56 questions. Try each one, then open the answer to check yourself and read the explanation.
The Sales Day Book is used to record
Answer: B (credit sales)
The sales day book lists credit sales only.
The principle of double entry book-keeping states that every
Answer: A (debit entry must have a corresponding credit entry.)
Each debit has an equal and opposite credit.
Which of the following is used to record the purchase of fixed asset on credit?
Answer: B (Journal proper)
Credit purchases of fixed assets go in the journal proper; the purchases journal is for goods for resale.
Which of the following is both a subsidiary book and a ledger?
Answer: D (Cash book.)
The cash book is a book of original entry and also the cash and bank accounts of the ledger.
Which of the following is not a source document?
Answer: D (Bank note)
A bank note is money, not a document evidencing a transaction.
Pending the location of an error, the difference disclosed in a trial balance is temporarily treated in
Answer: A (Suspense Account)
The difference is held in a suspense account.
Which of the following items is not shown in the Trial Balance?
Answer: A (Closing stock value)
Closing stock is found after the trial balance and is normally given as a note, not in it.
Rent prepaid 1/01/2003 N600.00
Rent paid 31/12/2003 N3,000.00
Rent prepaid 31/12/2003 N400.00
Rent for 2003 amounted to
Answer: B (N3,200)
600 + 3,000 − 400 = N3,200.
Unpresented cheques N85,305
Balance as per bank statement N206,865
Balance as per cash book N144,495
Uncredited cheques amount to
Answer: D (N22,935)
206,865 − 85,305 + uncredited = 144,495, so uncredited cheques = N22,935.
The amount set aside out of profit for a specific purpose is
Answer: A (provision)
In the WAEC syllabus a provision is an amount set aside out of profit for a specific purpose, such as a known loss or liability (e.g. bad debts, depreciation); a general reserve is kept back for no specific purpose.
Which of the following terms describes the provision made for the loss in the value of an asset that has a legal life span?
Answer: D (Amortization)
Writing off assets with a fixed legal life, such as leases and patents, is called amortisation.
Which of the following is correct about cost of goods sold?
Answer: A (Opening stock + purchases - closing stock)
Cost of goods sold = opening stock + purchases − closing stock.
Net debtors is
Answer: A (debtors less provision for bad debts)
Net debtors = debtors − provision for bad debts.
The balance on the Sales Ledger Control Account at the end of the accounting year represents total
Answer: A (trade debtors at the end of the year)
Its closing balance is the total owed by customers.
The accounting concept which allows the use of a particular method for treating a transaction for a reasonable number of years is
Answer: A (consistency)
Consistency requires the same method year after year.
A decrease in the provision for doubtful debts results in
Answer: A (an increase in net profit)
The reduction is credited to profit and loss, raising net profit.
Purchases N2,000
Opening stock N900
Closing stock N300
Sales N3,850
Gross profit is
Answer: B (N1,250)
Cost of sales = 900 + 2,000 − 300 = 2,600; 3,850 − 2,600 = N1,250.
Purchases N2,000
Opening stock N900
Closing stock N300
Sales N3,850
The cost of goods available is
Answer: B (N2,900)
900 + 2,000 = N2,900.
Which of the following is not a debit item in the partnership profit and loss appropriation account?
Answer: A (Interest on partners drawings)
Interest on drawings is income to the firm, so it is credited.
Which of the following is not correct?
Answer: B (Credit purchases are entered on the debit side of the supplier's personal account)
Credit purchases are credited to the supplier's account.
When discount is allowed, the accounting entry is debit Discount Allowed Account and credit
Answer: C (Debtors Account)
Discount allowed reduces the debtor's balance.
When partners maintain fixed capital accounts, the correct entries for a partner's share of profit is
Answer: A (Debit Profit and Loss Appropriation Account, credit Current Account)
With fixed capitals, profit shares go to the current accounts, leaving capital unchanged.
Goodwill is taken into account in partnership when
Answer: C (a new partner is admitted)
Goodwill is valued when the partnership changes, e.g. on admission of a partner.
The excess of current assets over current liabilities is
Answer: A (working capital)
That is working capital.
A class of preference shares in which dividend rights are carried forward is
Answer: A (cumulative)
Unpaid dividends on cumulative preference shares are carried forward.
The class of shareholders who are paid last in the event of winding-up are
Answer: A (Ordinary)
Ordinary shareholders are paid last, after creditors and preference shareholders.
When both debit and credit entries in respect of a transaction are made in the same ledger account, this is
Answer: D (a contra entry)
Entries on both sides of the same (cash book) account are contra entries.
Stock of raw materials – 1st January, 2002 N460,000
Purchases of raw materials N1,000,000
Carriage inwards N100,000
Stock of raw materials – 31st December, 2002 N500,000
Royalty paid N35,000
Manufacturing wages N80,000
Supervisor's salary N15,000
Total overhead cost is
Answer: D (N15,000)
Only the supervisor's salary (N15,000) is an indirect factory cost; royalties are direct.
Stock of raw materials – 1st January, 2002 N460,000
Purchases of raw materials N1,000,000
Carriage inwards N100,000
Stock of raw materials – 31st December, 2002 N500,000
Royalty paid N35,000
Manufacturing wages N80,000
Supervisor's salary N15,000
The prime cost is
Answer: A (N1,175,000)
Materials 1,060,000 + wages 80,000 + royalty 35,000 = N1,175,000.
Stock of raw materials – 1st January, 2002 N460,000
Purchases of raw materials N1,000,000
Carriage inwards N100,000
Stock of raw materials – 31st December, 2002 N500,000
Royalty paid N35,000
Manufacturing wages N80,000
Supervisor's salary N15,000
Cost of raw materials used is
Answer: D (N1,060,000)
460,000 + 1,000,000 + 100,000 − 500,000 = N1,060,000.
The price paid by an acquiring company is
Answer: D (purchases consideration)
The price paid for a business is the purchase consideration.
A unit of a company's capital which can be bought is
Answer: A (share)
A share is a unit of a company's capital.
Receipts and Payments Account
Receipts: Balance – 1st January, 2002 N200; Subscriptions received: 2002 N3,600, 2003 N250; Receipts from Bar N4,500; Receipts from dance N500; Sundry receipts N400; total N9,450
Payments: Bar supplies N2,850; Wages N350; General expenses N400; Printing expenses N120; Equipment N650; Repairs N200; Balance – 31st December N4,880; total N9,450
Additional information (1/01/02; 31/12/02): Equipment N4,500; N5,150. Stock – Bar N1,200; N3,200. Bar supplies N2,400; N5,600
Accumulated fund as at 1st January 2002 is
Answer: D (N3,500)
Equipment 4,500 + bar stock 1,200 + cash 200 − owing for bar supplies 2,400 = N3,500.
Receipts and Payments Account
Receipts: Balance – 1st January, 2002 N200; Subscriptions received: 2002 N3,600, 2003 N250; Receipts from Bar N4,500; Receipts from dance N500; Sundry receipts N400; total N9,450
Payments: Bar supplies N2,850; Wages N350; General expenses N400; Printing expenses N120; Equipment N650; Repairs N200; Balance – 31st December N4,880; total N9,450
Additional information (1/01/02; 31/12/02): Equipment N4,500; N5,150. Stock – Bar N1,200; N3,200. Bar supplies N2,400; N5,600
Gross profit from Bar trading is
Answer: C (N450)
Purchases = 2,850 + 5,600 − 2,400 = 6,050; cost = 1,200 + 6,050 − 3,200 = 4,050; profit 4,500 − 4,050 = N450.
Receipts and Payments Account
Receipts: Balance – 1st January, 2002 N200; Subscriptions received: 2002 N3,600, 2003 N250; Receipts from Bar N4,500; Receipts from dance N500; Sundry receipts N400; total N9,450
Payments: Bar supplies N2,850; Wages N350; General expenses N400; Printing expenses N120; Equipment N650; Repairs N200; Balance – 31st December N4,880; total N9,450
Additional information (1/01/02; 31/12/02): Equipment N4,500; N5,150. Stock – Bar N1,200; N3,200. Bar supplies N2,400; N5,600
Amount owing to Bar creditors is
Answer: C (N5,600)
The amount owing at 31st December is the closing bar supplies creditor, N5,600.
An expense is said to be revenue in nature if it
Answer: A (adds or contributes to the operating income of the business.)
Revenue expenditure supports day-to-day earning of income.
The amount of money granted by government to public institutions to meet recurrent expenditure during a fiscal year is
Answer: A (subvention)
Such a grant is a subvention.
A business operates on a mark-up of 25%. If cost of goods sold is N800,000. What is the profit?
Answer: B (N200,000)
25% × 800,000 = N200,000.
Rent prepaid as at 1st January, 2002 was N10,000. Annual rent payable is N80,000 and rent accrued as at 31st December, 2002 was N15,000. How much was paid for rent in 2002?
Answer: C (N55,000)
Rent expense 80,000 = prepaid b/f 10,000 + cash paid + accrued 15,000, so cash paid = N55,000.
Which of the following is not correct? (Assets; Liabilities; Capital)
Answer: A (N95,550; N11,500; N82,000)
11,500 + 82,000 = 93,500, not 95,550; the others satisfy assets = liabilities + capital.
Purchase price of equipment N60,000
Freight and installation cost N10,000
Annual maintenance cost N1,000
Estimated useful life – 5 years
Estimated scrap value N2,000
What is the total acquisition cost of the equipment?
Answer: C (N70,000)
60,000 + 10,000 = N70,000; maintenance is a revenue expense.
Purchase price of equipment N60,000
Freight and installation cost N10,000
Annual maintenance cost N1,000
Estimated useful life – 5 years
Estimated scrap value N2,000
What is the annual depreciation charge if straight line method is used?
Answer: B (N13,600)
(70,000 − 2,000) ÷ 5 = N13,600.
Purchase price of equipment N60,000
Freight and installation cost N10,000
Annual maintenance cost N1,000
Estimated useful life – 5 years
Estimated scrap value N2,000
Using reducing balance method at the rate of 20%. What is the depreciation charge for the second year?
Answer: B (N11,200)
Year 1: 14,000; year 2: 20% × 56,000 = N11,200.
Capital at start was N280,000, while capital at the end of the year was N485,000 and drawings during the year was N15,000. What is profit for the year?
Answer: B (N220,000)
485,000 − 280,000 + 15,000 = N220,000.
A statement that measures the performance of a business over a period of time is the
Answer: D (Profit and loss account.)
Performance over a period is shown by the profit and loss account; the balance sheet shows position at a date.
Computer programmes are
Answer: B (software)
Programs are software.
Which of the following is not a unit of the computer?
Answer: A (Console)
Input, output and control are units of a computer system; the console is not one of them.
Section A – Theory of Financial Accounting (answer two questions only from this section)
1. List three items and the source from which they are transferred into each of the following accounts. (a) Sales Ledger Control; (b) Purchases Ledger Control.
(a) Sales ledger control (any three): opening debtors – balance b/d from last period; credit sales – sales day book; returns inwards – returns inwards book; cash/cheques received and discount allowed – cash book; bad debts and contra entries – journal; dishonoured cheques – cash book.
(b) Purchases ledger control (any three): opening creditors – balance b/d; credit purchases – purchases day book; returns outwards – returns outwards book; cash/cheques paid and discount received – cash book; contra entries – journal; bills payable – bills payable book/journal.
Pair each item with the book of original entry it comes from.
2. "In departmental accounts, items of expenses are allocated using some basis of apportionment". List five items of expenses related to a departmental account and a base of apportioning each item.
Any five: rent and rates – floor area; lighting/air-conditioning – floor area or meter; power – horse power or meter; depreciation – value of fixed assets in each department; insurance of stock – value of stock; insurance of premises – floor area; carriage inwards and discount received – purchases; carriage outwards, advertising and discount allowed – sales; salaries, canteen and welfare costs – number of employees; supervision – labour hours or number of employees.
Choose a basis that reflects how much each department uses the service.
3. (a) What is a Trial Balance? (b) State four reasons why a trial balance may not balance
(a) A trial balance is a list of all the debit and credit balances extracted from the ledger on a particular date to check the arithmetical accuracy of the books.
(b) Any four: a balance left out of the trial balance; a balance put on the wrong side; incomplete double entry (single entry); wrong balancing of an account; errors in addition (undercasting or overcasting); posting different amounts to the debit and credit; transposition of figures on one side only.
Only errors that make debits differ from credits stop the trial balance from agreeing.
4. (a) List and explain four sources of income to a not-for-profit making organization. (b) State three limitations of the Receipts and Payments Account.
(a) Any four: entrance fees – paid by new members on joining; subscriptions – regular dues paid by members; donations and grants – gifts from members, non-members or government; bar/canteen profits – from trading activities; profits from special events – dances, competitions, bazaars; investment income – interest on deposits; profit on sale of assets.
(b) Any three: it ignores accruals and prepayments; it does not show non-cash items such as depreciation and bad debts; it does not show the surplus or deficit; it mixes capital and revenue items; it does not show profit or loss on sale of assets.
Receipts and payments is only a cash summary, so its limitations are all things that are not cash.
Section B – Financial Accounting Practice (answer three questions only from this section)
5. The records of assets of Moklo Limited show the following:
Motor Vehicles – Purchases: 1. Land Rover 1st March, 1998 N240,000; 2. Peugeot 505 1st June, 1999 N240,000; 3. Peugeot 504 1st January, 2000 N120,000; 4. Nissan Rover 1st September, 2000 N240,000
Disposal: Land Rover 30th June, 2001 N50,000
The company has a policy of depreciating its vehicles on a straight line basis over an estimated useful life of five years with no scrap value.
You are required to prepare: (a) Motor Vehicle Accounts for the years 1998, 1999, 2000 and 2001; (b) Provision for Depreciation Account; (c) Motor Vehicle Disposal Account.
Depreciation is 20% of cost a year, charged by months owned.
(a) Motor vehicles account: 1998 bank (Land Rover) 240,000, balance c/d 240,000. 1999 + Peugeot 505 240,000 → 480,000. 2000 + Peugeot 504 120,000 + Nissan 240,000 → 840,000. 2001: disposal 240,000; balance c/d 600,000.
(b) Provision for depreciation: 1998 40,000 (10 months of 48,000). 1999 76,000 (48,000 + 7 months of 48,000 = 28,000); balance 116,000. 2000 136,000 (48,000 + 48,000 + 24,000 + 4 months of 48,000 = 16,000); balance 252,000. 2001 charge 144,000 (Land Rover 6 months 24,000 + 48,000 + 24,000 + 48,000); transfer to disposal 160,000; balance c/d 236,000.
(c) Disposal account: Dr motor vehicles 240,000. Cr provision for depreciation 160,000; bank 50,000; loss on disposal to profit and loss 30,000.
Charge depreciation only for the months each vehicle was owned.
6. Alpha, Blank and Cyron are partners. They agreed to share profits in the ratio 3:2:1 respectively. The balances in their books as at 31st December 2001 were as follows:
Trading income N88,000
Bank interest received N2,600
Salaries N25,000
Rent N7,000
Stationery and printing N2,500
Accountancy and audit fees N1,630
Subscriptions to trade association N5,060
Travelling expenses N700
Sundry office expenses N800
Debtors N130,000
Investment interest N6,000
Capital Account: Alpha N2,400 Cr.; Blank N1,600 Cr.; Cyron N800 Cr.
Current Account: Alpha N1,200 Dr.; Blank N800 Dr.; Cyron N400 Dr.
Additional information: (a) Outstanding creditors: stationery N70, Sundry office expenses N240. (b) Cyron is to be credited with a partnership salary of N6,000. (c) 5% interest on capital is allowed for the full year and no interest allowed on current account. (d) Provide 2% of debtors as bad debt.
You are required to prepare: (i) Profit and Loss Account; (ii) Profit and Loss Appropriation Account for the year ended 31st December, 2001.
(i) Profit and loss account: income – trading income 88,000; bank interest 2,600; investment interest 6,000; total 96,600. Expenses – salaries 25,000; rent 7,000; stationery 2,500 + 70 = 2,570; accountancy 1,630; subscriptions 5,060; travelling 700; sundry office 800 + 240 = 1,040; provision for bad debts 2% × 130,000 = 2,600; total 45,600. Net profit 51,000.
(ii) Appropriation: net profit 51,000; salary Cyron 6,000; interest on capital 5%: Alpha 120, Blank 80, Cyron 40 (240); balance 44,760 shared 3:2:1: Alpha 22,380, Blank 14,920, Cyron 7,460.
Expenses and provisions first; salary and interest on capital are appropriations.
7. The following information relates to the business of Tunde, a petty trader for the month of May, 2002:
May 1 Started business with capital in cash N25,000
2 Bought goods on credit from: Dotun N5,400; Mebude N8,700; Kola N2,500; Bobo N7,600; Olowe N6,400
4 Sold goods on credit to: Bimbo N4,300; Hakeem N6,200; Sumbo N17,600
6 Paid rent by cash N1,200
9 Bimbo paid his account by cheque N4,300
10 Sumbo paid by cheque N15,000
12 Paid the following by cheque: Kola N2,500; Dotun N5,400
15 Paid for carriage on goods by cash N2,300
18 Bought goods on credit: Mebude N4,300; Bobo N11,000
21 Sold goods on credit to Hakeem N6,700
31 Paid rent by cheque N1,800
You are required to prepare the ledger accounts and extract a trial balance.
Cash book: cash – capital 25,000 less rent 1,200 and carriage 2,300 = 21,500; bank – Bimbo 4,300 + Sumbo 15,000 = 19,300 less Kola 2,500, Dotun 5,400, rent 1,800 = 9,600.
Purchases 30,600 + 15,300 = 45,900; sales 28,100 + 6,700 = 34,800. Rent 1,200 + 1,800 = 3,000; carriage inwards 2,300.
Personal accounts: Dotun and Kola nil; Mebude 13,000 Cr; Bobo 18,600 Cr; Olowe 6,400 Cr; Bimbo nil; Hakeem 12,900 Dr; Sumbo 2,600 Dr.
Trial balance at 31st May 2002: Debit – purchases 45,900; Hakeem 12,900; Sumbo 2,600; rent 3,000; carriage 2,300; bank 9,600; cash 21,500; total 97,800. Credit – capital 25,000; sales 34,800; Mebude 13,000; Bobo 18,600; Olowe 6,400; total 97,800.
Open an account for each person and each type of income or expense, then list the closing balances.
8. The following information relates to Soya-Ogi Manufacturing Company Limited for the six month ended 30th June, 2002:
Purchases – raw materials N120,000
Direct wages N100,000
Rent and rates N40,000
Carriage inwards N1,440
Opening stock: 1st January, 2002: Raw materials N20,000; Finished goods N16,000
Closing stock: 30th June 2002: Raw materials N22,240; Finished goods N32,000
Work in progress: Opening 1st January 2002 N4,800; Closing 30th June 2002 N16,000
Cost of factory supervision N8,000
Sale of finished goods N300,000
Distribution expenses N15,000
You are required to prepare: (a) Manufacturing Account; (b) Trading and Profit and Loss Account for the six month's ended 30th June, 2002.
(a) Manufacturing account: raw materials 20,000 + purchases 120,000 + carriage inwards 1,440 − closing 22,240 = 119,200; direct wages 100,000; prime cost 219,200; factory supervision 8,000 = 227,200; add opening WIP 4,800, less closing WIP 16,000; cost of production 216,000.
(b) Trading: sales 300,000; opening finished goods 16,000 + 216,000 − 32,000 = cost of sales 200,000; gross profit 100,000.
Profit and loss: rent and rates 40,000; distribution 15,000; net profit 45,000.
Rent and rates are not said to be factory costs, so they are charged in profit and loss (if treated as factory overheads, cost of production becomes 256,000 and net profit is still 45,000).
9. Moyinnet Limited has a branch in Abeokuta and forwarded goods for resale from the head office in Lagos invoicing them at selling price; the mark up was one-third of selling price.
During the year to 31st December, 2001, the following transactions took place at Abeokuta: Goods received from Lagos N360,000; Goods returned to Lagos N3,360; Bad debts N1,192; Cash received from debtors N137,248; Cash discounts given N3,616; Cash sales N201,600; Credit sales N144,000
The following additional information is relevant (1st January, 2001; 31st December, 2001): Stock on hand at selling price N32,160; N42,000. Debtors N13,216; N15,160.
You are required to prepare: (a) Branch Stock Account; (b) Goods Sent to Branch Account; (c) Branch Stock Adjustment Account; (d) Branch Debtors Account.
(a) Branch stock (at selling price): Dr balance b/f 32,160; goods sent 360,000 = 392,160. Cr returns 3,360; cash sales 201,600; credit sales 144,000; balance c/d 42,000; stock shortage 1,200 (balancing figure) = 392,160.
(b) Goods sent to branch: Cr branch stock 360,000. Dr returns 3,360; branch stock adjustment (loading 1/3 × 356,640) 118,880; head office trading account (cost) 237,760.
(c) Branch stock adjustment: Cr loading on opening stock 10,720; loading on goods sent 118,880 = 129,600. Dr loading on closing stock 14,000; loading on shortage 400; gross profit to profit and loss 115,200 (= 1/3 × sales 345,600). The cost of the shortage, 800, is charged to profit and loss.
(d) Branch debtors: Dr balance b/f 13,216; credit sales 144,000 = 157,216. Cr cash 137,248; discounts 3,616; bad debts 1,192; balance c/d 15,160 = 157,216.
With a mark-up of one-third of selling price, the loading on any figure at selling price is one-third of it.