WAEC SSCE - Financial Accounting - 2015

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The accounting concept that allows the cost of kitchen cutlery to be expensed, even though it will be used for more than one year is materiality. Materiality concept refers to the principle that financial information should only include items that are significant or material enough to influence the decisions of users of the financial statements. In the case of kitchen cutlery, although they will be used for more than one year, their cost is not significant enough to impact the overall financial statements, and therefore can be expensed in the current year rather than being capitalized and depreciated over their useful life.

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The accounting concept that states that a firm's financial affairs must be separated from that of the owner's private transactions is the "business entity" concept. This concept recognizes that the business is a separate entity from its owners and requires the financial transactions of the business to be recorded separately from the personal transactions of the owners. This means that the business must have its own set of accounts, which are separate from the personal accounts of the owners. The concept is important in ensuring that the financial statements of the business reflect its true financial position and performance, without being affected by the personal transactions of the owners.

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In preparing a profit and loss account, a decrease in provision for doubtful debts is treated as income. This is because provision for doubtful debts is a provision made by a business to account for the possibility that some of its customers may not pay their debts. When the business determines that the likelihood of customers not paying their debts has decreased, it can decrease the provision. This decrease represents an increase in the amount of money that the business expects to collect from its customers, and therefore, is treated as income in the profit and loss account.

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Assets acquired are recorded by debiting Asset Account and crediting Cash Account. This means that the Asset Account will increase while the Cash Account will decrease. When a company acquires an asset, it uses cash or a similar form of payment to make the purchase. Therefore, the Cash Account is credited because there is a decrease in cash, while the Asset Account is debited because there is an increase in assets. This helps to maintain the accounting equation, which states that assets must always equal liabilities plus equity. By debiting the Asset Account and crediting the Cash Account, the transaction is properly recorded in the company's books.

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The total of the returns outwards journal is a summary of all the returns made by the business to its suppliers or vendors. To record these returns, the returns outwards journal is used, and all the entries made in the journal are posted to the returns outwards account. As the returns outwards account is a nominal account, it has a credit balance. Therefore, the total of the returns outwards journal is posted to the credit side of the returns outwards account.

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The accounting entry to correct sales day book overcast is to debit sales account and credit suspense account. This is because when the sales day book is overcast, it means that the total sales for the period have been overstated. To correct this error, the amount of the overcast needs to be deducted from the sales account, which is credited with the corrected amount. At the same time, the overcast amount is recorded in the suspense account, which is used to temporarily record any errors until they are corrected. Once the actual amount is determined, the suspense account is debited and the appropriate account is credited to complete the correction.

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The accounting ledger for goods sold on credit are debit to the debtors account and credit to the sales account. When goods are sold on credit, it means the payment will be received in the future. So, the person who purchased the goods becomes the debtor of the business until the payment is made. Therefore, the business records the sale in the sales account as a credit entry, and records the increase in the debtor's account as a debit entry. This helps in maintaining accurate records of the amount of goods sold on credit and the amount that is outstanding, which helps in managing the business's cash flow and collecting the payments on time.

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The process of using sales ledger balance to cancel off purchases ledger balance is called set off. Set off is a process where the outstanding balance of two parties is offset against each other. In accounting, set off is commonly used to cancel out the balance in the sales ledger with the balance in the purchases ledger. This is done to simplify the settlement process between two parties and reduce the amount of money that needs to be exchanged. For example, if a customer owes a business money for goods purchased on credit and the same customer has also supplied goods to the business on credit, the two balances can be set off against each other, resulting in a reduced amount owed by one party to the other.

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The quality of the labor force is not revealed by a firm's accounting records. Accounting records are concerned with the financial transactions of a business entity and do not cover qualitative aspects of the business such as the quality of labor force, employee motivation, or customer satisfaction. While accounting records can provide some insights into a firm's profitability, financial health, and asset value, other non-financial aspects of the business require alternative sources of information such as surveys, feedback from customers, and employee performance evaluations. Therefore, the option "Quality of labor force" is the answer to the question as it is not revealed by a firm's accounting records.

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Market tolls is a source of revenue for a local government. Market tolls refer to the fees charged for the use of local markets. These fees are usually collected by local government authorities to generate revenue to fund local government projects and services such as road maintenance, public schools, health clinics, and waste disposal among others. Therefore, among the given options, market tolls are the only source of revenue that a local government can generate.

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The quality of output information depends on the quality of input data. In other words, the accuracy, completeness, and relevance of the information being inputted into a system will ultimately determine the quality of the information that is produced as output. The quality of input data can be affected by factors such as the skills and training of the personnel entering the data, the accuracy of the tools and instruments used to collect the data, and the consistency and completeness of the data being collected. Therefore, it is essential to ensure that the input data is of high quality to produce accurate and reliable output information.

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Interest on partners' capital is found in the "Profit and Loss Appropriation" account. This account is used to distribute the profit or loss of the business among the partners based on the agreed profit-sharing ratio. The interest on partners' capital is a charge against the profits of the business and is calculated on the balance of each partner's capital account at an agreed rate. The interest on partners' capital is debited to the Profit and Loss Appropriation account, and the balance of this account is then distributed among the partners according to their respective profit-sharing ratios.

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The person who has applied to purchase shares in a company is referred to as a subscriber. When a company is newly formed or issues new shares, it offers those shares to the public for purchase. Those who are interested in buying those shares need to fill out an application form and submit it to the company along with the required payment. This person is called a subscriber because they are subscribing to or agreeing to purchase a certain number of shares at a specified price. Once the company has received all the applications and payments, it will allot the shares to the subscribers, who then become shareholders in the company.

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The instrument used to release fund which the minister of finance has earlier withheld is a "Supplementary Warrant". A supplementary warrant is issued when additional funds are required for a particular purpose beyond the amount originally allocated in the budget. It enables the Minister of Finance to authorize additional expenditure without having to go through the process of amending the budget. The supplementary warrant is used to release funds that have previously been withheld by the minister of finance.

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The document which sets out the internal arrangement for the proper management of a company is the "Articles of Association". It is a legal document that outlines the rules, regulations, and procedures for the internal governance of a company. It defines the roles and responsibilities of the company's directors, the procedures for appointing and removing directors, the company's voting rights, and procedures for holding meetings. The articles of association are an important component of a company's constitution, and they are binding on both the company and its shareholders.

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A trial balance is a list of balances in the books of a business. It is a statement that shows all the ledger account balances (both debit and credit) of a business in order to check that the total debits are equal to the total credits. The purpose of a trial balance is to detect any errors or omissions made in the double-entry accounting system before preparing the financial statements. Therefore, the correct answer is: "It is a list of balances in the books".

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When goods are stolen at a branch, it results in a loss for the company. The appropriate account to debit in this case would be the "Defalcations account" or "Losses account". This account is used to record losses resulting from theft, fraud, or other types of losses that occur within the business. By debiting this account, the company is able to recognize and record the loss in its books of accounts.

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The Discount Received account is a nominal account. Nominal accounts are used to record revenues, expenses, gains, and losses. The Discount Received account is used to record the discounts received by a business from its suppliers for prompt payment of its accounts payable. The balance of the Discount Received account is added to the balance of other revenue accounts on the credit side of the profit and loss account to determine the net profit or loss for the accounting period. Therefore, the Discount Received account plays a key role in determining the financial performance of a business.

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The answer is "Purchases account." A book of original entry is a book where business transactions are first recorded before being transferred to the ledger. The purpose of these books is to provide a chronological record of all transactions. The other options listed are all books of original entry. The sales journal is where all credit sales are recorded, the cash account is where all cash receipts and payments are recorded, and the return inwards journal is where all goods returned by customers are recorded. A "Purchases account" is not a book of original entry, but rather a ledger account used to record all purchases made by the business.

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Excel is a spreadsheet application. It is a software program developed by Microsoft that is used to create, organize, and manipulate data in a tabular format. With Excel, users can create and edit spreadsheets that can perform calculations, generate charts and graphs, and analyze data. It is widely used in business, finance, and accounting for tasks such as budgeting, financial analysis, and forecasting.

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The cash basis of accounting is a method of recording transactions in which revenue and expenses are only recognized when cash is received or paid out, respectively. Therefore, only cash transactions are recorded, and other items such as accruals, prepayments, debtors, creditors, and fixed assets are not considered. This means that the answer to the question is: - Accruals and prepayments are not considered

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The expense that is allocated according to the floor area is "Rent and Rates". Rent and Rates is a common expense for businesses that rent or own commercial space. This expense is usually allocated based on the amount of floor space that the business occupies. The larger the floor space, the higher the rent and rates expense. This is because the amount of space that a business occupies is a key factor in determining the cost of rent and rates for that space. Wages and Salaries, Canteen Expenses, and Discount allowed are not allocated based on the floor area, as they are either related to the employees or the sales of the business.

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When goods are returned to a supplier, it means that the buyer is returning the goods to the supplier due to various reasons, such as defects or incorrect delivery. Therefore, the accounting entry for this transaction should reflect the change in the buyer's account and the supplier's account. The buyer's account should be credited and the supplier's account should be debited. In this case, the correct option is "Credited to returns outwards account."

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Goodwill is recognized in partnership accounts when a new partner is admitted. Goodwill is an intangible asset that represents the value of a business's reputation, brand name, customer relationships, and other intangible factors that contribute to the business's success. When a new partner is admitted into a partnership, they bring with them capital, skills, and other resources that contribute to the growth of the business. As a result, the value of the business increases, and the existing partners recognize the increase in the value of the business as goodwill. Goodwill is usually recorded in the books of accounts and is distributed among the partners based on their profit-sharing ratio.

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The expression that expresses the fundamental accounting equation is: Assets - liabilities = Capital This equation is the foundation of double-entry accounting and reflects the fundamental principle that a company's assets must be equal to the sum of its liabilities and capital. It means that the total value of the assets owned by a company must be equal to the sum of the amount owed to its creditors and the amount invested by its owners or shareholders. If this equation is not in balance, it may indicate errors in accounting records or problems with the company's financial position.

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Unpresented cheques are cheques that have been recorded in the cash book but have not yet been presented for payment to the bank. This means that the bank has not yet deducted the amount of the cheque from the account balance of the person or company who wrote the cheque. Unpresented cheques can cause a difference between the balance shown in the bank statement and the balance shown in the cash book, known as a bank reconciliation item. It is important to identify and reconcile unpresented cheques to ensure accurate accounting records and prevent errors or discrepancies.

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In the balance sheet of a social club, subscription owing is treated as a current asset. This is because subscription owing represents the amount of money that the club's members have agreed to pay in the future for the use of the club's facilities or services. Since the club has a legal right to receive these payments, subscription owing is treated as an asset in the balance sheet. Additionally, since these payments are expected to be received within a short period of time, subscription owing is classified as a current asset.

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Goodwill is an intangible asset that arises when one business acquires another business. It represents the excess of the purchase price over the net value of the assets acquired. In this case, Mr White acquired Mr Black's business for GH¢ 410,000, while the total assets of the business were GH¢ 670,000 and liabilities amounted to GH¢ 320,000. Therefore, the goodwill in this transaction is GH¢ (410,000 - 350,000) = GH¢ 60,000. To record the goodwill in the books, the double entry would be to debit the goodwill account (an asset account) and credit the purchase of business account (a liability account) for the same amount of GH¢ 60,000. This entry reflects the fact that the goodwill represents an asset for Mr White's business, while at the same time acknowledging that the purchase of the business has increased his liabilities. Therefore, the correct answer is: Goodwill account and credit purchase of business account.

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The accounting concept that assumes that a business will continue operating for an indefinite period is called "Going concern." This concept assumes that the business will not be liquidated in the foreseeable future and that its operations will continue for the foreseeable future. Therefore, financial statements are prepared with this assumption in mind, and assets and liabilities are valued based on their expected future usefulness and obligation period, rather than their current market value. This concept is important for the financial stability of a business and its ability to make long-term decisions.

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To determine the amount paid for goodwill, we need to calculate the net assets acquired by Mr. White. Net assets = Total assets - Total liabilities Net assets = GH¢ 670,000 - GH¢ 320,000 Net assets = GH¢ 350,000 The purchase price of GH¢ 410,000 minus the net assets of GH¢ 350,000 gives the goodwill purchased: Goodwill = Purchase price - Net assets Goodwill = GH¢ 410,000 - GH¢ 350,000 Goodwill = GH¢ 60,000 Therefore, the amount paid for goodwill is GH¢ 60,000.