net profit, we need to use the formula: Net profit = Total sales - Cost of goods sold - Expenses Cost of goods sold (COGS) can be calculated using the following formula: COGS = Opening stock + Purchases - Closing stock Plugging in the values from the table, we have: COGS = 20,000 + 25,000 - 30,000 = 15,000 Therefore, Net profit = 45,000 - 15,000 - 15,000 = N15,000 Therefore, the net profit is N15,000.

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The total emolument for the assistant directors is calculated as follows: - For each Assistant Director (Audit): - Basic salary: N160,000 - Step increment: N18,000 - Housing allowance: N24,000 - Transport allowance: N18,000 - Total annual salary = (N160,000 + N18,000 + N24,000 + N18,000) = N220,000 - Total emolument for both assistant directors = (N220,000 x 2) = N440,000 Therefore, the total emolument for the assistant directors is N440,000. Answer: Option A, N404,000, is incorrect.

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Devaluation of Naira does not lead to depreciation of assets. Depreciation is a decrease in the value of an asset over time due to various factors, including wear and tear, obsolescence, usage, and the passage of time. However, devaluation of the currency in which an asset is denominated does not directly impact the physical or functional attributes of the asset. Devaluation of currency can affect the relative value of assets in terms of their purchasing power, but it does not cause physical deterioration or obsolescence of the asset itself. Therefore, the correct answer is "devaluation of Naira."

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Working capital is measured by the excess of current assets over current liabilities. Current assets are the assets of a business that are expected to be converted into cash or used up within one year or less, while current liabilities are the obligations that a business is expected to pay within the same time frame. Working capital is the amount of money that a business has available to cover its day-to-day operations, and it is calculated by subtracting current liabilities from current assets. The resulting figure represents the net amount of current assets that a business has to meet its short-term obligations. Therefore, the option that correctly identifies the measurement of working capital is "current assets over current liabilities". The other options do not accurately describe the calculation of working capital.

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The option that is not a debit entry on a sales ledger control account is "cash received." A sales ledger control account is used to keep track of the transactions related to a company's accounts receivable. Debit entries in the sales ledger control account represent increases in the amount owed to the company by its customers. The other options listed are all types of transactions that would result in a debit entry on a sales ledger control account: - Goods sold would increase the amount owed to the company by the customer, and therefore would be recorded as a debit entry. - Dishonoured cash refers to a payment that was not accepted by the bank, which would result in the customer still owing the company money. This would also be recorded as a debit entry. - Payment to debtors for a claim would reduce the amount owed to the company by the customer, and therefore would be recorded as a negative debit entry (also known as a credit). - Interest charges would increase the amount owed to the company by the customer, and therefore would be recorded as a debit entry. Cash received, on the other hand, would be a credit entry on the sales ledger control account, since it represents a decrease in the amount owed to the company by the customer. In summary, cash received is not a debit entry on a sales ledger control account, as it represents a decrease in the amount owed by the customer and would therefore be recorded as a credit entry.

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The aggregate of amounts owed to a business by its customers is known as accounts receivable. Accounts receivable is a financial term used to describe the money that a company has a right to receive from its customers who have bought goods or services on credit. It represents the total amount of outstanding payments that are due to a business, and is considered an asset on the company's balance sheet. The term "receivable" refers to the fact that the amount owed is expected to be paid by the customer in the future, and is not yet collected by the business. The accounts receivable balance can be an important indicator of a company's financial health, as it represents the amount of money that the business expects to receive in the near future.

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Undistributed profits of a limited liability company refers to the portion of the net profit that the company has not distributed as dividends to its shareholders. Instead, these profits are retained by the company for future use such as reinvestment in the business, expansion or to pay off debts. Therefore, the correct answer is "retained earnings".

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The maximum amount which a company can raise by way of selling shares is the authorized capital. Authorized capital is the maximum amount of capital that a company is authorized to raise by issuing shares. This is the amount that is specified in the company's articles of association, and it represents the maximum amount that the company can raise through the sale of shares to the public or to its members. The authorized capital is not necessarily the same as the issued capital or paid-up capital, which are the amounts of capital that have actually been issued and paid for by the shareholders. The working capital, on the other hand, is the amount of capital that is required to finance the day-to-day operations of the business. Shareholders' capital is a broader term that refers to the total amount of capital that has been invested in the company by its shareholders, including both equity and debt. Therefore, the maximum amount that a company can raise by way of selling shares is its authorized capital.

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Income and expenditure does not relate to a manufacturing concern. Income and expenditure is a statement prepared by non-profit making organizations like clubs, societies, churches, etc to show the sources of their income and how it was expended during a particular period. On the other hand, manufacturing concerns are profit-making organizations that are involved in the production of goods for sale. The balance sheet, profit and loss account, ledger account, and cash book are all accounting records that are used to prepare financial statements for manufacturing concerns.