WAEC Accounting 2019
Questions & Answers

A student might mistakenly choose options A, C, or D by selecting terms that are not recognized enhancing qualitative characteristics in accounting. Verifiability is an enhancing qualitative characteristic of financial information meaning that different independent observers can reach a consensus that the information faithfully represents economic phenomena. Common mistake: Confusing verifiability with terms like profitable or applicable which are not defined qualitative characteristics.

A student might mistakenly select options A, B, or D by misinterpreting ledger posting notations. A contra entry is indicated by the letter 'C' in the folio column of a cash book, representing internal transactions between the cash and bank columns, such as cash deposited or withdrawn. Common mistake: Assuming the letter 'C' stands for a cash entry or a journal entry instead of a contra entry.

A student might pick options B, C, or D by confusing payment documentation with revenue collection documents. A revenue collector issues a receipt voucher to the payer as official evidence that payment has been received, providing proof for the payer's records and ensuring accountability. Common mistake: Confusing a receipt voucher issued by a revenue collector with a payment voucher.

A student might mistakenly choose options A, C, or D by focusing on operational or managerial metrics rather than owner returns. Shareholders are the owners of a business and their primary concern is maximizing their return on investment through the dividend payable. Common mistake: Assuming shareholders prioritize employee welfare or taxable profit over their own dividend returns.

A student might mistakenly select options B, C, or D by improperly combining assets and liabilities. The accumulated fund for a not-for-profit organization represents net assets, calculated as total assets including fixed and current assets minus total liabilities, reflecting accumulated surpluses over time. Common mistake: Adding liabilities to assets instead of subtracting them when calculating the accumulated fund.

A student might mistakenly pick options A, C, or D by incorrectly adding or subtracting opening and closing creditor balances. Using the creditors control account reconciliation, purchases equal closing creditors plus cash paid minus opening creditors, which evaluates to 780000 plus 2700000 minus 630000, giving 2850000. Common mistake: Adding opening creditors instead of subtracting them in the control account calculation.

A student might select options A, C, or D by misapplying the inventory adjustment formula. Cost of goods sold is determined by adding opening stock to purchases and subtracting closing stock, which means taking the purchases value of 2850000, adding opening stock of 540000, and subtracting closing stock of 630000 to arrive at 2760000. Common mistake: Adding closing stock instead of subtracting it when determining the cost of goods sold.

A student might mistakenly choose options A, B, or D by treating operational personnel costs as capital investments or receipts. Employee salaries represent recurring operational expenses essential for daily government functions, classifying them as recurrent expenditure in public sector accounting. Common mistake: Classifying routine staff salaries as capital expenditure instead of recurrent expenditure.

A student might mistakenly select options A, B, or D by reversing the debit and credit rules for settling liabilities. When paying a creditor like Suleman by cheque, you debit Suleman's account to reduce the liability and credit the bank account to reduce the asset. Common mistake: Debiting the bank account instead of the creditor when making a payment.

A student might pick options A, B, or D by confusing conservatism with disclosure or consistency concepts. The prudence concept dictates that anticipated losses should be accounted for while anticipated profits must not be recognized until realized, preventing profits from being overstated. Common mistake: Confusing the prudence concept with consistency or materiality.

A student might mistakenly choose options B, C, or D by including cash outflows or missing individual cash sale events. Total cash receipts include only cash inflows from sales, which are April 11 at 50000 and April 26 at 49000, summing to a total of 99000. Common mistake: Subtracting cash payments when calculating total cash receipts.

A student might mistakenly pick options A, B, or D by failing to subtract cash payments from the total receipts. Starting with zero opening balance, total cash receipts equal 99000 while total cash payments equal 64000, leaving a closing balance of 35000 after subtracting payments from receipts. Common mistake: Forgetting to deduct the various cash purchases and expense payments from the total cash inflows.

Students might mistakenly choose option B by calculating the dividend as 10% on just the 1,000,000 shares without factoring in the price per share. To determine the correct amount, first find the total share capital by multiplying 1,000,000 shares by GH¢2.00 each to get GH¢2,000,000. Applying the 10% dividend recommendation to this total capital yields GH¢2,000,000 multiplied by 10%, which equals GH¢200,000. Once declared, this sum is deducted from retained earnings and treated as a current liability until settled. Common mistake: forgetting to multiply the share quantity by the nominal price per share before applying the percentage.

A student might incorrectly select option D, thinking goodwill is only calculated when a business is liquidated or entirely sold off. Goodwill is instead recorded upon admitting a new partner to reflect the existing partnership's established reputation, customer base, and future earning potential. The financial valuation is determined using average profits and subsequently adjusted across the partners' capital accounts. Common mistake: confusing the complete sale of a business with internal restructuring events like partner admission.

Candidates might erroneously pick option C by confusing the definition of mark-up with margin directly without converting the fractions. Mark-up represents profit as a fraction of the cost price, given here as 2/3, meaning a cost of 3 parts yields a profit of 2 parts, bringing the selling price to 5 parts. Margin is calculated as profit divided by the selling price, which gives 2/5. Alternatively, margin can be found using the formula mark-up divided by one plus mark-up, resulting in (2/3) divided by (5/3), which simplifies to 2/5. Common mistake: dividing the profit by the cost price instead of the selling price when finding the margin.

An unwary student might select option B by misidentifying which asset category is excluded from liquidity measurements. The quick ratio, or acid-test ratio, evaluates immediate solvency by taking current assets, subtracting stock, and dividing the result by current liabilities. Inventory is excluded because it cannot always be converted to cash rapidly, offering a conservative liquidity measure. Common mistake: including inventory instead of removing it when calculating the quick ratio.

A student might mistakenly choose option A by incorrectly adding drawings instead of subtracting them from the capital total. To find the closing capital, start with the opening capital of D10,800, add the net profit of D6,000, and then subtract the drawings of D2,500, resulting in D14,300. This calculation successfully reconciles changes in owner's equity under the assumption of no additional capital contributions. Common mistake: adding drawings to the equity balance instead of deducting them.

A candidate might select option A by improperly incorporating trade debtors or cash as liabilities or including trade creditors in the asset tally. Working capital is derived by subtracting current liabilities from current assets. Current assets consist of trade debtors at D2,880 plus cash in hand at D1,000, totaling D3,880. Subtracting the current liabilities of trade creditors at D2,560 from D3,880 gives D1,320, which measures the funds available for daily operations. Common mistake: mixing up the addition and subtraction of debtors and creditors within the working capital formula.

Students might mistakenly choose option A by assuming a general trading account is used to track credit purchases in incomplete records. In single-entry systems, purchases are derived using a creditors' control account through the formula of cash paid to creditors plus closing creditors minus opening creditors. This approach reconstructs missing double-entry ledger details necessary before building a full trading account. Common mistake: attempting to find credit purchases directly through a trading account rather than a memorandum creditors' ledger.

A test-taker could mistakenly select option C by assuming any recording error involving names is an original entry mistake. This scenario describes an error of commission because a correct transaction amount was posted to the wrong personal account of the same general class, specifically debiting Shamail instead of Samah. Such mistakes do not disrupt trial balance equality, though they misstate specific subsidiary accounts. Common mistake: confusing an error of commission with an error of original entry when names are misapplied.