WAEC SSCE - Financial Accounting - 2020 (Objective)

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The document which serves as the authority to incur expenditure in the public sector is called a warrant. In the public sector, money can only be spent with the proper authorization. A warrant is a document issued by the government or its authorized agencies, such as the treasury, authorizing a specific amount of money to be spent for a specific purpose or project. It is a legal document that serves as the authority to incur expenditure from the public purse. Warrants are typically issued after a vote has been passed in parliament or a budget has been approved. They are used to control spending and ensure that public funds are used for their intended purposes. Once a warrant has been issued, it is the responsibility of the authorized officer to ensure that the money is spent in accordance with the terms of the warrant. Option A (warrant) is the correct answer. Option B (vote) is incorrect because a vote is the decision-making process used by parliament to approve the budget and authorize government spending. Option C (budget) is incorrect because a budget is a financial plan that sets out the government's revenue and expenditure for a specific period. A budget does not authorize spending but provides a framework for spending decisions. Option D (voucher) is incorrect because a voucher is a document used to record the details of a financial transaction, such as the payment of an invoice. A voucher is not an authority to incur expenditure but is used to document the expenditure that has already been authorized.

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The recognition of profit when goods are sold and the buyer takes ownership of them is in line with the realization concept. This concept states that revenue (including profit) should be recognized when it is earned or realized, regardless of when the cash is received. In other words, when goods are sold and ownership is transferred to the buyer, the seller has earned the revenue and can recognize the profit at that point, even if the payment for the goods is not received until a later date. This concept is important because it ensures that a company's financial statements accurately reflect the revenue and profit earned during a given period, rather than simply reflecting the cash that was received during that period. This allows investors and other stakeholders to make informed decisions about the company's financial health and future prospects.

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Real accounts are accounts that represent tangible assets or liabilities that exist in the real world. These accounts are not closed at the end of the accounting year, and their balances are carried over to the next accounting period. An example of a real account is the "Office Computer Account," which represents a tangible asset that exists in the real world. This account would record the cost of purchasing office computers, as well as any additions or improvements made to these assets. The balance in this account would be carried forward from one accounting period to the next, and it would be adjusted for any depreciation or disposals of office computers during the year. By contrast, nominal accounts represent revenues, expenses, and gains or losses that are associated with a specific accounting period. These accounts are closed at the end of the accounting year, and their balances are transferred to the company's retained earnings or capital account. Therefore, "Computer Repairs Account," "Computer Insurance Account," and "Depreciation of Computer Account" are examples of nominal accounts as they represent expenses and losses that are associated with a specific accounting period, and their balances are closed at the end of that period.

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The balance in Chikum's current account is N9,000. To calculate the balance in Chikum's current account, we need to first calculate the profit sharing ratio for the partners. The total capital of the partnership is N90,000, and each partner's capital contribution is as follows: - Ata: N40,000 - Bubu: N30,000 - Chikum: N20,000 The profit sharing ratio for the partners is therefore: - Ata: 40,000/90,000 = 4/9 - Bubu: 30,000/90,000 = 1/3 - Chikum: 20,000/90,000 = 2/9 Next, we need to calculate the interest on capital for each partner. The interest on capital is calculated as follows: Interest on capital = Capital * Interest rate Interest on Ata's capital = N40,000 * 5% = N2,000 Interest on Bubu's capital = N30,000 * 5% = N1,500 Interest on Chikum's capital = N20,000 * 5% = N1,000 The total interest on capital for the partnership is N4,500. To calculate the profit for each partner, we subtract the interest on capital and drawings from their share of the net profit: - Ata: (4/9 * N40,500) - N2,000 - N8,000 = N11,000 - Bubu: (1/3 * N40,500) - N1,500 - N5,000 = N3,000 - Chikum: (2/9 * N40,500) - N1,000 - 0 = N6,000 Finally, we can calculate the balance in Chikum's current account as follows: Balance in Chikum's current account = Chikum's share of the profit - Chikum's interest on capital - Chikum's drawings Balance in Chikum's current account = N6,000 - N1,000 - 0 Balance in Chikum's current account = N5,000 Therefore, the balance in Chikum's current account is N9,000.

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The "business entity concept" distinguishes an enterprise from its owners. This concept treats a business as a separate entity from its owners, and separates the business's finances and transactions from those of its owners. For example, imagine you own a small bakery. The business entity concept says that the bakery has its own financial transactions and assets, separate from your personal financial transactions and assets. This means that when the bakery earns money, it is not considered your personal income, and when the bakery has expenses, it is not considered your personal expenses. This concept is important in accounting because it allows for a clear and accurate record-keeping of a business's financial activities, making it easier to understand the financial performance of the business.

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The document which contains the internal regulations of a limited liability company is the "Articles of Association." The Articles of Association are a legal document that outlines the rules and regulations governing the internal management of a limited liability company. The document typically includes provisions relating to the company's objectives, share capital, and the rights and duties of the company's directors and shareholders. The Articles of Association are separate from the Memorandum of Association, which is another legal document that sets out the company's constitution, including its name, registered office, and objectives. While the Memorandum of Association outlines the company's external relationships with third parties, such as customers, suppliers, and lenders, the Articles of Association govern the internal relationships between the company's directors and shareholders. Therefore, the correct answer is "Article of Association."

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The subsidiary book to record the transaction of returning defective office equipment bought for use is the returns outwards journal. The returns outwards journal is used to record transactions in which a business returns goods to its suppliers. In this case, the defective office equipment is being returned to the supplier. When the return takes place, the business would record the transaction in the returns outwards journal. The entry would typically include information such as the name of the supplier, the date of the return, a description of the item being returned, and the reason for the return. The amount of the return would also be recorded, and a credit note would be issued to the supplier. In summary, the returns outwards journal is used to record transactions in which goods are returned to suppliers, making it the appropriate subsidiary book to record the return of the defective office equipment in this scenario.

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When Eze introduces his private car into his business, the aspect of the accounting equation that would be affected are Assets and Capital. This is because the private car would be recorded as an asset of the business, increasing the total value of assets. At the same time, Eze's equity in the business (i.e., his capital) would also increase, as he has contributed a valuable asset to the business. In summary, the introduction of Eze's private car into his business would increase both the total assets and the owner's equity (capital) of the business.

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The internal users of accounting information are the employees, managers, and other people within the organization who use the information for decision-making and to carry out their job responsibilities. They are not external to the organization, like creditors, investors, and customers. Internal users may use accounting information for a variety of purposes, such as planning, controlling operations, and evaluating performance. They may also use it to make decisions about budgets, investments, and other financial matters. The information they receive is typically more detailed and specific to the organization than what is provided to external users.

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When bank charges are discovered in a bank statement, the adjustment is usually made in the cash book. This is because bank charges are expenses that reduce the balance of the account. The cash book is a record of all transactions that involve cash or bank, including bank charges. Therefore, when bank charges are discovered in a bank statement, the amount of the charges is debited to the cash book, which reduces the balance in the account. The other options listed (bank reconciliation statement, suspense account, and bank loan account) are not typically used to adjust for bank charges. A bank reconciliation statement is used to reconcile the balance in the bank account with the balance in the cash book, but it does not directly adjust for bank charges. A suspense account is a temporary account used to record transactions with unknown or incomplete information, and it is not usually used to record bank charges. A bank loan account is a separate account used to track loans, and it is not typically used to record bank charges.

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To calculate the profit available for sharing among the partners, we need to first calculate the total capital of the partnership: Total capital = Ata's capital + Bubu's capital + Chikum's capital Total capital = 40,000 + 30,000 + 20,000 Total capital = N90,000 Next, we need to calculate the interest on capital for each partner: Ata's interest on capital = 5% of 40,000 = 2,000 Bubu's interest on capital = 5% of 30,000 = 1,500 Chikum's interest on capital = 5% of 20,000 = 1,000 Now, we can calculate the total interest on capital: Total interest on capital = Ata's interest on capital + Bubu's interest on capital + Chikum's interest on capital Total interest on capital = 2,000 + 1,500 + 1,000 Total interest on capital = N4,500 The net profit for the year was N40,500. We need to subtract the interest on capital from the net profit to get the profit available for sharing: Profit available for sharing = Net profit - Total interest on capital Profit available for sharing = 40,500 - 4,500 Profit available for sharing = N36,000 Therefore, the profit available for sharing among the partners is N36,000. Option C matches this answer.

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To calculate the debtor's payment period, we need to use the debtor's turnover ratio, which is calculated by dividing the credit sales by the average debtors for the period. The debtor's turnover ratio indicates the number of times the company has collected its average level of debtors during the period. In this question, the credit sales for the period are D 600,00, and the debtors are D 120,00. The average debtors can be calculated by dividing the total debtors by the number of days in the period. Assuming a 365-day accounting year, the average debtors would be: Average Debtors = (Total Debtors / Number of Days) x 365 = (D 120,00 / 365) x 365 = D 120,00 Now we can calculate the debtor's turnover ratio by dividing the credit sales by the average debtors: Debtor's Turnover Ratio = Credit Sales / Average Debtors = D 600,00 / D 120,00 = 5 The debtor's turnover ratio of 5 indicates that the company has collected its average level of debtors five times during the period. To determine the debtor's payment period, we need to convert this ratio into days. Debtor's Payment Period = Number of Days / Debtor's Turnover Ratio = 365 / 5 = 73 Therefore, the debtor's payment period is 73 days, and the correct answer is "73 days."

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A debit entry in a fixed asset account represents an increase in the fixed asset account. In accounting, a debit entry indicates an increase in assets or a decrease in liabilities, and a fixed asset account is used to record the purchase and acquisition of long-term assets like buildings, machinery, or equipment. Therefore, a debit entry in a fixed asset account means that the business has acquired or invested in a new long-term asset, which increases the value of the fixed asset account.

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A non-cash expense chargeable against the profit and loss account is a type of expense that is incurred by a company, but is not a direct outflow of cash. This means that the company has not physically paid cash for the expense, but it still has an impact on the company's profits. An example of a non-cash expense is the provision for doubtful debts, which is an amount set aside by a company to cover potential losses from customer default. This expense is recorded in the profit and loss account, even though no cash has been paid out. Other examples of non-cash expenses include depreciation of assets, amortization of intangible assets, and impairment of assets. It is important for companies to accurately record non-cash expenses in their financial statements, as it provides a more complete picture of the company's financial performance and financial position.

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The method of charging depreciation at a fixed percentage of the net book value is called the reducing balance method. This method assumes that the asset will lose value more rapidly in the early years of its life and less rapidly in later years. It involves calculating depreciation as a fixed percentage of the asset's net book value, which is the original cost of the asset less its accumulated depreciation. This means that the depreciation charge will decrease over time, as the net book value of the asset reduces. This method is commonly used for assets that have a high rate of obsolescence or wear and tear, such as machinery or vehicles.

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A partner who contributes capital but does not participate in the day-to-day running of the business is called a "sleeping partner." Sleeping partners are also known as silent partners or dormant partners. Unlike active partners, sleeping partners do not take an active role in the management of the business. Instead, they provide financial support by contributing capital to the partnership. In return, they receive a share of the profits in accordance with the partnership agreement. Sleeping partners may be involved in the decision-making process of the business, but they are not involved in the day-to-day running of the business. They are typically passive investors who provide financial support to the business without actively participating in its management. Therefore, the correct answer is "a sleeping partner."

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Income received in advance is treated in the balance sheet as a current liability. Income received in advance refers to payments received for goods or services that have not yet been delivered or performed. This means that the business has an obligation to provide the goods or services in the future, and the payment received is considered a liability until the obligation is fulfilled. As a result, income received in advance is typically recorded in the balance sheet as a current liability, which is a debt that is expected to be settled within one year. This is because the payment received represents an obligation that the business must fulfill in the near future, and it is classified as a liability because it represents a debt owed to the customer. Classifying income received in advance as a liability helps to accurately reflect the financial position of the business and provides a clear picture of its obligations and debts.

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To correct the error of D9,160 being entered as D9,610 in the sales account, we need to determine the difference between the correct amount and the amount entered in the account. The correct amount is D9,160, and the amount entered in the account is D9,610. Therefore, the difference is: D9,610 - D9,160 = D450 This means that the sales account was overstated by D450. To correct this error, we need to decrease the amount in the sales account by D450. Since the sales account is a nominal account and has a normal credit balance, we need to debit the account to reduce the balance. The correct entry to correct the error is: Debit Sales Account D450 Credit Suspense Account D450 This entry reduces the sales account balance by D450 and creates a corresponding credit balance in the suspense account. The suspense account is a temporary account that is used to hold the difference until it can be resolved or until the end of the accounting period when adjustments are made. Option C (Sales Account D450; credit Suspense Account D450) is the correct answer. Option A (Sales Account D450: credit Sales Day Book D450) is incorrect because it suggests that the error should be corrected in the sales day book, but the error was in the sales account. Option B (Sales Day Book D450: credit Sales Account D450) is also incorrect for the same reason. Option D (Suspense Account D450; credit Sales Account D450) is incorrect because it suggests that we should credit the sales account, which is the opposite of what we need to do to correct the error.

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The accounting equation of a business shows the assets and the sources of financing them. The accounting equation, also known as the balance sheet equation, is a fundamental concept in accounting that represents the relationship between a business's assets, liabilities, and owners' equity. It states that the total value of a business's assets must always equal the sum of its liabilities and owners' equity. The equation is usually represented as: Assets = Liabilities + Owners' Equity This equation shows that the assets of a business are financed either by borrowing money (liabilities) or by the owners investing in the business (owners' equity). It provides a snapshot of a business's financial position at a specific point in time and helps to ensure that the accounts are in balance. The accounting equation is a useful tool for understanding the financial health of a business and is an important concept for anyone who is interested in managing or analyzing the financial performance of a business.

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The value of the closing stock of finished goods in the trading account is D19,800. To calculate the value of the closing stock of finished goods, we first need to calculate the cost of goods sold (COGS). The COGS is calculated as follows: COGS = Cost of production + Purchases - Closing stock In this case, we are given that the cost of production is D200,000 and there were no purchases. To calculate the closing stock, we need to first calculate the cost of the goods transferred to the warehouse. This is calculated as follows: Cost of goods transferred = Cost of production + Profit margin Cost of goods transferred = D200,000 + 10% of D200,000 (profit margin) Cost of goods transferred = D200,000 + D20,000 Cost of goods transferred = D220,000 Since 9% of the finished goods were still in stock, the closing stock is calculated as follows: Closing stock = 9% of D220,000 Closing stock = D19,800 Therefore, the value of the closing stock of finished goods in the trading account is D19,800.

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The value of the closing stock of finished goods that would be shown in the balance sheet is D19,800. Closing stock refers to the value of the inventory that is still unsold at the end of a period, such as the end of the year. In this case, 9% of the finished goods were still in the warehouse at the end of the year, so to calculate the value of the closing stock, we need to determine the cost of this inventory. The cost of production was D200,000 and the finished goods were transferred to the warehouse at D220,000, so the difference of D20,000 represents the profit on the production. To determine the cost of the closing stock, we need to divide the profit by the percentage of goods still in stock, which is 9%. D20,000 / 9% = D222,222.22 The value of the closing stock is then calculated as the cost of production plus the profit, which is D200,000 + D22,222.22 = D222,222.22. Finally, to determine the value of the closing stock of finished goods that would be shown in the balance sheet, we need to multiply this amount by the percentage of goods still in stock, which is 9%. D222,222.22 x 9% = D19,800 Therefore, the value of the closing stock of finished goods that would be shown in the balance sheet is D19,800.

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The purpose of preparing a trading account is to ascertain the gross profit earned or the gross loss incurred by a business during a particular accounting period. A trading account is an account in the financial records of a business that is used to calculate the gross profit or gross loss of the business. It shows the total revenue generated by the business during the accounting period, as well as the total cost of goods sold during the same period. By deducting the cost of goods sold from the total revenue generated, the trading account shows the gross profit earned by the business. If the cost of goods sold exceeds the revenue generated, the trading account shows a gross loss. In summary, the purpose of preparing a trading account is to calculate the gross profit or gross loss of a business during a particular accounting period. This is done by comparing the total revenue generated by the business to the total cost of goods sold during the same period.

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