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WAEC Financial Accounting 2012 Question 5

Question 5

Double Entry and the Ledger

A fixed asset fully written-down by a trader is now considered to be worth ₦5,000. The double entry required to effect this is: debit

  1. A.Asset Account; credit Purchases Account.
  2. B.Asset Account; credit Capital Account.
  3. C.Capital Account; credit Asset Account.
  4. D.Capital Account; credit Profit and Loss Account.
Show the answer and explanation

Answer: B (Asset Account; credit Capital Account.)

Explanation

The asset's value goes up, so the Asset Account is debited. The gain belongs to the owner, so the Capital Account is credited.