WAEC Accounting 2021
Questions & Answers

Students often mistakenly select the trial balance or cash book, confusing books of final entry or summary statements with original chronological records. The journal (book of original entry) records transactions chronologically from source documents like invoices and receipts, serving as the basis for systematic posting to the general ledger accounts. Common mistake: Confusing ledger posting sources with final summary trial balances.

The accrual concept or business entity concept might seem plausible when thinking about general statement rules, but liquidation intent specifically targets business longevity. The going concern concept assumes the business will continue operating indefinitely without liquidation, allowing assets to be valued at historical cost and long-term planning in financial statements. Common mistake: Confusing operational continuity assumptions with profit-matching timing rules.

An option like 'is easy to understand' highlights a characteristic rather than a conceptual drawback. The money measurement concept records only quantifiable monetary transactions, excluding non-monetary qualitative factors like employee morale or brand reputation, limiting the completeness of financial reports. Common mistake: Mistaking an operational definition for an accounting limitation.

The trading and profit and loss account is frequently misidentified by students who group all operational accounts together. The manufacturing account calculates the prime cost and factory overheads to arrive at the total cost of goods produced, transferred to the trading account as opening stock or COGS. Common mistake: Confusing production cost calculation with general trading performance statements.

Gross profit on market value is an appealing distractor that introduces unearned valuation metrics into standard sales accounting. Gross profit on cost of sales = Net Sales - Cost of Goods Sold, representing the profit before deducting operating expenses, directly from trading activities. Common mistake: Mixing up market valuation concepts with standard historical cost-of-sales computations.

Sales returns account is a common trap because both involve returns, but sales returns handle outward customer transactions. Purchases returns (returns outwards) are debited to the purchases returns account (contra purchase) and credited to creditors, reducing net purchases in the trading account. Common mistake: Mixing up customer returns inwards with supplier returns outwards.

Students might mistakenly choose option A by adding the salary to the profit, or option D by subtracting it. Partners' salaries are appropriations of profit rather than operating expenses deducted from the total profit. Consequently, the starting total profit remains at N34,000 before any appropriations are made. Common mistake: treating partnership salaries as business expenses rather than profit distributions.

A student might choose option A or C by improperly computing the shares directly without accounting for the salary correctly. To determine Atama's share, subtract the N10,000 salary from the initial N34,000 profit to leave a residual profit of N24,000, then apply Atama's 4/7 profit-sharing ratio to the residual and add the salary back. Common mistake: failing to deduct the salary appropriation before calculating profit distribution shares.

A student might incorrectly select option A or C by applying Wawa's fraction to the wrong baseline figure. Subtracting Atama's salary of N10,000 from the N34,000 profit leaves a residual profit of N24,000 to be divided between the partners. Wawa receives a share of this residual profit based on the 3/7 profit-sharing ratio. Common mistake: overlooking the deduction of partner salaries when calculating the divisible residual profit.

A student might be tempted to select the purchases account or sales account due to confusion over inventory flows. When goods are returned to a supplier, they are credited to the returns outwards account, which serves to reduce net purchases and decrease the liability owed to the supplier. Common mistake: confusing returns outwards with returns inwards.

A student might select profit making or increasing sales, as these are general business goals. Obtaining finance is specifically a function of financial management, which involves sourcing, allocating, and controlling funds to meet overarching business objectives. Common mistake: confusing broad corporate goals with specific managerial functions.

A student might mistakenly choose option A by thinking returns add value, or option D by doubling the impact. Gross profit is calculated as net sales minus cost of goods sold, meaning an increase in sales returns directly reduces net sales by GH¢1,000, which in turn reduces gross profit by the exact same amount. Common mistake: misunderstanding the directional impact of sales returns on net sales.

A student might choose option C or B by miscalculating stock turnover or using incorrect stock averages. Opening stock of Le20,000 plus purchases of Le300,000 minus closing stock of Le50,000 gives a cost of goods sold of Le270,000, and dividing this by the average stock of Le35,000 yields a stock turnover of approximately 7.71 times, which when divided into 365 days gives a holding period of roughly 47 days. Common mistake: calculating average stock incorrectly by omitting the division by two.

A student might select option B or C by failing to compute the correct cost of goods sold or average stock value. The cost of goods sold is determined by adding opening stock and purchases then subtracting closing stock to reach Le270,000, while average stock is computed as Le35,000, resulting in a stock turnover ratio of Le270,000 divided by Le35,000 which equals approximately 7.71 times. Common mistake: using closing stock instead of average stock in the turnover ratio.

A student might mistakenly choose option D because a seal is a common corporate feature, or option A regarding legal counsel. Operating as a separate legal entity means a company possesses perpetual succession, allowing it to enter contracts, own property, and sue or be sued in its own name independently of its shareholders. Common mistake: confusing administrative corporate items with foundational legal status attributes.

A student might select options A, B, or C individually if they focus only on a single category of inventory. Stock records comprehensively track raw materials for inputs, work-in-progress for semi-finished items, and finished goods for outputs to ensure proper inventory control and valuation. Common mistake: overlooking that inventory control applies to all stages of production.

A student might mistakenly choose option D, confusing a major asset purchase with regular operating expenses. Office equipment is classified as a non-current or fixed asset because it is utilized over multiple accounting periods and recorded as capital expenditure on the balance sheet. Common mistake: treating long-term asset purchases as short-term revenue expenditure.

A student might select option A or D by confusing account balances with transaction entries. The double-entry principle requires that every debit entry must have a corresponding credit entry, ensuring that every transaction affects at least two accounts equally and maintains the balance of the accounting equation. Common mistake: reversing the rules of debit and credit matching.

A student might select option A or C, which describe mechanical entry rules rather than the meaning of the equation itself. The equation assets equals capital plus liabilities signifies that a business's assets are financed by owner's capital and external liabilities, meaning the business owns what it has and owes what it owes. Common mistake: confusing the definition of the accounting equation with double-entry mechanics.

A student might select option A by keeping the erroneous amounts or option C by flipping the direction. An overpayment of D180 occurred, which must be corrected by reversing the excess amount through debiting the bank by D180 to recover funds and crediting Congo by D180 to adjust the recorded payment in Drongo's books. Common mistake: failing to calculate the exact difference between the recorded amount and the correct amount.