WAEC Accounting 2017
Questions & Answers

Students might mistakenly select the government, creditors, or investors, assuming they operate within the firm. However, these groups operate outside the business entity and rely on published financial statements rather than internal reports. Management directs operations internally and utilizes accounting data for planning, controlling, and decision-making. Common mistake: Failing to distinguish between internal operators like management and external stakeholders like investors and creditors.

A student might mistakenly select a direct manufacturing cost or an administration cost, thinking that because the crane is used in building, it must be directly traceable to every output or tied to office work. Equipment hire charges are classified as overhead costs because they are indirect costs that cannot be directly traced to a specific unit of output, unlike direct materials or direct labor. Common mistake: Treating large equipment rentals as direct costs instead of indirect overhead.

An examinee might choose the consistency concept, dual aspect concept, or going concern concept, believing that profit recognition relates to uniform methods, balancing entries, or business longevity. The prudence concept, also known as conservatism, dictates that a business should not lay claim to any profit before it is earned, ensuring that assets and income are not overstated while provisions are made for all known liabilities and potential losses. Common mistake: Confusing conservatism with the going concern assumption.

A student might mistakenly calculate using incorrect addition or subtraction of creditors and carriage inwards, leading to wrong totals like #121,000, #117,000, or #111,000. To find the correct figure, start by calculating credit purchases using the formula: Payments to creditors (#110,000) plus closing trade creditors (#6,000) minus opening trade creditors (#4,000), which equals #112,000. Then, add the carriage inwards (#1,000) to get the total purchases of #113,000. Common mistake: Forgetting to add carriage inwards to the calculated credit purchases.

Students might mistakenly choose option C or A by confusing trade creditors with long-term debts or assets. Trade creditors are amounts owed to suppliers for goods purchased on credit, and since these obligations are due within one year, they are classified in the balance sheet as short-term (current) liabilities. Common mistake: Confusing current liabilities with long-term liabilities or assets.

A student might incorrectly select option A, B, or D, thinking general accounting rules or dual aspects govern asset pricing. Assets of a business are valued based on the historical cost concept, which records them at their original purchase cost to provide an objective and verifiable basis, subject only to subsequent adjustments for depreciation or impairment. Common mistake: Believing current market value rather than original purchase cost dictates asset valuation.

A student might incorrectly calculate the figure by omitting returns outwards or adding carriage inwards incorrectly, making option B, C, or D seem plausible. To find the cost of goods available for sale, first determine net purchases by taking purchases of D160,000, subtracting returns outwards of D880, and adding carriage inwards of D740 to arrive at D159,860; since no opening stock is mentioned, this figure equals the cost of goods available for sale. Common mistake: Forgetting to subtract returns outwards when calculating net purchases.

Students often miscalculate by forgetting to adjust sales for returns inwards, leading them to select option A, B, or D. Net sales are computed by subtracting returns inwards of D620 from sales of D195,000 to equal D194,380, while the cost of goods sold is found by taking the cost available of D159,860 and subtracting the closing stock of D14,100 to yield D145,760, and subtracting these two results gives a gross profit of D48,620. Common mistake: Failing to subtract closing stock from the cost available for sale.

One might select option A, B, or D by misapplying operating expenses or carrying over incorrect gross profit figures. Taking the gross profit of D48,620 from the previous step and deducting the salaries expense of D27,600 results in a net profit of D21,020. Common mistake: Subtracting expenses from sales instead of gross profit.

A student might choose option A, C, or D by confusing the foundational bookkeeping rule with measurement or matching principles. The duality concept, alternatively known as the dual aspect concept, ensures the accounting equation of Assets = Liabilities + Equity stays balanced by requiring every single transaction to have two distinct effects consisting of a debit and a credit. Common mistake: Confusing the duality concept with the historical cost or accrual principles.

Students might mistakenly pick option A, B, or D, confusing physical assets with intangible rights or values. Machinery qualifies as a tangible asset because it is a physical asset that can be touched, whereas goodwill, leases, and copyrights lack physical form and are categorized as intangible assets. Common mistake: Treating intangible items like leases and copyrights as physical property.

An examinee might select option B, C, or D, assuming a discount implies an increase in capital or a resource. Discount allowed is a reduction given to customers for prompt payment, and it is treated as a selling expense in the profit and loss account, which reduces the overall income of the business. Common mistake: Treating a discount allowed to customers as business income.

Students could mistakenly select option A, B, or C by misinterpreting where carriage costs belong in financial statements. Carriage inwards on purchases is added directly to the cost of goods purchased and appears in the trading account to accurately determine the cost of goods sold. Common mistake: Misplacing carriage inwards in the profit and loss account instead of the trading account.

A student might choose option C or D, assuming factory wages are indirect or overhead expenses. Wages of machine operators are directly attributable to the production process itself, making them classified as direct labor costs within the manufacturing account. Common mistake: Classifying direct factory labor as indirect overhead.

A student might pick option A, B, or D by miscalculating the sum of the years' digits fraction. First, find the depreciable amount by subtracting the residual value of N2,000 from the cost of N12,000 to get N10,000, and calculate the sum of the years' digits as 1+2+3+4 = 10; for the third year, the fraction is 2/10, which when multiplied by N10,000 gives a depreciation charge of N2,000. Common mistake: Using the wrong year's fraction in the sum of the years' digits calculation.

One might incorrectly select option B, C, or D by forgetting to subtract the first-year depreciation from the asset cost. The depreciation for year one is calculated as (4/10) multiplied by the depreciable amount of N10,000, which equals N4,000, and subtracting this from the initial cost of N12,000 leaves a book value of N8,000 at the end of the first year. Common mistake: Reporting the depreciation expense instead of the net book value at year-end.

A student might choose option A, C, or D by confusing fund allocation with budgetary terms or virements. A vote in public sector accounting refers specifically to the allocation of funds from the treasury to various accounting heads or expenditure units for approved purposes. Common mistake: Confusing a vote with a virement or general budget.

An examinee might select option B, C, or D by naming national taxes or international borrowings instead of local funding sources. The District Assemblies Common Fund (DACF) is a major source of funding for local governments in Ghana, allocated directly from national revenues to support local development. Common mistake: Assuming local authorities rely primarily on foreign loans or excise duties.

A student might choose option B, C, or D by mixing up manufacturing ledgers with trading or balance sheet accounts. Carriage inwards on raw materials is a direct cost of production and is therefore debited to the manufacturing account to form part of the prime cost. Common mistake: Recording production-stage carriage inwards in the trading account.

A student might mistakenly include operational items, leading them to choose option A, B, or D. Capital expenditures are those that benefit future periods, consisting of the construction of wards for Le200,000, beds for Le20,000, and an x-ray machine for Le100,000, which combine to total Le320,000. Common mistake: Including short-term operational costs in capital expenditure totals.