WAEC SSCE - Financial Accounting - 2013

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The basic assumption which underlines the preparation of periodic financial statements is known as accounting concepts. These concepts are a set of principles that guide the preparation and presentation of financial statements. They are essential to ensure that financial statements are reliable, comparable, and relevant to the users of the statements. There are several accounting concepts, including the going concern concept, the accruals concept, the consistency concept, the prudence concept, and the materiality concept. These concepts are used by accountants to ensure that financial statements are prepared in a consistent and reliable manner and that they provide useful information to the users of the statements.

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The Public Accounts Committee (PAC) is an organ of the parliamentary regime. It is a committee consisting of members of parliament who are tasked with examining the public accounts of government departments and agencies. The committee is responsible for ensuring that public funds are being used efficiently and effectively, and that government departments are following proper accounting procedures. The PAC is an important part of the parliamentary oversight process, and its work helps to ensure accountability and transparency in government finances.

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The going concern concept in accounting assumes that a company will continue its operations for the foreseeable future. However, if this concept is no longer applicable, fixed assets of the company are recorded at their revalued amount. This means that the fixed assets are recorded at their current fair market value as determined by an independent valuer, and not their original purchase cost less accumulated depreciation (i.e., net book value). The reason for this is that in the absence of the going concern assumption, the company will not be able to use its assets to generate future income, and therefore, their fair market value becomes more relevant. By recording the assets at their revalued amount, the financial statements provide a more accurate representation of the company's financial position in the absence of the going concern assumption.

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A trading account is prepared to disclose the gross profit or loss for the year. The purpose of a trading account is to determine the gross profit earned or loss incurred during the financial year. Gross profit is the difference between the net sales revenue and the cost of goods sold. The trading account takes into account all the revenues and costs directly associated with the production and sale of goods or services, such as the cost of raw materials, labor costs, and overhead expenses. The final figure in the trading account represents the gross profit or loss, which is then transferred to the profit and loss account to calculate the net profit or loss for the year.

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The capital of a sole trader is the amount of money invested by the owner into the business. Any changes to this capital can occur due to various transactions. For example, when equipment is purchased by cheque, it does not affect the capital directly, as it is considered a non-cash transaction. However, when the owner draws money out of the business by cheque, it reduces the capital because it is treated as a withdrawal of funds by the owner. Similarly, when the business makes a purchase on credit, it does not affect the capital, but it does increase the liabilities of the business. Therefore, the correct answer is "drawing by cheque" as it reduces the capital of the sole trader.

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In departmental accounts, administrative expenses are recorded in the profit and loss account. The profit and loss account is used to calculate the net profit or loss of a business over a specific period. It includes all the revenue and expenses incurred by the business, including the cost of goods sold, operating expenses, and any other income or expenses. Administrative expenses are expenses that are incurred in the general management of a business, such as salaries, rent, and utilities. These expenses are recorded in the profit and loss account, along with all other expenses and revenue, to determine the net profit or loss of the business.

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The process of detecting, tracing and eliminating errors in a computer program is called "debugging". Debugging is a crucial step in the software development process, as it helps to ensure that the program works as intended. Debugging involves identifying and correcting errors, such as syntax errors, logic errors, and runtime errors. This is usually done using debugging tools and techniques, such as print statements, breakpoints, and step-by-step execution. The ultimate goal of debugging is to produce a program that is error-free and runs smoothly.

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The business entity concept emphasizes that the business is a separate entity from its owners. According to this concept, a business has its own identity and its financial transactions should be recorded separately from the personal financial transactions of its owners. This means that the business's financial statements should show the financial position and performance of the business alone, without including any personal assets or liabilities of the owners. The business entity concept is a fundamental accounting principle that helps ensure accurate financial reporting and is also important for legal and tax purposes.

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The accounting principle that states that revenues should be recognized as soon as goods or services are passed on to the customer is the realization concept. This means that revenue should be recognized in the accounting records when a transaction has been completed, regardless of whether or not the payment has been received. This concept is also known as the revenue recognition principle and is a fundamental principle of accounting. It ensures that the financial statements accurately reflect the revenues earned by the business during a particular accounting period.

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The correct order of financial accounting process involves: i. Recording: This is the first step where transactions are recorded in a systematic and chronological order in the books of original entry like journal and subsidiary books. ii. Collecting: In this step, the recorded transactions are then posted into the respective ledger accounts in a classified manner. iii. Analyzing: After recording and collecting the transactions, they are then analyzed to determine the financial position and performance of the business. iv. Presenting: The last step is presenting the analyzed financial information in the form of financial statements such as the income statement, balance sheet, and cash flow statement. Therefore, the correct order of financial accounting process is iii, i, ii, and iv.

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The double entry principle states that every transaction in financial accounting has two equal and opposite effects, namely a debit entry and a corresponding credit entry. This means that for every debit entry made, there must be a corresponding credit entry, and vice versa. The principle is based on the idea that every financial transaction affects at least two accounts in a company's financial records. By following this principle, the accounting system ensures that the books are always in balance, and that the total amount of debits recorded must equal the total amount of credits recorded.

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Upon the dissolution of partnership business, the party to be settled first out of the proceeds realized is the secured creditors. Secured creditors are those who have a charge on the assets of the business as security for their loans or advances. They have a legal right to the assets charged and must be paid first before other creditors or partners. Unsecured creditors are those who do not have a charge on the assets of the business and are paid from the remaining assets after secured creditors have been settled. Partners' loans and advances are paid after all creditors have been settled, and partners' capital is paid last after all other claims have been settled.

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Trial balance is a statement that shows the total of debit and credit balances of accounts used in double-entry bookkeeping system. It is used to check the accuracy of the bookkeeping by ensuring that the total of debit balances is equal to the total of credit balances. Therefore, the option that is not a characteristic of trial balance is "it is an account". Trial balance is not an account, but rather a statement that shows the balances of all accounts in the ledger.

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Depreciation of factory equipment is not part of prime cost of production. Prime cost refers to the total cost of direct materials, direct wages, and direct expenses incurred in the production of a product. Depreciation is a non-cash expense and does not represent any actual expenditure of cash in the production process. Instead, it represents the wear and tear on the factory equipment over time. Therefore, it is not included in the calculation of prime cost.

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A recurrent expenditure is an expense that is incurred regularly and is needed to keep the operations of an organization running. Among the options provided, the purchase of drugs is a recurrent expenditure in public sector accounting since it is a regular expense needed for the day-to-day operation of the health sector. The purchase of vehicles and the construction of bore holes and buildings are considered capital expenditures since they are typically one-time expenses that are not incurred regularly.

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A stock account is a type of real account. Real accounts are accounts that relate to assets and liabilities, and they are used to keep track of the financial position of a business. Stock accounts are used to track the value of goods held for resale by a business. They are categorized as real accounts because they represent a tangible asset of the business. The balance of a stock account reflects the cost of the goods on hand, and it is adjusted when new stock is purchased or when goods are sold.

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At the end of a trading period, a business calculates its profit or loss for the period. The cost of goods sold represents the cost of goods that have been sold during the period, and it is calculated by subtracting the value of the ending inventory from the sum of the cost of goods available for sale. This cost of goods sold is debited to the trading account. On the other hand, the cost of services represents the cost of services that have been provided by the business during the period, and it is usually charged directly to the profit and loss account. This is because the cost of services is not related to the cost of goods sold, which is the focus of the trading account. Therefore, the cost of services is not debited to the trading account but rather to the profit and loss account.

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A statement showing a trader's financial position as at a particular date is a balance sheet. A balance sheet is a financial statement that presents a snapshot of a company's financial position at a specific point in time by showing its assets, liabilities, and equity. The purpose of the balance sheet is to give stakeholders an idea of the company's financial position and to provide insights into the company's liquidity, solvency, and financial strength. The balance sheet is a crucial document for investors, creditors, and management as it helps them make informed decisions about the company's financial position and future prospects.

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The process of detecting, tracing and eliminating errors in a computer program is called debugging. When a computer program is written, it may contain errors or bugs that prevent it from working properly. Debugging is the process of identifying these errors and removing them from the program. This is an important step in the development of software, as it ensures that the program is functioning as intended and producing the correct output. Debugging can be done manually by looking through the code line by line, or it can be automated using special software tools.

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A nominal account is an account that records all expenses, losses, incomes, and gains of a business. These accounts are temporary accounts that are closed at the end of an accounting period to determine the net profit or loss of the business. Out of the given options, the wages account is a nominal account since it records all the expenses incurred by a business on wages paid to its employees. The machinery account is a real account that records the value of fixed assets owned by a business, the drawings account is a personal account that records the withdrawals made by the owner from the business, and the debtors account is also a personal account that records the amount of money owed to the business by its customers.

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The excess of current assets over current liabilities is known as working capital. In simpler terms, working capital represents the funds available for the day-to-day operations of a business. It is calculated by subtracting the total current liabilities from the total current assets of a business. The resulting figure represents the amount of money that a company can use to finance its daily operations such as purchasing inventory, paying salaries, and meeting other short-term expenses. Therefore, the correct option is working capital.

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In a non-for-profit making organization, the cash book is referred to as "receipts and payments account". This is because, in such organizations, the primary purpose is not to make a profit, but rather to fulfill a specific mission or purpose. Therefore, the main financial statement used to record the organization's financial transactions is the receipts and payments account, which is a summary of all cash and bank transactions during a given period, including both receipts and payments. This statement shows the organization's total income and expenditure for that period, and it helps to determine whether the organization has a surplus or a deficit. It is an essential tool for monitoring the organization's cash flow and ensuring that there is sufficient cash to meet its obligations.

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When a business is purchased from a sole trader, the excess of the purchase price over the net assets is called goodwill. Goodwill represents the intangible value of the business, such as its reputation, customer base, and brand recognition, that cannot be directly attributed to its tangible assets. It is calculated as the difference between the purchase price of the business and the fair market value of its net assets, which include tangible assets such as property, plant, and equipment, as well as current assets and liabilities. Goodwill is recorded on the balance sheet as a non-current asset and is subject to periodic impairment testing.

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The capital employed refers to the total amount of capital that a company has used to generate its income or revenue. It is calculated by adding the total assets and the total liabilities of a company. In this case, the total assets of the company are ₦520,000 and the total current liabilities are ₦150,000. Therefore, the capital employed can be calculated as follows: Capital Employed = Total Assets - Current Liabilities Capital Employed = ₦520,000 - ₦150,000 Capital Employed = ₦370,000 Therefore, the capital employed in this scenario is ₦370,000.

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A low current ratio in business indicates that the business is unable to pay its bills on time. The current ratio is a measure of a company's ability to pay off its short-term obligations using its current assets. If a business has a low current ratio, it means that its current assets are not enough to cover its current liabilities, which could lead to problems in paying its bills and meeting its short-term obligations. In other words, a low current ratio indicates that the business may have difficulties in managing its cash flow and could potentially face financial difficulties.

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The process of detecting, tracing and eliminating errors in a computer program is called "debugging". When a program is written, it may contain errors or bugs that prevent it from functioning correctly. Debugging is the process of identifying and fixing these errors, allowing the program to run as intended. Debugging typically involves a combination of analyzing the program's code, using software tools to track down errors, and testing the program to ensure that the errors have been resolved.

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The set of instruments or programs that control the operation of a computer is called "software". Software includes all the programs and data used by a computer system to perform various tasks. It consists of two main types, namely system software and application software. System software is responsible for controlling and managing the computer hardware and providing basic functions such as operating system, device drivers, utilities, and system libraries. Application software, on the other hand, is designed for specific tasks and includes programs such as word processors, spreadsheets, graphics software, and database management systems.

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The current ratio is a financial ratio that compares a company's current assets to its current liabilities. It is used to measure a company's short-term liquidity or its ability to meet its short-term financial obligations. To calculate the current ratio, you divide current assets by current liabilities. In this case, the current assets is ₦280,000 and the current liabilities is ₦150,000. So, the current ratio is: Current Ratio = Current Assets / Current Liabilities Current Ratio = ₦280,000 / ₦150,000 Current Ratio = 1.87 : 1 Therefore, the answer is option A, which is 1.87 : 1.

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The minimum number of persons required to form a partnership business is 2. A partnership is a business structure where two or more people come together to carry out a business with a view to making a profit. The partners pool their resources, skills, and expertise to achieve their business objectives. Partnerships can be formed with a written or verbal agreement, but it is advisable to have a written agreement that outlines the terms and conditions of the partnership. The partnership agreement should include the details of the partners, their contributions to the business, their share of profits and losses, and the management and decision-making process of the partnership.

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The lodgement of business cash into the business bank account is an example of a contra entry. A contra entry is a type of accounting entry where two opposite transactions are recorded in order to make adjustments to the ledger accounts. In this case, the lodgement of cash into the business bank account is an increase in the bank account balance, and a corresponding decrease in the cash account balance. These two opposite transactions are recorded in the ledger accounts to accurately reflect the change in the financial position of the business. It's important to note that a contra entry is not the same as a reversal entry, which is an accounting entry made to reverse a previously recorded transaction.

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To calculate the returns on capital employed, we need to divide the net profit by the total capital employed, which is the total assets minus the current liabilities. Total capital employed = Total assets - Current liabilities Total capital employed = Le 520,000 - Le 150,000 = Le 370,000 Returns on capital employed = (Net profit / Total capital employed) x 100% Returns on capital employed = (Le 60,000 / Le 370,000) x 100% ≈ 16.22% Therefore, the returns on capital employed is approximately 16.2%. Answer corresponds to this value.

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A dishonored cheque is a check that cannot be processed because the account holder who wrote the check did not have enough funds or their account has been closed. When a cheque is dishonored by the bank, it is considered as an unpaid cheque. In accounting, the dishonored cheque is debited in the cash book and credited in the bank book to show that the amount of the check cannot be withdrawn or deposited. This entry is necessary to update the accounting records of the business and to ensure that the cash book balance and bank book balance are in agreement.

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The option that relates to the essence of partnership is "form a business for profit". Partnership is a form of business organization where two or more individuals come together with the aim of making a profit. The essence of partnership is to create a business where the partners pool their resources, skills, and expertise together to achieve a common goal of making a profit. In a partnership, the profits and losses of the business are shared among the partners based on the agreed-upon terms. Therefore, the main purpose of forming a partnership is to establish and operate a business for profit.