WAEC Accounting 2017
Questions & Answers

Internal users of accounting information are individuals within the organization, such as management, who use the information for planning, controlling, and decision-making. External users include government, creditors, and investors.

Hire charges for equipment like a crane in a construction company are typically classified as overhead costs because they are indirect costs not directly traceable to a specific unit of output, unlike direct costs such as materials or labor.

The prudence concept, also known as conservatism, requires that profits should not be anticipated and that provisions should be made for all known liabilities and potential losses, ensuring that assets or income are not overstated.

Credit purchases = Payments to creditors + Closing creditors - Opening creditors = #110,000 + #6,000 - #4,000 = #112,000. Total purchases including carriage inwards = #112,000 + #1,000 = #113,000.

Trade creditors represent amounts owed to suppliers for goods purchased on credit, which are due within one year, hence classified as short-term (current) liabilities in the balance sheet.

The historical cost concept states that assets are recorded at their original purchase cost, providing an objective and verifiable basis for valuation, adjusted only for depreciation or impairment.

Net purchases = Purchases - Returns outwards + Carriage inwards = D160,000 - D880 + D740 = D159,860. Since no opening stock is mentioned, cost of goods available for sale = net purchases = D159,860.

Net sales = Sales - Returns inwards = D195,000 - D620 = D194,380. Cost of goods sold = Cost available D159,860 - Closing stock D14,100 = D145,760. Gross profit = D194,380 - D145,760 = D48,620.

Gross profit = D48,620 (from question 8). Less expenses: Salaries D27,600. Net profit = D48,620 - D27,600 = D21,020.

The duality concept, also known as the dual aspect concept, states that every transaction has two effects (debit and credit), ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.

Tangible assets are physical assets that can be touched, such as machinery. Goodwill, lease, and copyright are intangible assets with no physical form.

Discount allowed is a reduction given to customers for prompt payment, treated as a selling expense in the profit and loss account, reducing the business's income.

Carriage inwards (on purchases) is added to the cost of goods purchased and appears in the trading account to determine the cost of goods sold accurately.

Wages of machine operators are directly attributable to the production process, hence classified as direct labor costs in the manufacturing account.

Depreciable amount = N12,000 - N2,000 = N10,000. Sum of years' digits = 1+2+3+4 = 10. For year 3, fraction = 2/10. Depreciation = (2/10) × N10,000 = N2,000.

Depreciation for year 1 = (4/10) × N10,000 = N4,000. Value at end of year 1 = Cost N12,000 - N4,000 = N8,000.

A vote in public sector accounting refers to the specific allocation of funds from the treasury to various accounting heads or expenditure units for approved purposes.

The District Assemblies Common Fund (DACF) is a major source of funding for local governments in Ghana, allocated from national revenues to support local development.

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.

Capital expenditures are those that benefit future periods, such as construction of wards Le200,000, beds Le20,000, and x-ray machine Le100,000, totaling Le320,000.

Recurrent expenditures are ongoing operational costs, such as stationery Le15,000, salaries Le60,000, and drugs Le50,000, totaling Le125,000.

Reliability (or faithful representation) means that accounting information is complete, neutral, and free from error, based on verifiable evidence to ensure it can be depended upon by users.

A casting error is a totaling or arithmetic error in the trial balance, which directly causes the debit and credit totals to disagree.

Dividends are the portion of a company's profits distributed to ordinary shareholders as a return on their investment.

The purchases day book (or journal) is a book of original entry used to record all credit purchases of goods for resale or use in the business.

Debenture interest is a finance cost and is charged to the profit and loss account as an appropriation of profit.

The purchases ledger (creditors ledger) contains personal accounts of suppliers to whom the business owes money for credit purchases.

The memorandum branch account is used in branch accounting to calculate the closing stock at the branch when physical verification is not done, by adjusting for goods sent, sales, etc.

Total calls due = 3,000,000 shares × GH¢0.40 = GH¢1,200,000. Calls unpaid = GH¢100,000. Paid-up share capital = GH¢1,200,000 - GH¢100,000 = GH¢1,100,000.

The authorised share capital is the maximum number of shares the company is legally allowed to issue, which is five million ordinary shares.

The nominal ledger contains all nominal accounts, which record incomes, expenses, gains, and losses, used to prepare the profit and loss account.

Carriage inwards is apportioned to departments based on the value of purchases made by each department, as it relates directly to the cost of goods acquired.

A two-column cash book has columns for cash and bank transactions, recording all cash and cheque receipts and payments.

Total purchases = Recorded purchases + Closing creditors - Opening creditors = D17,000 + D7,300 - D6,500 = D17,800.

Total purchases = D17,800 (from Q34). Cost of sales = Opening stock D1,400 + Purchases D17,800 - Closing stock D1,600 = D17,600. Gross profit = Sales D30,000 - D17,600 = D12,400. Net profit = D12,400 - Rent D1,200 = D11,200.

In the absence of a partnership agreement, interest is chargeable on partners' drawings at 5% per annum, but no interest is allowed on capital contributions.

Maintaining a full set of double-entry accounting records can be costly and time-consuming for small businesses, leading them to use simpler single-entry systems.

Closing capital = Opening capital + Profit - Drawings. #70,000 = #40,000 + #50,000 - Drawings. Drawings = #90,000 - #70,000 = #20,000.

Mark-up is 25% on cost, so sales = cost + 0.25 × cost = 1.25 × cost. Cost of sales = D12,000 / 1.25 = D9,600.

The accumulated fund in a not-for-profit organization is equivalent to net assets (Assets - Liabilities), representing the excess of assets over liabilities built up from surpluses over time.