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WAEC Financial Accounting 2001 Question 4

Question 4

Final Accounts of a Sole Trader

Which of the following is not an example of a fictitious asset?

  1. A.Raw materials stock
  2. B.Debit balance of Profit and Loss Account
  3. C.Preliminary expenses of a limited company
  4. D.Expenditure on incorporation carried forward.
Show the answer and explanation

Answer: A (Raw materials stock)

Explanation

Raw materials are real goods; fictitious assets are debit balances with no real value, like preliminary expenses or a debit profit and loss balance.