WAEC SSCE - Financial Accounting - 2012

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A balance sheet shows the financial position of a company at a particular point in time. It lists all the assets owned by the company (both fixed and current) and all the liabilities owed by the company (both short-term and long-term). The difference between the total assets and the total liabilities is the company's equity, which represents the amount of money that would be left over if all the company's debts were paid off. Therefore, a balance sheet shows both the assets and liabilities of a company.

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The component of prime cost is the cost directly related to the production of goods or services. The prime cost consists of the direct cost of materials, labor cost, and other direct expenses incurred in the production process. Depreciation, royalty, and factory rent are not part of prime cost since they are indirect expenses. However, factory electricity is part of prime cost since it is a direct expense that is directly related to the production process.

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The concept that establishes the rule for the periodic recognition of revenue as soon as it is capable of objective measurement is "realization." This concept guides accountants on when to recognize revenue in financial statements. According to the realization concept, revenue should be recognized when it is earned, and it can be measured objectively. In simpler terms, it means that revenue should be recorded in the financial statements as soon as the seller has completed the delivery of goods or services to the buyer, and the buyer has an obligation to pay for them.

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The central processing unit (CPU) is the "brain" of a computer, responsible for executing instructions and performing calculations. It is made up of several components, including the arithmetic and logical unit (ALU), memory unit, input unit, and control unit. The input unit is responsible for receiving data and instructions from external sources, such as a keyboard or mouse. The memory unit stores data and instructions temporarily for processing, and the ALU performs arithmetic and logical operations on that data. The control unit directs the flow of data and instructions through the CPU. Therefore, the option that is not part of the CPU is the input unit since it is responsible for receiving data from external sources and not part of the internal components of the CPU.

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The objective of accounting information is to enable users to make decisions. Accounting information provides a means of communicating financial information to different users who are interested in making decisions about an entity. These users include investors, creditors, management, government agencies, and other stakeholders. By providing relevant and reliable financial information, accounting enables users to make informed decisions about an entity's financial position, performance, and prospects. This information can be used to evaluate the entity's ability to generate profits, manage risks, and achieve its strategic objectives.

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Partners whose liabilities are restricted to their financial contribution to the partnership in the event of winding up are called limited partners. This means that in case the partnership runs into debts or losses that exceed the amount of their investment, they will not be personally liable for the additional amount owed. Limited partnership is a type of partnership that has both limited and general partners. The limited partners are the ones whose liabilities are restricted while the general partners have unlimited liability. This arrangement is commonly used in businesses where investors provide capital but do not want to be involved in the day-to-day management of the business.

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The addition of prime cost and factory overhead results in the "cost of goods produced". Prime cost refers to the direct cost of materials and labor required for the production of a product, while factory overheads include indirect expenses like rent, utilities, and other costs associated with the production process. When these two costs are added together, they represent the total cost of producing a product. This cost is also referred to as the "cost of goods manufactured" or "cost of goods produced".

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A book of ordinary entry is a book in which all the day-to-day financial transactions of a business are initially recorded before they are posted to the appropriate accounts in the ledger. Out of the options given, the only book of ordinary entry is the sales journal, which is used to record all sales made on credit. Therefore, the sales journal is the correct answer. The ledger is not a book of ordinary entry, but rather a book where all the accounts of a business are maintained. The balance sheet is a financial statement that summarizes a company's assets, liabilities, and equity at a specific point in time. The bank statement is a record of all transactions that have occurred in a bank account over a particular period.

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The trading account is a statement that shows the gross profit or gross loss of a business over a particular period. It takes into account the direct expenses and direct incomes of the business. Out of the given options, "carriage inwards" can be considered a trading account item. Carriage inwards refers to the cost incurred by a business in bringing goods purchased into its premises or warehouse. This cost is a direct expense and is taken into account while calculating the cost of goods sold (COGS) and eventually the gross profit or loss of the business. Therefore, carriage inwards is a trading account item. On the other hand, discount allowed, discount received, and carriage outwards are not direct expenses or incomes of the business, and therefore, they are not considered trading account items. Discount allowed and discount received are usually recorded in the profit and loss account, while carriage outwards is a part of the statement of profit or loss.

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The profit and loss account is a financial statement that shows the revenues and expenses of a company over a period of time. It helps to determine the profitability of the business. Drawings, salaries, and bad debts are items that appear in the profit and loss account because they are expenses incurred in the course of generating revenue. Interest, on the other hand, is not an item in the profit and loss account because it represents the cost of borrowing money, which is a financing activity and not a revenue-generating activity. Therefore, the answer to the question is "interest".

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To calculate the recurrent expenditure, we need to add up all the expenses that occur repeatedly or regularly, such as salaries, wages, and purchase of drugs. From the table, we can see that the total amount spent on salaries and wages and the purchase of drugs is Le 80,000 + Le 55,000 = Le 135,000. Therefore, the answer is Le 135,000.

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Trade discounts are discounts given by suppliers to their customers for purchasing goods or services in bulk quantities. These discounts are usually based on the quantity of goods or services purchased and are intended to encourage large orders. In other words, trade discounts are given to customers who buy large quantities of products or services. It is an incentive given to encourage bulk purchases and help companies to reduce their inventory carrying costs. Although trade discounts can be based on other factors such as prompt payment or quick delivery, the primary purpose is to encourage bulk purchases.

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When a business is acquired, the value of its assets and liabilities are assessed. The purchase consideration, which is the amount paid to acquire the business, is compared with the total value of assets and liabilities. If the value of the assets is greater than the purchase consideration, the difference is considered as goodwill. Goodwill is an intangible asset that represents the value of the business beyond its physical assets. Since goodwill is an asset, the excess value of assets over the purchase consideration is credited to the goodwill account. Therefore, the correct answer is goodwill account.

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Working capital is the difference between current assets and current liabilities. Current assets are assets that can be converted to cash within one year, while current liabilities are liabilities that are due to be paid within one year. From the given balance sheet, the current assets are: stock (₦3,000), debtors (₦4,000), cash at bank (₦6,500), and cash in hand (₦1,500), which adds up to ₦15,000. The current liabilities are: creditors (₦8,000) and accrued expenses (₦4,000), which adds up to ₦12,000. Therefore, the working capital is current assets minus current liabilities, which is ₦15,000 - ₦12,000 = ₦3,000. Hence, the answer is ₦3,000.

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Personal income tax is not a revenue to a local government. Personal income tax is a tax on the income of individuals and is collected by the federal or state government, depending on the country. Local governments may have their own taxes and revenue sources, such as fines, licenses, and tenement rates, which are fees charged to property owners for the use of local services. Therefore, the correct answer is "personal income tax."

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The total assets of the business are Cash in hand + Cash at bank + Stock + Furniture and fittings = D1,440 + D2,440 + D2,500 + D2,200 = D8,580. The liability is the amount owed to creditors, which is D1,000. Therefore, the liability is D1,000. Option D is the correct answer.

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The process of entering transaction from one book to another is known as posting. In accounting, posting refers to transferring the information from the journal to the ledger. It involves recording the transaction in the ledger accounts in a way that is organized, clear, and easy to understand. This process helps to maintain accurate and up-to-date records of all the financial transactions of a business, making it easier to track and analyze the financial position of the business. Therefore, - posting is the correct answer.

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"Line partnership" is not an input device. Input devices are used to input data or commands into a computer system for processing. A "card reader" is a device that reads data from a magnetic stripe or barcode on a card, while a "paper top reader" is a device that reads data from a sheet of paper. An "alpha-numeric keyboard" is a device that allows a user to input text and numbers using a keyboard. However, "line partnership" is not an input device; it is not a device at all, but rather a business term referring to a type of partnership.

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The portion of authorized capital that has been allotted to subscribers is called "issued capital". Issued capital is the part of authorized capital that a company actually sells and issues to its shareholders, either in the form of common or preferred shares. It represents the amount of money that has been raised by the company through the sale of shares. The issued capital can be different from the paid-up capital, which is the actual amount of money that has been paid by the shareholders for their shares.

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The income and expenditure account is not prepared by a partnership. The income and expenditure account is a statement that shows the income earned and the expenses incurred by non-trading organizations such as clubs, societies, and charities. On the other hand, a partnership is a form of business organization that engages in trading activities, buying and selling goods or services for profit. Partnerships prepare trading accounts, which show the gross profit earned from trading activities, and profit and loss accounts, which show the net profit or loss of the partnership. Additionally, partnerships prepare profit and loss appropriation accounts, which show how the profits are shared among the partners.

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In this scenario, shares were issued at a price of ₦4, which is higher than the nominal value of the shares, which is ₦3. The difference between the issue price and the nominal value of the shares is ₦1. This difference is called a "premium." A premium is a payment made by investors for shares in excess of their nominal value. It represents the amount by which the issue price exceeds the nominal value of the shares. Therefore, the correct answer is "premium."

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A loss made on the disposal of a fixed asset means that the amount received from the sale of the asset is less than its book value (i.e., the amount at which the asset was recorded on the company's books). When such a loss is incurred, it is debited to the profit and loss account. This account is used to record all revenue and expenses, including gains and losses from the sale of assets, in order to calculate the net income or net loss for the company during a specific period of time. Therefore, the correct answer is "profit and loss account."

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The journal paper is not a source document. Source documents are documents that provide evidence of a transaction, such as a sale or purchase. They are used to record financial transactions in accounting records. Examples of source documents include sales invoices, debit notes, and credit notes. The journal paper, on the other hand, is a document used to record journal entries, which summarize and classify financial transactions. It is not a source document because it does not provide evidence of a specific transaction.

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The form of memorandum of association that is a statement of the purpose and objectives for which a company is formed is the object of the business. The object clause defines the scope of the company's activities and its goals. It outlines the company's primary objective and specifies the business that the company is authorized to carry out. This clause is included in the memorandum of association to protect the company's shareholders from the risks of the company pursuing activities that are beyond the scope of its authorized business. Therefore, the correct option is "object of the business."

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The term used to denote the capital of a not-for-profit making organization is "accumulated fund". Accumulated fund represents the surplus amount generated from the not-for-profit organization's activities, such as donations, grants, and profits from their operations. This fund is used to finance the organization's future projects, investments, and other initiatives that align with their mission and goals. It is similar to the retained earnings of a for-profit organization, as it reflects the organization's financial stability and its ability to sustain its activities in the long run.

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An underwriter for a company's share is paid a commission. When a company issues shares to the public, it often hires an underwriter to purchase all or a portion of those shares. The underwriter then resells the shares to the public for a higher price to earn a profit. In exchange for this service, the underwriter is paid a commission, which is a percentage of the total value of the shares they purchase. The commission serves as compensation for the underwriter's risk and effort in purchasing and reselling the shares.

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Administrative, selling, and distribution expenses in a manufacturing firm are recorded in the profit and loss account. The profit and loss account is a financial statement that shows the revenue, expenses, and net profit of a company during a specified period. These expenses are treated as indirect expenses and are subtracted from the revenue earned during the period to calculate the net profit or loss of the company. The manufacturing account, on the other hand, is used to record the direct costs of production, such as raw materials, labor, and factory overheads. The trading account shows the gross profit of a company by subtracting the cost of goods sold from the net sales revenue. Finally, the balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

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An increase in the provision for doubtful debts means that the company is setting aside more money to cover the possibility of customers not paying their debts. This increases the expenses of the company and decreases the net profit. Therefore, the answer is a decrease in the net profit.

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The sales ledger control account is a summary account in the general ledger of a business that records the total amount owed to the business by its customers. It is also known as the total debtors account because it represents the total amount of money owed to the business by its debtors (i.e., customers who have bought goods or services on credit). The sales ledger control account is used to monitor and reconcile the balances in the individual customer accounts maintained in the sales ledger, and is an important tool for managing the cash flow of a business.

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